Paul Bagnell

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“Maybe in the intervening 11 years, they learned something about potash.”

Those words were spoken by Bill Doyle – the former chief executive officer of Potash Corporation of Saskatchewan – in an interview Wednesday. He was talking about BHP Group Ltd. Doyle has never soft-pedalled his view on the global potash industry. And he’s been notably blunt about one potash project in particular – the Jansen mine project that was given final approval by global mining giant BHP on Tuesday.

In an interview on Wednesday, Doyle had plenty to say about BHP’s rocky history in Saskatchewan’s potash sector.  He praised BHP for scaling back its previously grandiose ambitions for Jansen, but nonetheless said the mine will be the most expensive in the world – putting BHP at the mercy of world potash prices.  He urged BHP to get some potash-expertise in its management ranks and suggested BHP may view Jansen as a costly mistake into which it now has little choice but to keep pouring in billions of dollars.

Doyle, of course, was CEO of Potash Corp. in 2010, when BHP launched a hostile takeover offer for the company.  The attempt failed when Ottawa blocked it on the grounds it would not provide a “net benefit” to Canada.

BHP’s Plan B has been Jansen – a huge potash deposit about 200 kilometres north from Regina.   Over the years, BHP has spent US$4.5 billion on Jansen but until yesterday, had not committed to fully developing it into a producing mine.  Yesterday’s announcement called for a further US$5.7 billion in spending over the next six years. But it’s nonetheless a more modest project than BHP has envisioned in the past.

“The tone of the announcement is completely different from what we heard back in 2010,” Doyle said. “In 2010, they were going to take over the potash world.  What was announced yesterday was a much different scenario.  It’s a four million tonne mine, not ten million or 12 million – not this mega project that they have talked about,” he said.

At four million tonnes of potash production a year, Jansen will account for about four percent of global output, Doyle said.  That’s not enough to sway the supply fundamentals of the marketplace, which will likely make BHP a price-taker.

“It really benefits existing players in the industry,” he said, pointing to Nutrien Ltd. and The Mosaic Company.

BHP will need to earn a return on the roughly US$10 billion it will have spent on Jansen, a sum that makes it the most expensive potash mine development project ever.

“I think in hindsight, they wish they hadn’t done it,” Doyle said.  “I think they made a mistake. They threw so much money at it.  So the question is: Is this good money after bad?”

“The fact of the matter is they are going to have, by far and away, the most expensive potash project in the history of the industry.”

His advice to fellow Canadian Mike Henry, the current CEO of BHP?

“Get yourself some expertise.  It’s a much different industry than copper or iron ore.”