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BHP says Jansen lessons key to cost control POTASH
| Americas head explains $1.7B budget overrun
BY FRÉDÉRIC TOMESCO
B
HP (NYSE, LSE, ASX: BHP) wants to use lessons from its maiden foray into potash production to ensure that a subsequent expansion of the facility is completed at or under budget. The world’s biggest miner in July disclosed a $1.7-billion (C$2.38-billion) cost overrun in the development of its Jansen potash mine in Saskatchewan as it pushed first production back by six months to mid2027. The project’s first stage – known as Jansen 1 – is now expected to cost as much as $7.4 billion, up from a previous target of $5.7 billion. Capital expenditures for a second stage, whose entry into service was delayed by two years to 2031, are still pegged at $4.9 billion, though the amount is under review. Located about 140 km east of Saskatoon, Jansen is crucial to BHP’s ambitions of building a significant footprint in potash – a new commodity for the mining behemoth. The investment, the largest in Saskatchewan’s history, is part of an effort by BHP to shift its portfolio away from steelmaking materials and towards what executives call “future-facing commodities” such as copper and potash. About 65% of BHP’s capital will be invested in these sectors over the medium term, the company said this year. “We’ve had a lot of learnings from Jansen 1 in terms of what drove those cost pressures,” Brandon Craig, BHP’s president for the Americas, told The Northern Miner by phone. “We want to take all of that and apply what we understand about Jansen 1 to Jansen 2.” Modules Greater use of modular construction will be key to BHP’s efficiency ambitions for the project’s second stage, Craig said by phone in November. He likens the process to building a structure with Lego blocks, adding that BHP’s assembly facility in Edmonton will play a key role.
“The more you can push into the module, the less work you have to do on the site itself,” he said. “If you can pre-fit out in a factory a very large amount of the project build and transport it to the site, where you use very large cranes to erect that module, all you have to do is bolt it on site. The less you pre-fit out, the more labour hours you have to consume on the site itself.” BHP is aiming to disclose an updated capital estimate for Jansen’s second stage by June 30, the executive said. While a two-year
“We want to take [what we learned] and apply what we understand about Jansen 1 to Jansen 2.” BRANDON CRAIG PRESIDENT FOR THE AMERICAS, BHP
postponement will probably result in higher costs, some savings could still materialize, he stressed. “We want to do the work first to make sure we have a degree of confidence in the accuracy,” he said. “The team is working quite hard at understanding how we can really improve the productivity. Whether
that’s sufficient to offset the inflationary effects, we will see.” Major producer Stage 1 of Jansen is almost threequarters complete, while Stage 2 is 13% done, BHP said Oct. 21. Once fully ramped up, Jansen will become one of the world’s largest potash mines, producing about 8.5 million tonnes of the fertilizer annually – equivalent to about 10% of global supply. Crews reached a key milestone in August with the installation of a new 50-metre-tall steel headframe – the equivalent of a 16-storey building. Most of the steel was made in Canada before being shipped to the mine site. With major steel construction almost done, focus will now BHP 40 >
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BHP’s Jansen potash project in east-central Saskatchewan. BHP PM44082538