Australian mining firm BHP Billiton has committed US$240 million to move toward entering potash mining in Saskatchewan, an industry now dominated by a small clutch of players.
This initial sum is meant to “support the development of the first stages” of a mine near Jansen, Sask., about 65 km southeast of Humboldt. The funding will “facilitate the early stage work for the establishment of the production and service shafts.”
Billiton’s Jansen project is far from a done deal, as the company is now in the final stages of a “pre-feasibility” study. It expects to move to the “feasibility” phase sometime in mid-2010 and make a “full investment decision” in late 2011. It also expects to have the necessary environmental permits in hand by mid-2011.
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Billiton said its first $240 million in funding will be used to start the ground freezing needed for “safe and effective” shaft sinking to take place. It will also pay for the engineering, equipment and materials commitments and “other elements” that would allow the shaft sinking to begin once environmental permits are in place.
The Jansen project is being designed to produce about eight million tonnes of farming-grade potash per year, the company said in a release Wednesday.
Billiton, which bills itself as the “world’s largest diversified natural resources company,” now holds about 7,338 square kilometres under exploration lease in Saskatchewan’s potash basin, in areas considered the “most promising” for economically viable potash deposits.
The company completed exploration at its Jansen site last April, and started its pilot hole drilling program there in October.
“Other opportunities”
“The Jansen project is the first phase of what we expect to be our strong presence in the potash sector,” Graham Kerr, Billiton’s president for diamonds and specialty products, said Wednesday.
“In conjunction with the Jansen project, we will continue to pursue other potash opportunities that fit within our portfolio of Tier 1, long-life, export-oriented assets.”
Those include two other sites near Nokomis and Young, Sask., where Billiton said it’s now pursuing greenfield potash projects “in parallel” with the Jansen project, and is also advancing work on logistics and a port. An exploration project began in November for its Boulder site, near Nokomis.
Billiton’s interest in Saskatchewan potash dates back to 2006, when it formed a joint venture with Anglo Potash to evaluate land for potential mining projects. Billiton bought out Anglo’s 25 per cent stake in the venture in 2008 and became the project’s sole owner.
“BHP Billiton is not just hoping to open a mine, we want to start a Saskatchewan business,” the company said on its website.
“800-pound gorilla”
At least one potash market analyst suggests Billiton could potentially start much more than that, bringing a powerful mining player into a market now shared by just a few firms including Saskatoon’s PotashCorp and Minneapolis-based Mosaic.
Citing Billiton’s announcement, as well as mining giant Vale’s plans to buy Bunge’s fertilizer business in Brazil (including a 42 per cent stake in Fosfertil), New York investment bank Dahlman Rose said Wednesday it would look for both companies “to operate away from the oligopoly as they try to enter the market and take share.”
Even by 2015, when both companies could potentially have potash available, “there will still be plenty of slack (potash production) capacity in the world,” Dahlman Rose wrote in a report subtitled “The 800-Pound Gorilla Has Entered The Room.”
