The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
CALGARY— BHP Billiton Ltd.’s (BHP-N60.84-0.72-1.17%) move to reconsider major spending plans may delay the construction of a promised potash mine in Saskatchewan, another sign the commodity “supercycle” is gearing down as slower global growth cools demand.
The Jansen project, estimated to cost as much as $12-billion, has the potential to become the largest potash mine in the world and is one of three major projects BHP was slated to consider for approval later this year. But comments by the global mining giant’s chief executive officer, Marius Kloppers, suggest the company could postpone such developments.
“You should not expect in the next six months any new major approval of projects,” Mr. Kloppers said in an interview with Caixin Media Co. “The economics of some of these projects has changed,” he said. “I think for the next two years, 18 months perhaps, we will just wait and see how things develop.”
Resource companies around the world have become nervous as growth in China and India cools, easing global demand for commodities. The mining industry has enjoyed an extended stretch of high prices, but this so-called supercycle has escalated capital costs and prompted some governments to raise royalty rates in an effort to cash in on the boom. Now that supplies are more closely aligned with demand and costs remain hot, megaprojects may be losing their allure.
A delay at Jansen is a “reasonable possibility,” said Joel Jackson, an analyst at BMO Nesbitt Burns. But BHP must also be mindful of its relationships in Saskatchewan, he noted.
The Jansen project played a key role in BHP’s attempt to acquire Potash Corp. of Saskatchewan Inc. (POT-T40.16-0.47-1.16%) for $38.6-billion (U.S.) in 2010 in a hostile bid. The takeover was blocked by the federal government, which had sought guarantees from BHP that it would proceed with the Jansen development. But BHP, needing to carry out due diligence, was not in a position to give such assurances.
BHP may still issue a go-ahead for Jansen by year-end, but current trends in the potash market serve as a headwind.
Shares of Potash Corp. have tumbled amid uncertain demand from major buyers of the mineral, used in making fertilizer to boost crop output, and Potash Corp. itself has curtailed some production this year.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/bhp-billiton-hints-at-jansen-potash-mine-delay/article2447917/