At the Lanigan Town Hall Meeting last Tuesday, May 28th, a number of local industries were on hand to provide updates. Among them was BHP, represented by Ken Smith who is manager of corporate affairs for BHP.

Foremost on the minds of attendees was the viability of the Jansen Lake Mine project in light of a comment made by BHP CEO Andrew Mackenzie to colleagues at a mining conference in Barcelona. Mackenzie was quoted as saying that BHP had "overinvested" in the initial phase of the project, but he also made it clear to investors and industry officials that the company continued to view the project as "attractive". Given that a final decision regarding completion and targeting a production start date rest in the hands of BHP's Board with no official timeline, both analysts and residents in the mine's impact region have been more than curious.

On Tuesday, Smith provided some interpretation for Mackenzie's statement. Smith began with an overview of progress to this point, noting that 2018 was a year of highlights. Contractors DMC have reached the target depths for both the service shaft at 1005 metres and the production shaft at 975 metres. A second contractor, TRL, has successfully removed the boring equipment leaving the company in a position to install the final liners. The shafts intersected the Patience Lake potash layer which represented the first strike of potash for the mining giant. 

With a little less than two years remaining on the completion of the work and 300 workers onsite, mostly outside contractors, there is considerable pressure to come to a determination on the go-ahead for production. Another 200 employees at the corporate centre in Saskatoon are working with on-site crews to build the business case that will be presented to the BHP Board. Regarding the sanction decision, Smith stated, "We don't have timing on that decision date; it is not imminent. But we continue to work towards enhancing the project so that it meets our capital allocation framework which is the guideline the company follows for any new investments it undertakes."

When it comes to expenditures and projections, Smith was clear that BHP considered the Jansen Lake project a major commitment. To date, the company has put approximately $3.9 billion US into construction thus far with a capital investment projection of an additional $5.3 - 5.7 billion US. In response to Mackenzie's statement, Smith addressed the magnitude of the project overall, but he focused on the Discovery Lodge Project. Discovery Lodge has been built to accommodate a projected 2,500 people during the construction phase of the mine if and when the production facilities go ahead. Smith noted, "At the current time, we have about 230 to 250 residing at the camp. So of course, we have a facility where we are currently using less than 10 percent." This specific instance brings exemplifies the over-investment perception.

An additional key "upfront" investment was for new boring technology. Smith explains, "The shaft boring roadheader  (SBR) technology we deployed has now been exported internationally to other operations. The expenditure and some of the lessons learned in employing the new technology were part and parcel of the comments in our CEO's statement."

Notwithstanding the comments, BHP insists that both the mine and the potash industry, in general, remain attractive for investors in spite of the current state of over-supply. As Smith states, "We know that by the year 2050, there will be another 2.5 billion people in this world. We do see the demand for potash increasing over time. We've seen a 2.2 to 2.3 percent growth on an annual basis, and at some point during the 2020s we do feel that the demand is going to intersect the available sources and supply. Jansen Lake is very well placed for the timing of that."

Smith maintained the BHP executives continue to work on building the most attractive business case possible. While no official timeline for the sanction decision is on the books, some industry analysts predict that further capital demands will require a decision as early as next year.