REG - BHP Group Limited - BHP approves investment in Jansen Stage 2

BHPAnnouncement

31/10/2023 07:45

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RNS Number : 8405R  BHP Group Limited  31 October 2023

Exchange release

31 October 2023

 

BHP approves US$4.9 billion investment in stage two of Jansen potash project

BHP has approved an investment of US$4.9 billion (C$6.4 billion) for stage two
of the Jansen potash project (Jansen Stage 2) in Saskatchewan, Canada.

This follows BHP's approval of US$5.7 billion (C$7.5 billion) for stage one of
the Jansen potash project (Jansen Stage 1) in August 2021 and a pre-Jansen
Stage 1 investment of US$4.5 billion (C$4.9 billion).

BHP Chief Executive Officer, Mike Henry said:

"This is an important milestone that underscores our confidence in potash and
marks the next phase of the company's growth in Canada. We believe Jansen will
deliver long-term value for shareholders and the local community, and will
position BHP as one of the leaders in the global potash industry.

The stage two investment advances BHP's strategy to increase its exposure to
commodities positively leveraged to the global megatrends of population
growth, urbanisation, rising living standards and decarbonisation. Potash,
used in fertilisers, will be essential for food security and more sustainable
farming.

Today's additional investment will transform Jansen into one of the world's
largest potash mines, doubling production capacity to approximately 8.5
million tonnes per annum (Mtpa)(1).

We are advancing our sustainability and economic development priorities for
Jansen and we are pleased with the progress of our ongoing work with the
Governments of Canada and Saskatchewan, as well as local and Indigenous
communities on shared solutions."

Jansen Stage 1 is 32% complete and progressing in line with its schedule.
First production from Jansen Stage 1 is expected to be delivered in late
CY2026. Construction of Jansen Stage 2 is anticipated to take approximately
six years, and is expected to deliver first production in FY2029, followed by
a ramp up period of three years.

Jansen Stage 2 is expected to deliver approximately 4.36 Mtpa of production at
a capital intensity of approximately US$1,050/t, lower than Jansen Stage 1,
due to the leveraging of existing and planned infrastructure(2). In October
2022, BHP approved an initial funding commitment of US$188 million to procure
long lead equipment and commence process plant foundation works. The
additional US$4.9 billion investment for Jansen Stage 2 will be used for the
development of additional mining districts, completion of the second shaft
hoist infrastructure to handle higher mining volumes, expansion of processing
facilities and the addition of more rail cars.

Westshore Terminals, in Delta, British Columbia, remains BHP's main port
facility to ship potash from Jansen to customers. The Jansen Stage 2
investment includes funding to increase storage facilities at the port. BHP
will not be initiating a formal capacity extension for the Westshore port
terminal at this time and will evaluate closer to Jansen Stage 2 reaching
first production.

Jansen has been designed with a focus on social value and sustainability and
is expected to have approximately 50% less operational (Scopes 1 and 2)
greenhouse gas emissions per tonne of product and use up to 60% less fresh
water when compared to the average potash mine in Saskatchewan. Indigenous
employee representation at Jansen has increased to approximately 9% with a
target to increase Indigenous employee representation at Jansen to 20%. Jansen
aspires to maintain a gender balanced workforce.

Jansen Stage 2 was evaluated utilising BHP's Capital Allocation Framework and
at consensus prices has an internal rate of return of 15% to 18% and an
expected payback period of approximately six years from first production(3).
Underlying EBITDA margins for Jansen Stage 1 and Stage 2 of approximately 65%
to 70% are expected due to a low-cost position of US$105 to US$120/t(4).

Transitioning to Jansen Stage 2 during the construction period of Jansen Stage
1 is expected to bring a number of operational benefits. These include
leveraging the experience of the integrated Jansen project team, continued use
of existing contractors, reduced overheads and savings on mobilisation and
demobilisation costs. Potential synergies of US$0.3 billion have been embedded
into Jansen Stage 2's economics.

Longer term, Jansen has the potential for two additional expansions to reach
an ultimate production capacity of 16 to 17 Mtpa (subject to studies and
approvals).

The Jansen Mineral Resources and Jansen Ore Reserves as at 30 September 2023
and the report issued in support of the declaration of Mineral Resources and
Ore Reserves that accompanies the investment in the Jansen Stage 2 project can
be accessed via BHP's website at https://www.bhp.com (https://www.bhp.com)
      and has been submitted to the FCA National Storage Mechanism and
will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)

 

Footnotes

1.   Jansen Stage 1 production capacity was reduced by 0.2Mt by deferring
the investment in the recovery circuit in order to enable better capital
efficiency outcomes and capture economies of scale by having a combined
circuit for Jansen Stage 1 and Stage 2.

2.   Expected capital intensity for Jansen Stage 2, US$/product tonne, Real
1 July 2023.

3.   Price assumptions reflect the average of Argus and CRU prices. Jansen
Stage 2 internal rate of return range is post-tax, nominal and reflects Argus
and CRU prices (Average 2029-2039: US$369/t Argus and US$466/t CRU). The
internal rate of return is the expected internal rate of return based on
incremental Jansen Stage 2 cashflow across approximately 50-year mine life.

4.   Operational expenditure includes costs relating to the Jansen mine and
port and rail costs, excludes carbon tax, Real 1 July 2023.

 

 

Authorised for release by Stefanie Wilkinson, Group Company Secretary.

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