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BHP to decide on Canada potash project in 2021

Mining company BHP will decide whether to go ahead with a giant Canadian potash project in 2021 after it has spent a further $345m on final preparation work.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Mining company BHP will decide whether to go ahead with a giant Canadian potash project in 2021 after it has spent a further $345m on final preparation work.

The Anglo-Australian group said its board would be asked to approve the $5bn Jansen mine in February 2021 and that the extra money would help inform the decision. 

“Work on engineering to support project planning and on finalising the port solution is required and the board has approved $144m for these activities,” BHP said in a trading update on Thursday.

“An additional $201m of funding was approved to further de-risk the project, focusing on the mine's scope of work,” it added.

Potash is attractive to BHP because it offers diversification. Fertiliser prices are generally not correlated with the other commodities it produces like iron ore and copper. 

The company has already spent billions of dollars at Jansen, which is located 140km east of Saskatoon in Saskatchewan. 

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Chief executive Andrew Mackenzie signed off on $2.7bn of spending for the construction of 1km deep shafts at the site in August 2013 - barely 100 days after being appointed to his role. 

Mr Mackenzie and other BHP executives claim a fresh supply of potash, a crop nutrient used by farmers, will be needed by the middle of the next decade to feed a growing global population. 

BHP expects prices to be much higher by the time supply from Jansen enters the market, some time after 2025. 

However, some of its shareholders are sceptical and have questioned the logic of adding more supply to an already saturated fertiliser market. 

The news on Jansen came as BHP retained production guidance for all of its major commodities. 

BHP said its flagship iron ore business had produced 69m tonnes of iron ore in the three months to September, down 3 per cent on the previous quarter. 

It said the lower volumes reflected “significant planned maintenance” at its key port in Western Australia. 

BHP expects annual output of the steel-making ingredient to react 273m to 286m tonnes in the financial year to June. 

This article was written by Neil Hume and Natural Resources Editor from The Financial Times and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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