http://www.thestarphoenix.com/index.html
Contrary to Premier Brad Wall’s spin, BHP Billiton’s decision to delay making a final go-ahead decision on the massive Jansen potash mine should not be somehow misconstrued as good news.
When the globe’s biggest mining company is suddenly struggling and putting on hold its decision to build a $13 billion mine in your jurisdiction, it’s anything but good news. If anything, the Billiton announcement adds credence to the notion that Saskatchewan’s eight-year boom might be done.
That said, Wall did provide a few compelling points as to why this isn’t necessarily the worst news. The premier’s Grant Devinesque optimism came in reaction to news emerging from Billiton’s six-month financial report, which showed a 58 per cent drop (or about $5.5 billion decline) in profits, largely due to weak prices for the copper, iron ore, coal, nickel, aluminum and natural gas it produces. As a result, the mining giant announced it was cancelling expansions to Australian iron ore and copper operations, pegged at a combined $50 billion, and would delay final approval of Jansen until next year, at the earliest.
Billiton’s Canadian officials were quick to say the company remains committed to its Saskatchewan project and would continue to spend the budgeted $1.2 billion at the Jansen site.
Also, additional engineering work will now be done so that the mine can start up at with a production capacity of four million tonnes, double the original startup projection. When at full capacity, Jansen would be the biggest potash mine in world, producing eight million tonnes annually.
This was good enough for Wall, who told reporters Wednesday that if this bad news, he’d love more of it.
But while that $1.2 billion commitment does seem huge, let’s acknowledge that Billiton has no history in potash production and is now losing close to a billion dollars a month. And it has postponed final approval of the $13 billion potash project.
Coupled with last week’s news that Brazil’s Vale SA is indefinitely postponing its $3 billion potash project at Kronau, the news clearly isn’t so good for Saskatchewan.
Wall then added to the potash confusion by musing Wednesday that his government and the potash industry are going to have to work on a new royalty structure that “is a little bit more sensitive to production than cost.”
The NDP quickly hailed this as an utter flip-flop, given the Saskatchewan Party’s campaign criticism that then leader Dwain Lingenfelter’s talk of a potash royalty review threatened mine expansion.
For the rest of this column, please go to the Saskatoon StarPhoenix website: http://www.thestarphoenix.com/news/Potash+news+negative/7137819/story.html