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BHP Dreams of Five More Potential Mines in Saskatchewan

The world's biggest miner says there is the potential for several new potash mines to be built in Saskatchewan, but it's taking a measured approach an ambitious dream.

SASKATOON — The world's biggest miner says there is the potential for several new potash mines to be built in Saskatchewan, but it's taking a measured approach to an ambitious dream.

BHP Billiton (LSE:BLT) has about 14,500 square kilometers of land in the Prairie province and thinks there's the potential for about five more mines.

"We've got a great land position in Saskatchewan . . . and we're exploring that as fast as we can to make sure that we understand the resource that we have available to us," Chris Ryder, vice-president of external affairs for BHP in Canada, said in a phone interview Wednesday.

BHP, a British-Australian company with global operations — including diamond and potash businesses in Canada, is currently developing its Jansen mine in Saskatchewan and hopes to start producing potash in 2015.

The project is expected to employ 1,900 people during construction and create about 1,000 operational jobs once the mine has reached full capacity.

BHP has sunk $1.2 billion into the Jansen project. That includes US$488 million announced in June to support the development of Jansen in its feasibility study stage. Mine design and engineering will now be completed along with initial surface construction and the first 350 meters of shaft sinking.

Ryder said Wednesday that BHP is also exploring two other properties in Saskatchewan near Melville and Young.

"We would establish then which of those properties would follow Jansen into production — assuming that the demand scenario continues to unfold the way it has been and the way that we think it will," he said.

Demand for potash — a key ingredient in fertilizer— is rising sharply around the world as farmers seek to boost crop yields and food production.

Ryder said at least three more mines are further out on the exploration horizon and the expectation is that they would look similar to Jansen. Although he stressed that BHP is not announcing five new mines.

It all depends on the demand for potash — a key ingredient in fertilizer — market conditions and the geology.

"We're ambitious. We will build a conveyor belt of projects to feed global demand for potash but we're not going to suddenly throw a handful of mines up overnight," said Ryder.

Saskatchewan Premier Brad Wall said BHP has their own business model, but he welcomed the potential investment.

"BHP since last fall, and prior to it, has been a great corporate citizen and very good to work with, very transparent in all their dealings. And our Environment Ministry, Energy and Resources Ministries report that they're just a very good company to deal with," said Wall.

"They're considering billions of dollars of investment, thousands of people already at work, literally ... right now, even at the exploratory stage, so we're grateful they're here."

Last year, BHP failed in a $40 billion bid to buy Saskatoon-based PotashCorp (TSX:POT), the world's biggest fertilizer producer and one of Canada's best known companies.

Wall vehemently opposed the deal on the grounds Saskatchewan could lose billions in revenue from taxes and royalties if the BHP bid were successful. The premier painted the proposed takeover as anti-Canadian and said the country's strategic interests would be at risk if the province sold most of its potash industry to an international company.

Ottawa later rejected the takeover after concluding it failed to benefit Canada.

Talk of BHP's potential expansion came a day after a major Russian company and global mining giant Rio Tinto PLC — the world's No. 2 miner — said they're teaming up in a joint venture that could lead to the construction of the next big potash mine in Saskatchewan.

Financial terms of the deal between North Atlantic Potash Inc., the Canadian subsidiary of Russia's JSC Acron, and Rio Tinto were not revealed.

The Saskatchewan deal gives Rio Tinto a stake in the world's most prolific potash producing region, while the Russian company will benefit from the Anglo-Australian miner's rich cash resources and longstanding mining experience in Canada and around the world.

North Atlantic Potash holds nearly 1.1 million hectares and 26 exploration permits in the Saskatchewan potash belt.

The joint venture will cover nine permitted areas that cover about 241,000 hectares extending from the eastern shore of Last Mountain Lake southeast to Broadview in eastern Saskatchewan. The joint venture partners said they plan an extensive exploration program.

David Waugh, CEO of North Atlantic Potash, said the company will begin a drilling campaign on the company's Foam Lake exploration properties this fall.