BHP Is in Talks With Nutrien on Giant Potash Mine

BHP Is in Talks With Nutrien on Giant Potash Mine

BHP Group is in talks with Nutrien Ltd. about a potential partnership in its massive Canadian potash venture as the world’s biggest mining company moves closer to a final decision on the project.

The pair are discussing multiple options, including Nutrien becoming the operator and selling the potash through its existing channels, or the Canadian company taking a stake in the Jansen mine, according to people familiar with the matter. There is no guarantee the talks will lead to a deal, said the people, who asked not to be identified as the discussions are private.

A deal would offset BHP’s financial and operational risk, said Gavin Wendt, founding director and senior resource analyst at Mine Life Pty. “It’s a large-capex project and BHP is new to the potash space. It makes sense for it therefore to utilize Nutrien’s industry knowledge, where it is the world’s biggest fertilizer distributor.”

BHP Is in Talks With Nutrien on Giant Potash Mine

BHP has struggled with the Jansen project for years. Despite spending about $4.5 billion and digging two 1,000-meter (3,300-feet) deep shafts, it has yet to approve construction and has faced investor opposition. The miner has said it will decide around mid-year on whether to approve a further $5.7 billion in spending to bring Jansen into production.

Major potash producers could expect greater price certainty if a BHP-Nutrien deal goes ahead, “and keeps new tons marketed within the existing global structure,” said Bloomberg Intelligence industry analyst Jason Miner. “A potential Nutrien deal could lift the cloud BHP’s Jansen mine has long cast over this market,” he added.

BHP has repeatedly said it’s open to bringing a partner into the project, especially one with expertise in the fertilizer market or potash. While that’s a product it currently doesn’t mine, the Melbourne-based miner sees potash as a potential cornerstone of its future business, helping to feed a growing global population as the pressure on agricultural land increases.

Spokespeople for BHP and Nutrien declined to comment.

“We continue to like potash. We think the long-term demand and supply fundamentals for potash are attractive,” BHP Chief Executive Officer Mike Henry said at a conference last week when asked about the project. “We’ve always said we’re open to partnering, but the project doesn’t need a partner to proceed.”

Nutrien shares in Toronto rose 1.5% to C$73.90 ($61) on Wednesday. BHP shares rose as much as 3.4% in London on Thursday after gaining 1% in Sydney.

Changing Tone

Should an agreement be reached with BHP, it would mark a sharp reversal in Nutrien’s attitude. The company has been an outspoken critic of the project for years, saying its development would flood the market with unneeded potash. Yet Nutrien’s tone has changed since Mayo Schmidt replaced Chuck Magro as CEO earlier this year.

Nutrien -- formed in 2018 from the merger of two large Canadian agriculture firms, Potash Corp. of Saskatchewan and Agrium Inc. -- said this month that the market could cope with the tons from Jansen if mined in a “disciplined” way. The price of potash tumbled to 10-year lows in April last year amid the pandemic, but has since recovered as a global rally in food prices boosted demand.

BHP’s willingness to explore partnership options with an established producer such as Nutrien would indicate that it’s working to limit potential market disruption that could be caused by Jansen, RBC Capital Markets analyst Andrew Wong said in a note. That’s “incrementally positive to the longer-term potash market outlook,” he said.

©2021 Bloomberg L.P.