BHP Billiton is investing US$2.6 billion to finish the excavation and lining of the Jansen Potash project production and service shafts, and to continue the installation of essential surface infrastructure and utilities.
"In light of all the negative news potash has been getting recently, this is really great news," said DonnaLyn Thorsteinson, executive director of the Humboldt and District Chamber of Commerce. This investment will be spread over a number of years, with completion of both shafts expected during 2016, while the associated works program will extend into the following year.
But people shouldn't be worried over the length of time it's taken for this project to get off the ground.
"The timelines are good," Thorsteinson said. "It gives Humboldt and the surrounding communities plenty of time to grow properly and prepare for this. It shouldn't be rushed."
The longer term outlook for potash, a fertiliser that improves the yield and quality of agricultural production, is strong, BHP Billiton said in a news release Aug. 20.
They went on to explain their predictions:
"As the world's population grows and incomes in emerging economies improve, agricultural demand is expected to rise. This will increase the need for potash and require the construction of new mines. Our projections assume a shift away from the current marketing dynamic and we believe the potash price will ultimately reflect the cost of adding new supply."
BHP Billiton believes Jansen is the world's best undeveloped potash resource and is capable of supporting a mine with annual capacity of ten million tonnes for more than 50 years.
Chris Ryder, vice president of external affairs for the company, echoed this sentiment.
"The amount of potash, its quality and mining conditions and all the work we've put into it in the past six years is why [the Jansen mine] will have the best potash in the world," Ryder said.
He also attributed much of its anticipated success to Saskatchewan itself, noting its "stable economy and infrastructure" and adding that communites such as Humboldt will be "wonderful places" for future employees of the Jansen mine to live.
He also agreed with Thorsteinson's view that the spreading out of the project over the next few years until 2016 is beneficial.
"It's great, in fact. It's not a delay at all, we're just adjusting to the market and it gives us time to get infrastructure in place," Ryder said.
He also explained that after the two shafts are installed by 2016, the timeline now gives the company a lot of leg room to correspond the construction of the surface facility to match new potash demand.
With economies of scale and the use of modern mining techniques, Jansen is likely to be one of the lowest cost sources of supply once fully developed, BHP said in their news release.
"The successful excavation and lining of both shafts will substantially reduce development risk and allow the company to time first production to meet growth in market demand."
BHP Billiton chief executive officer, Andrew Mackenzie, went on to say in the release, "Annual investment at Jansen of approximately $800 million will form an important part of the Group's capital and exploration budget, which will decline to approximately US$16 billion this year. Continued development of the shafts reflects our confidence in the quality of our 5.3 billion tonne measured resource and the compelling long term fundamentals of the potash industry.
"Investment at Jansen is creating a valuable asset and we will continue to pursue a development path that maximises returns for shareholders. In time, this may include the introduction of one or more partners, consistent with our approach for other major operations."
BHP Billiton Petroleum and Potash President, Tim Cutt added: "Potash and Jansen represent a significant opportunity for BHP Billiton. Saskatchewan, with its attractive geology and stable political and fiscal environment, is the best place in the world to develop a potash business. Our construction activities are going well and we have successfully introduced specialised boring machines that reduce the development timeframe and safety risk associated with construction of the shafts. This technology has been in operation for several months and we are very pleased with the results."
BHP Billiton also noted they've "increased the in situ Mineral Resource tonnage estimate for Jansen, which incorporates: additional freehold mineral rights that have been acquired; advanced data analysis and improved estimation methods; and the inclusion of additional Inferred Resource within the granted mining lease. Resource confidence has also increased and we have converted significant tonnages of Indicated Resources to Measured Resources." "Consequently, the updated resource estimate for Jansen increases to 5,328 million tonnes Measured Resource @ 25.7% K2O, 7.1% insolubles and 0.07% MgO and 1,288 million tonnes Inferred Resource @ 25.7% K2O, 7.1% insolubles and 0.07%MgO."
The Jansen potash project is 100 per cent owned by BHP Billiton.
Tuesday's approval will take the company's total commitment to Jansen to approximately US$3.8 billion.
"It shows that BHP is completely committed to our region," Thorsteinson said.
