Falling potash prices may cause BHP to mothball Jansen mine; iron ore price jumps 3% to $61.80

Because of the 38 percent drop in potash prices in the Gulf of Mexico to US$190 (A$246.86) over the past 12 months, giant miner BHP Billiton (ASX: BHP) is considering mothballing its Jansen potash mine in Canada. Other commodity prices, such as iron ore, nickel and copper, are increasing.

BHP has completed two shafts at the Jansen potash mine at a cost of about US2.6 billion (A$3.38 billion), with depths of 600 metres and 300 to 400 metres more to go, discloses Andrew Mackenzie, BHP CEO, to analysts and investors in London on Tuesday. The BHP board will decide on the fate of the project when the shafts are completed in 2018 or 2019.

Mackenzie estimates 60 percent of the Jansen mine is complete and BHP has about US$200 million (A$260 million) left in fiscal 2017 to spend. If the market is not ready for potash in three years, BHP would likely mothball the project, he says.

The BHP CEO adds the cost of mothballing would be reasonably small. “Obviously at that point we'd have to examine whether or not that was something we wanted to stay in for the long term. We have the flexibility to wait and time our entry into the market,” Australian Financial Review quotes Mackenzie.

With iron ore price jumping to a three-and-a-half-month high of US$61.80 (A$80.27), Mackenzie says the worst of the commodity cycle has ended. It is the higher price for the key steelmaking-ingredient since May 3, according to The Steel Index when price reached US$62.50 (A$81.21), reports The Australian.

Meanwhile, signals that the US interest rate would be kept placed the greenback under pressure and caused aluminium to reach a month-high level and copper to gain speculators. After copper finished slightly firmer on Monday and reached a one-month low on Friday, the benchmark copper price at the London Metal Exchange closed 0.9 percent higher at US$4,811 (A$6,231.35) a tonne.

Aluminium prices for three months in London closed one percent higher at US$1,693 (A$2,199.80), the highest since July 15. Lead logged a 0.4 percent price hike to US$1,875 (A$2,435.89), its highest price since July 21.

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Source: Bloomberg