* CEO sees Jansen as a good project
* BMO report says better to return cash to shareholders
By Clara Ferreira-Marques
LONDON, Oct 25 BHP Billiton
said on Thursday it won't decide soon on whether to build the
world's biggest potash mine in Western Canada, a project some
say would exacerbate a global glut of the fertilizer nutrient.
In late August, BHP pushed back to at least June 2013 a
decision on building an 8 million-tonne mine at Jansen,
Saskatchewan, but emphasized it would still proceed with
construction and was planning to double the first phase of
production. The Anglo-Australian mining giant has been aiming to
start production in 2015.
The emphasis appeared to shift on Thursday, when Chief
Executive Marius Kloppers made remarks that suggested there's
little urgency to proceed.
"The guys still have their lease agreements to complete,
they have a substantial amount of engineering to complete," he
said when speaking to reporters after BHP's annual meeting in
London. "We do have quite some time ahead of us before we need
to consider additional approvals."
Kloppers said the company still considers Jansen "a good
project" but added, "we approve only projects that are
value-creating for our shareholders."
BHP continues to dig two shafts and build surface facilities
at the mine site. Analysts estimate the mine could cost up to
$14 billion to complete.
Kloppers' comments follow a report this week by BMO Capital
Markets that concluded BHP should shelve Jansen, which it said
would not provide an attractive return, and instead return cash
The next best option would be buying U.S. potash producer
Mosaic Co, the report said.
The world's potash capacity surplus looks to climb as high
as 19.3 million tonnes by 2020 from 11.3 million tonnes in 2012
due to expansions and potential new mines, including Jansen, and
Jansen's capacity will not be needed for at least another
decade, BMO said.
"We believe that the worst option is to build Jansen,
although this may well be what BHP intends to do," BMO analysts
Joel Jackson and Tony Robson wrote.
If BMO's estimates of rate of return prove correct, which
BHP disputes, the Jansen project would not get approval, said
chairman Jac Nasser.
"Those numbers, I can tell you, would not pass muster,"
Nasser said at the meeting. "You can feel very comfortable, that
if that is the presentation, if that is the proposal, to
management first and the board second, it won't pass the first
Demand for potash has been rising due to a growing global
population, rising incomes in developing countries and a
declining amount of arable land. But planned new supplies may
outstrip that demand growth.
Germany's K+S AG has started building a potash
mine in the Western Canadian province of Saskatchewan, home to
more than 40 percent of the world's potash reserves. Other mines
under construction include EuroChem's project in
Russia, a Vale SA mine in Argentina and Intrepid
Potash Inc's small mine in the U.S. state of New Mexico.
The Canadian government blocked BHP's hostile takeover bid
in 2010 for top potash producer Potash Corp of Saskatchewan