BHP signals commitment to Port of Vancouver project

Mining giant's $2.6B investment bodes well for potash export facility

By Aaron Corvin, Columbian port & economy reporter

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Global mining giant BHP Billiton says it will spend $2.6 billion over the next several years to complete work on a portion of its Jansen mine in Canada's Saskatchewan province. It's a step, the Port of Vancouver said Wednesday, that indicates the company's commitment to building an export facility at the port's Terminal 5 to ship potash — a crop nutrient — primarily to Asian markets.

"Port leadership will be meeting with BHP Billiton later this week in Houston and should have a better understanding of the implications of this latest announcement for the port," Katie Odem, a spokeswoman for the port, said in an email to The Columbian. "We continue to work closely with BHP Billiton on their plans and on a ground lease agreement at Terminal 5."

BHP's announcement that it will invest in finishing the excavation and lining of the Jansen mine's production and service shafts — in addition to surface infrastructure and utility work — contrasts with initial concerns by analysts that the company might pull the plug on the project. Those concerns were prompted by the collapse in July of an influential producer cartel, which some analysts said could slash prices for potash.

In a news release issued Tuesday, BHP, based in Melbourne, Australia, said the long-term outlook for potash remains strong. "As the world's population grows and incomes in emerging economies improve, agricultural demand is expected to rise," the company said. "This will increase the need for potash and require the construction of new mines."

The company also said it's open to taking on a partner in its Jansen project.

In 2010, BHP selected the Port of Vancouver's Terminal 5 as its preferred site for a new potash-export facility. The port originally anticipated securing a final lease deal with BHP at the end of 2012. Construction would have followed shortly thereafter. But softening global demand for commodities forced the company to delay its plans.

Odem said Wednesday that construction is now expected to begin in 2014, "with operations commencing as early as 2017."

At stake is a project that's expected to generate thousands of temporary construction jobs, trigger at least $250 million in private capital investment and lead to a lucrative long-term lease deal for the port. The port hopes to have lease terms in place by the end of October.

At full build-out, Odem said, BHP plans to move 8 million metric tons of potash through the port annually.

BHP's decision to pour $2.6 billion, spread out over several years, into the Jansen site brings the company's total commitment to the mine to about $3.8 billion, the company said.

BHP's plan to produce potash from the Jansen mine could cost as much as $15 billion, according to Bloomberg.com.

"Investment at Jansen is creating a valuable asset and we will continue to pursue a development path that maximizes returns for shareholders," BHP CEO Andrew Mackenzie said in the news release. "In time, this may include the introduction of one or more partners, consistent with our approach for other major operations."

A potash export-facility isn't the only project planned for the port's 218-acre Terminal 5.

It's also where Tesoro Corp. and Savage Companies want to build part of a controversial oil terminal capable of handling as much as 380,000 barrels of crude per day — the largest in the Pacific Northwest.

Odem said Terminal 5 "will provide property and rail access to accommodate both the BHP Billiton potash storage and dock facilities" and the "rail transload facility" for the oil-by-rail Tesoro-Savage operation, which would encompass other port sites for a total of 42 acres.

Aaron Corvin: http://twitter.com/col_econ; http://on.fb.me/AaronCorvin 360-735-4518;; aaron.corvin@columbian.com