BHP (ASX, NYSE:BHP) (LON:BLT), the world鈥檚 largest mining company by market capitalization, is considering to grow its potash business to the size of its iron ore division, but only under 鈥渃ertain circumstances.鈥�
Speaking to chief executive Andrew Mackenzie said that as part of the company鈥檚 , BHP expects to reinvest what it gets for its US shale gas assets into potash.
BHP is currently developing its听Jansen potash mine in Canada, which would be the company鈥檚 biggest single investment ever.
The results of this strategy, however, won鈥檛 be immediate, he warned: 鈥淚t鈥檚 taken us 50 years to create today鈥檚 iron ore business. It will be another 50 years to create a potash equivalent. So you have to start somewhere,鈥� Mackenzie said.
And that starting place seems to be Canada鈥檚 Saskatchewan province, where the world鈥檚 third largest iron miner is currently building its massive Jansen potash mine.
To date, BHP has committed a total investment of $3.8 billion to move Jansen into production. From that total, $2.6 billion have听been set aside听for surface construction and the sinking of shafts,听though analysts predict听the total cost will be close to听$14 billion.
Mackenzie of Jansen, which is projected to produce 8听million tonnes of potash a year or nearly 15% of the world鈥檚 total.
He added the company could seek approval from the board for such expansion as early as June 2018, with production beginning in 2023.
Prices for the crop fertilizer ingredient, however, are not favourable 鈥� they are still hovering around $230 a tonne, less than half what they were only five years ago.
Besides, BHP鈥檚 iron ore business brings in about $9 billion a year, which doesn鈥檛 look like an easy target to match by any other division, particularly by potash, given current听prices.
But the company is looking long-term and has repeatedly stated it believes rising demand for fertilizer in growing nations, particularly China and India, will lead to a long-term price increase for the commodity.
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