In 2010, the giant British Australian miner attempted to buy Potash Corp. of Saskatchewan, Nutrien’s predecessor company, but the deal was blocked by the federal Conservative government as not being of net benefit to Canadians.
BHP held talks with Nutrien in 2021 around a possible joint venture on its Jansen potash project in Saskatchewan. However, discussions between the two companies eventually fizzled. BHP elected instead to go it alone on the $7.5-billion project, the most expensive the company has ever undertaken.
With BHP making steady progress on construction of Jansen in the years since and first production expected in 2026, Mr. Henry indicated in an interview with The Globe and Mail that the industrial logic for a tie-up between BHP and Nutrien has faded away.
“There’s no kind of burning desire or need,” he said. “It’s very different than we were, way back when we were still facing a decision about whether we wanted to develop through an acquisition, or through developing our own resources. That ship has sailed.”
BHP is so bullish on Jansen that it is contemplating pulling the trigger on a second phase of the mine, even before the first phase comes into production, and will make a decision on that by the end of its financial year. Under an accelerated timeline, Jansen’s Phase 2 could be up and running in 2029.
BHP is making its potash push in Canada at a time of extreme volatility in the market. When Jansen was commissioned in 2021, potash was trading at roughly $695 a ton. Last year, after major potash producer Russia invaded Ukraine, the commodity skyrocketed to about $1,200 a ton. That dynamic prodded Nutrien to embark on a major production increase. The commodity has since fallen sharply to US$350 a ton, owing to a projected global supply shortfall not panning out, and farmers cutting back on their usage.
Mr. Henry says the ups and downs of the past 18 months in the potash market are a reminder that commodities are cyclical. Investment decisions on major projects like Jansen are taken, he said, in the full knowledge of that cyclicality, and based on a call on what the long-term price of the commodity is likely to be. Mr. Henry is convinced that over time potash demand will grind inexorably higher, owing to global population growth, the increased adoption of higher-calorie diets and growing pressure on arable land. He’s confident that BHP can be cash-flow positive on Jansen through any commodity cycle, even as he admits that forecasting short-term price movements are a fool’s errand.
“No matter what price we forecast, it’s going to be wrong,” he said.
BHP is in the process of restructuring its business to reduce or eliminate its exposure to environmental, social and governance-unfriendly commodities such as oil and gas, and coal, as it pivots more toward ESG-friendly critical minerals such as potash and copper, which are also assigned a premium valuation from investors.
Canada’s Teck Resources Ltd. (TSX:TECK-B) is embarking on a similar strategy, and is auctioning off its metallurgical coal assets to double down on copper and zinc.
Mr. Henry indicated that BHP is not interested in either Teck’s existing metallurgical coal assets, or what might remain of the company after its restructuring, signalling that Teck’s copper mines would not offer the scale BHP would covet to make a difference.
Mr. Henry, a Canadian by birth, has lived in Australia for decades. Canada, he says, is considered a top-tier jurisdiction for BHP, owing in part to its skilled mining work force and its stable political system that encourages inbound investment.
“We do see Canada as being attractive for investment because it’s got the resources and talent, but it also has, in relative terms, pretty stable policies, which gives rise to greater predictability and reduces the risk associated with investment,” he said.
“We found governments at the federal level, and at the provincial level to be very pro-active about engaging with a company like BHP and trying to draw in investments.”
The federal government last year provided C$100-million in financial aid to BHP to develop Jansen.
Apart from its big bet on the Canadian potash industry, BHP has also invested in several Canadian exploration and development companies over the past few years.
BHP however last year lost out in a protracted attempt to buy Noront Resources Ltd., the Canadian junior that owns the most promising assets in Ontario’s as yet to be developed Ring of Fire region. Instead Noront went to another Australian company, Wyloo Metals Pty Ltd.
Mr. Henry who earned a chemistry degree at the University of British Columbia, joined BHP in 2003. Before becoming chief executive in 2020, he ran the company’s massive Australian minerals business.