Key Takeaways:
BHP Group will take a $2.3 billion writedown on its Jansen potash mine in Canada after the Stage 2 expansion cost estimate jumped to $6.9 billion, the company said Thursday.
"The increased estimate reflects additional construction hours and quantities of materials required to complete Jansen Stage 2, as well as cost escalation identified during a comprehensive review," BHP said in a statement.
The new $6.9 billion price tag compares with an earlier forecast of $4.9 billion when the project was sanctioned. Stage 2 is now expected to start producing toward the end of 2031, with a two-year ramp-up period. As of the end of May, the expansion was 16 percent complete, with engineering 83 percent finished, according to the company.
The writedown and delay threaten to undermine BHP's long-running bet on potash as a diversification away from iron ore and coal. Combined output from Jansen Stage 1 and Stage 2 is expected to reach 8.5 million tonnes a year, representing about 10 percent of global potash production, with future expansions potentially pushing the site to between 16 million and 17 million tonnes.
Jansen Stage 1 on Track Despite Stage 2 Setback
Stage 1 of the Jansen project remains on schedule for first production in mid-2027, BHP said, with critical path milestones being met under the updated January 2026 cost and schedule estimate. The company maintained its group capital expenditure guidance for the 2027 financial year at about $11 billion.
Stage 2 has an updated internal rate of return of 11 percent and an expected payback period of eight years. Underlying earnings margins remain above 65 percent, supported by the mine's low-cost position, BHP said.
Peer Context and Market Implications
Once both stages are operational, the combined Jansen mine is expected to be the lowest unit-cost Canadian potash mine at between $114 and $130 per tonne, in line with estimates at sanction. That positions it competitively against Nutrien Ltd. and Mosaic Co., the dominant North American potash producers, whose costs have risen amid inflationary pressures on labor and inputs.
The delay in Jansen Stage 2 pushes back a significant source of new potash supply, which could provide near-term support for potash prices. Global potash markets have been volatile since the Russia-Ukraine war disrupted supplies from Belarus and Russia, two of the world's largest producers.
This article is for informational purposes only and does not constitute investment advice.
