BHP shares posted their steepest single-day decline in 14 months on Friday after the world’s largest miner flagged a $2.3bn writedown on its Jansen potash project in Canada, reported Bloomberg News.
Shares fell 5.6% in Sydney on Friday, while BHP’s London-listed stock dropped 4.4% on Thursday amid another round of cost and schedule overruns at the Saskatchewan development project. Its phase two development will now cost $6.9bn, up from a previous estimate of $4.9bn, with first production pushed to late 2031, said Bloomberg News.
Barclays estimates the company has spent $20.3bn on Jansen to date, of which $4.1bn has now been impaired. The bank’s analysts calculate a combined internal rate of return of 7.1% across both development phases, roughly half of BHP’s own earlier projections, and flagged upside risk to medium-term capital expenditure guidance.
BHP approved the Jansen mine in 2021 after years of investor scepticism over its price tag, then accelerated into a phase two expansion in 2023 — before phase one had produced a ton — as fertiliser prices spiked following Russia’s invasion of Ukraine. Prices have since retreated while costs across both phases have continued to escalate.
BHP regards Jansen as a century-long asset with the potential to eventually rival its Australian iron ore business in scale. First output from phase one is expected next year, said Bloomberg News.
