BHP BHP Group Ltd. CEO Mike Henry is talking down the chances of acquiring Canadian fertilizer giant Nutrien Ltd., as the world’s biggest mining company concentrates on building its own potash business instead.
In 2010, the giant 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 US$695 a ton. Last year, after major potash producer Russia invaded Ukraine, the commodity skyrocketed to about US$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.