TIDMBHP
RNS Number : 8405R
BHP Group Limited
31 October 2023
Exchange release
31 October 2023
BHP approves US$4.9 billion investment in stage two of Jansen
potash project
BHP has approved an investment of US$4.9 billion (C$6.4 billion)
for stage two of the Jansen potash project (Jansen Stage 2) in
Saskatchewan, Canada.
This follows BHP's approval of US$5.7 billion (C$7.5 billion)
for stage one of the Jansen potash project (Jansen Stage 1) in
August 2021 and a pre-Jansen Stage 1 investment of US$4.5 billion
(C$4.9 billion).
BHP Chief Executive Officer, Mike Henry said:
"This is an important milestone that underscores our confidence
in potash and marks the next phase of the company's growth in
Canada. We believe Jansen will deliver long-term value for
shareholders and the local community, and will position BHP as one
of the leaders in the global potash industry.
The stage two investment advances BHP's strategy to increase its
exposure to commodities positively leveraged to the global
megatrends of population growth, urbanisation, rising living
standards and decarbonisation. Potash, used in fertilisers, will be
essential for food security and more sustainable farming.
Today's additional investment will transform Jansen into one of
the world's largest potash mines, doubling production capacity to
approximately 8.5 million tonnes per annum (Mtpa)(1) .
We are advancing our sustainability and economic development
priorities for Jansen and we are pleased with the progress of our
ongoing work with the Governments of Canada and Saskatchewan, as
well as local and Indigenous communities on shared solutions."
Jansen Stage 1 is 32% complete and progressing in line with its
schedule. First production from Jansen Stage 1 is expected to be
delivered in late CY2026. Construction of Jansen Stage 2 is
anticipated to take approximately six years, and is expected to
deliver first production in FY2029, followed by a ramp up period of
three years.
Jansen Stage 2 is expected to deliver approximately 4.36 Mtpa of
production at a capital intensity of approximately US$1,050/t,
lower than Jansen Stage 1, due to the leveraging of existing and
planned infrastructure(2) . In October 2022, BHP approved an
initial funding commitment of US$188 million to procure long lead
equipment and commence process plant foundation works. The
additional US$4.9 billion investment for Jansen Stage 2 will be
used for the development of additional mining districts, completion
of the second shaft hoist infrastructure to handle higher mining
volumes, expansion of processing facilities and the addition of
more rail cars.
Westshore Terminals, in Delta, British Columbia, remains BHP's
main port facility to ship potash from Jansen to customers. The
Jansen Stage 2 investment includes funding to increase storage
facilities at the port. BHP will not be initiating a formal
capacity extension for the Westshore port terminal at this time and
will evaluate closer to Jansen Stage 2 reaching first
production.
Jansen has been designed with a focus on social value and
sustainability and is expected to have approximately 50% less
operational (Scopes 1 and 2) greenhouse gas emissions per tonne of
product and use up to 60% less fresh water when compared to the
average potash mine in Saskatchewan. Indigenous employee
representation at Jansen has increased to approximately 9% with a
target to increase Indigenous employee representation at Jansen to
20%. Jansen aspires to maintain a gender balanced workforce.
Jansen Stage 2 was evaluated utilising BHP's Capital Allocation
Framework and at consensus prices has an internal rate of return of
15% to 18% and an expected payback period of approximately six
years from first production(3) . Underlying EBITDA margins for
Jansen Stage 1 and Stage 2 of approximately 65% to 70% are expected
due to a low-cost position of US$105 to US$120/t(4) .
Transitioning to Jansen Stage 2 during the construction period
of Jansen Stage 1 is expected to bring a number of operational
benefits. These include leveraging the experience of the integrated
Jansen project team, continued use of existing contractors, reduced
overheads and savings on mobilisation and demobilisation costs.
Potential synergies of US$0.3 billion have been embedded into
Jansen Stage 2's economics.
Longer term, Jansen has the potential for two additional
expansions to reach an ultimate production capacity of 16 to 17
Mtpa (subject to studies and approvals).
The Jansen Mineral Resources and Jansen Ore Reserves as at 30
September 2023 and the report issued in support of the declaration
of Mineral Resources and Ore Reserves that accompanies the
investment in the Jansen Stage 2 project can be accessed via BHP's
website at https://www.bhp.com and has been submitted to the FCA
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Footnotes
1. Jansen Stage 1 production capacity was reduced by 0.2Mt by
deferring the investment in the recovery circuit in order to enable
better capital efficiency outcomes and capture economies of scale
by having a combined circuit for Jansen Stage 1 and Stage 2.
2. Expected capital intensity for Jansen Stage 2, US$/product tonne, Real 1 July 2023.
3. Price assumptions reflect the average of Argus and CRU
prices. Jansen Stage 2 internal rate of return range is post-tax,
nominal and reflects Argus and CRU prices (Average 2029-2039:
US$369/t Argus and US$466/t CRU). The internal rate of return is
the expected internal rate of return based on incremental Jansen
Stage 2 cashflow across approximately 50-year mine life.
4. Operational expenditure includes costs relating to the Jansen
mine and port and rail costs, excludes carbon tax, Real 1 July
2023.
Authorised for release by Stefanie Wilkinson, Group Company
Secretary.
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