BHP Group Ltd (LSE:BHP, ASX:BHP) shares saw their largest one-day drop in 14 months on Friday after the miner disclosed a US$2.3 billion write-down tied to its Jansen potash project in Saskatchewan, Canada, citing higher costs and schedule delays.
Shares of the Melbourne-based company fell 5.6% in Sydney trading to about $61 following the announcement, made late on Thursday.
BHP said the second phase of the Jansen mine development is now expected to cost US$6.9 billion, up from a previous estimate of US$4.9 billion, after completing a review of the project.
First production from the expansion is now expected toward the end of 2031.
The company said the impairment reflects increased capital requirements and revised cost forecasts for the project.
Analysts at Jefferies wrote that while another increase in Jansen spending had been anticipated because BHP had previously indicated the estimates were under review, the latest revision was larger than expected and "still unhelpful," particularly given what they described as a weak outlook for potash markets in the foreseeable future.
Jefferies noted that the latest adjustment marks the third upward revision to Jansen's development costs in less than a year and brings cumulative committed investment in the project to roughly US$19.8 billion. The firm wrote that execution risks remain because about 84% of Stage 2 construction work is still ahead.
The analysts estimated the revised spending guidance would reduce their net asset value estimate for BHP by 1.1% and reiterated a ‘Hold’ rating on the stock, writing that they see better value opportunities elsewhere in the mining sector.
Jansen is a key part of BHP's strategy to expand its exposure to potash, a crop nutrient used in fertilizer production. Stage 1 of the project remains on track for first production in mid-2027, according to Jefferies.
