KEY POINTS
- The cost to build Jansen’s next stage has blown out again, and BHP is taking a US$2.3 billion write-down.
- This is the third time the project has cost more or taken longer than promised, which is a fair worry.
- The hit is mostly a paper loss, not lost cash. BHP’s spending plans and dividend stay safe, paid for by iron ore and copper.
- We think the drop is a buying chance for patient investors, but the risks are worth watching.
BHP (ASX:BHP) shares fell 5.6% to close at A$61.40 on Friday, their worst day since March, after another snag at its giant potash project in Canada, known as Jansen. The cost of building the mine’s next big stage has jumped to nearly US$7 billion, forcing BHP to take a US$2.3 billion hit to its books, and that expansion is now delayed by two years to around 2031.
One thing investors might miss: the mine’s first stage is still on track to start producing in 2027, so the project is far from frozen. The slip came just days after the stock touched a record high, so investors are asking one simple thing: Is this a real warning sign or a dip worth buying?
Three Strikes at Jansen: The Real Red Flag for Investors
The bigger story is not the number, but the fact that it keeps happening. This is the third time BHP has overspent or run late at Jansen. The cost has climbed more than 40% since the project was approved in 2023.
For a company that likes to be seen as careful with money, that is not a good look. Each delay pushes back when BHP earns anything from the expansion, which now will not produce until around 2031. The yearly return BHP now expects from this stage is a thin 11%, a sign that rising costs have eaten most of the easy money.
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Why BHP Is Betting Billions on the World’s Fertiliser
So why not just walk away? Because the prize is big. Potash is used to make fertiliser, which farmers need to grow more food. As the world’s population grows, demand should keep rising for decades. BHP believes Jansen will one day produce about 10% of the world’s potash cheaply, with strong profit margins. In our view, the long-term logic makes sense, even if the road there keeps getting pricier.
There is also an interesting twist. This mess lands right on the desk of BHP’s new boss, Brandon Craig, who takes over on 1 July, before he has even properly started. How he handles Jansen will be an early test of whether he can finally stop the cost surprises.
The Investor’s Takeaway: Buy the Dip or Steer Clear?
Here is the key point: the US$2.3 billion hit is mostly an accounting move, not real cash leaving the business. BHP’s spending plans for next year are unchanged, and its dividend is still funded by its two cash machines, iron ore and copper, not potash.
For long-term investors, we believe Friday’s drop looks more like a chance to buy than a reason to panic, especially after the stock just hit a record high. More cautious investors might prefer to wait. The risks are real: workers at BHP’s key iron ore port have voted to strike, Jansen could blow out again, and a weaker iron ore price would sting. The next big update comes in mid-July, when BHP reports its full-year output.
