BHP Increases Bet on Fertilizer Ingredient Potash With $4.9 Billion Project

By Rhiannon Hoyle

ADELAIDE, Australia--The world's biggest mining company is doubling down on a bet that potash, a key fertilizer ingredient, will be in high demand in the decades ahead to help feed a growing global population.

BHP Group on Tuesday approved a $4.9 billion project to further expand the Jansen potash project that it is building in Canada's Saskatchewan province. That investment will transform it into one of the world's largest potash mines, doubling annual production capacity to roughly 8.5 million metric tons, said Mike Henry, BHP's chief executive.

The project's approval illustrates BHP's confidence in the outlook for potash, Henry said. It also reflects a shift by the mining giant away from fossil fuels to investments in commodities including copper and nickel that it expects will benefit from population growth, rising living standards and the transition to a low-carbon economy. BHP has been selling coal mines and last year offloaded its oil-and-gas unit.

"Potash, used in fertilizers, will be essential for food security and more sustainable farming," said Henry.

Potash is one of three major fertilizer ingredients, alongside nitrogen and phosphate. BHP says demand for potash could double by the late 2040s to become a $50 billion market. Henry has previously said mining at Jansen could last about 100 years.

Potash is seen by farmers as an attractive resource because it tends to boost yields, aid in drought tolerance and improve crop quality. It is also used in glass manufacturing, aluminum recycling and fireworks, among other applications.

The Jansen development should position BHP as a top potash supplier globally, Henry said Tuesday. The company is already pouring $5.7 billion into the first stage of the project, after spending about $4.5 billion on earlier preparation work.

The first stage is 32% complete and initial production is expected in late 2026, the company said. The second stage should enter production some time in the year through June, 2029.

The newly approved project has an internal rate of return of between 15% and 18%, based on consensus price estimates, and an expected payback period of about six years from first production, said BHP.

In the longer term, BHP could consider two further expansions that would raise annual production capacity to up to 17 million tons a year, it said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

October 31, 2023 06:20 ET (10:20 GMT)

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