BHP Billiton to stall Jansen potash production

By Yoke Wong
Published: Tuesday, 27 September 2016

Jansen project to be stalled; BHP blames weak demand; Partner being sought

Anglo-Australian mining giant BHP Billiton may put the completion of its Jansen potash mine in Saskatchewan, Canada on hold, the company told IM.   
The mine is anticipated to have an annual potash output of 8-10m tpa once the infrastructure and production facilities are completed. The project was started in 2011 and, according to the company, the site has the potential to become the world’s largest underground potash mine.

"BHP Billiton will be sinking two shafts in Jansen, that would be 60% complete. We would decide whether we would invest further in the mine," a company spokesperson told IM. "We will only invest if we can see good return."

BHP Billiton’s decision was primarily driven by declining potash prices. Long-term supply contract prices have fallen by at least 30% year-on-year (y-o-y). Potash producer Belarusian Potash Co. (BPC) first announced at the end of June that it would be supplying potash to Indian Potash Ltd (IPL) at $227/tonne on a CFR India basis for 2016/17. The price was a 32% decline on 2015 contracts, which were signed at $332/tonne.

The Jansen mine shaft. BHP Billiton says there is no "hard date" for
the project start up.
BHP Billiton 

In July, Chinese buyers also finalised agreements with BPC at $219/tonne CFR for the rest of 2016, compared with $315/tonne last year. This was followed by ICL’s announcement that it too had concluded a 700,000 tonne contract with China.

China is the biggest potash buyer in the world and Chinese potash agreements are an important indicator of global fertiliser demand. Chinese contracts are traditionally signed earlier in the year, but this year contracting was delayed due to industry destocking during the first quarter.

BHP Billiton is also seeking a joint venture (JV) partner to invest in the project, but the company declined to provide an update on this.  

Potash output at the Jansen mine will also be reduced when production starts, but BHP Billiton said there is "no hard date" for the project completion and start-up.

Amid global oversupply and weak fertiliser demand, producers worldwide are either cutting output or delaying the start of new production. German salt and potash producer K+S announced in August that it will postpone production at its Legacy potash mine in Saskatchewan to the second quarter in 2017, six months later than its original planned date.

K+S restarts potash production in Germany

  • Potash operations resumed
  • Full capacity hard to reach
  • Delays in deliveries to continue

Yoke Wong

German fertiliser and salt producer K+S AG restarted potash production at its Unterbreizbach site in Germany on 22 August following government approval for temporary waste water storage at a nearby mine.

Thuringia State Authority granted permission to K+S to store up to 200,000 cubic meters of waste water from the Unterbreizbach site at the nearby Springen mine field on 18 August, according to the company release.

However, the two Werra plants at the Unterbreizbach site will not become fully operational until K+S receives government’s approval to dispose of a higher volume of waste water in the deep well.

K+S would usually dispose its salt water waste into the Werra river but it has been restricted due to low water levels during the summer season. Meanwhile, K+S’s deep well injection licence also limits the volume of waste water disposal, which has caused production to halt.

K+S has applied to lift its waste water disposal quota via injection wells but the licence is subjected to government approval.

As potash production at the Unterbreizbach site has been down for 50 days this year the mine is unlikely to reach its 600,000 tpa capacity, a K+S spokesperson told IM on 22 August.  

Due to the on-going output disruptions at the site, K+S has been meeting existing contractual orders partially from inventories and also by raising production at other sites, the spokesman said. 
"For some customers, delays [in delivery] cannot be avoided," K+S company spokesman added.

Following its closure on 15 June, operations at its neighbouring Hattorf site are still suspended with the exception of Epsom salt production.

Output at the company’s Wintershall site, which produces speciality fertiliser and is the only facility producing pharmaceutical salt, also resumed on 22 August following a maintenance shut down.

The unplanned outage at Unterbreizbach has cut potash, sulphur and magnesium product output by 400,000 tonnes, compared to the same period in 2015, and has also negatively impacted the group’s performance, according to the company’s second quarter financial results.