As iron ore prices continued its dramatic retreat in August, BHP Billiton (ASX,LON,NYSE:BHP) finally decided to put its $20 billion export terminal project at Port Hedland on ice.
Of the global number one miner's mega-projects Outer Harbour was always thought to be the one investment to to survive the restructuring of its $80 billion capex program, but it was not to be.
From the start of BHP's "austerity" program the Olympic Dam uranium-copper-gold project looked the most vulnerable. Last week the company confirmed it's going back to the drawing board on the $30 billion expansion with 2016 probably the earliest Olympic Dam could resurface.
That left BHP's Jansen potash project in Canada.
After deciphering a briefing paper BHP Billiton handed out to the company's largest investors the Sydney Morning Herald believes the one multi-billion dollar project that will be approved sooner rather than later is Jansen:
Yesterday's briefing paper describes the outlook for potash as "attractive", and says work designing the Jansen project and obtaining government approvals was continuing apace.
The documents said BHP was "well placed to meet growing potash demand" and that "final investment decision remains subject to board approval".
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The mood of the briefing paper fits with a recent observation by analysts at Macquarie, whose interactions with BHP left them convinced that Jansen was now "leading a one-horse race" for project approval inside BHP.
The greenfield project was the response of CEO Marius Kloppers to Canada's blocking of its hostile takeover bid for Potash Corp of Saskatchewan.
The company has already spent more than $1.2 billion to bring the project to the feasibility stage and has undertaken some construction.
Jansen has the potential to become the world's biggest potash mine and could cost as much as $12 billion to construct.
What makes Jansen attractive is that start-up could happen as early as 2015 (and a 70-year mine life doesn't hurt either).
Kloppers and BHP management must also have been keeping a close eye on happenings at Russian giant Uralkali.
While BHP weighs its options, Vale (VALE:NYSE) puts off potash projects and Potashcorp (TSX:POT) idles mines, Uralkali has been expanding production and reaping windfall profits thanks to the fattest margins in the industry.
Global demand for potash is between 50–60 million tonnes per year and the fundamentals of the industry are stil strong. After trading in the $500–$540 a tonne range for most of 2011, the price of soil nutrient has steadily declined this year to its current levels of $460–$470 a tonne. Hardly comparable to the recent iron ore slump.
Uralkali mines potash for just $65 a tonne. If BHP can get even close to those kind of production costs and break the grip of the supposed global potash cartel it's easy to see why Jansen is making a comeback.
It would also be sweet revenge for the Anglo-Australian miner to put up shop in Potaschcorp's backyard after being so summarily dismissed two years ago.
And it would be a fitting response to Potashcorp's brash CEO Bill Doyle who famously said in May of Jansen "we’ll believe it when we see it" and that "they [BHP] can’t make the numbers work."