BHP shares fell 5.6% in their worst day since April 2025
BHP shares posted their steepest one-day fall in more than a year on Friday after the world's largest listed miner flagged fresh cost overruns at its Jansen potash project in Saskatchewan.
According to Reuters, the stock settled at A$61.40, down 5.6 percent, its worst session since April 7, 2025.
The broader Australian mining index closed 4 percent lower, and BHP’s London-listed shares fell 4 percent, as per the Financial Times.
The slide followed BHP’s decision to book an impairment charge of about US$2.3bn after costs at the project’s second stage climbed beyond earlier estimates, the company said on Thursday.
BHP now expects Jansen Stage 2 to cost US$6.9bn, up from the US$4.9bn it approved in 2023, an increase of roughly 40 percent, Reuters reported.
The miner traced the overrun to inflation, design changes, lower productivity, and additional labour hours and materials.
It was the third time BHP has overshot its cost and time estimates across the two stages of Jansen, Reuters reported, setting back a decade-long push to diversify beyond copper and iron ore.
The company first accelerated the development in 2022, betting that the Russia-Ukraine conflict would tighten fertilizer supply and lift prices, but costs rose and timelines slipped instead.
Investors and analysts focused on the near-term capital strain.
William Taylor, chief operating officer and portfolio manager at ETF Shares, said BHP's slide was "a direct reaction to climbing development costs" at Jansen, as reported by Reuters.
The long-term outlook held up, he said, but the market was reacting to the project's immediate capital intensity.
Jefferies analysts called the increase larger than expected and "unhelpful" given a weak potash outlook, and reiterated a hold rating, saying they saw better value elsewhere in mining.
BHP defended the long-term case.
The company estimates Stage 2 will deliver a rate of return of around 11 percent and an eight-year payback, and that the combined mine will be the lowest unit cost Canadian potash operation at US$114-130 per tonne, according to CTV News.
It expects the two phases together to supply about 10 percent of global potash production.
Brandon Craig, president for Americas and CEO-elect, said Jansen anchors BHP's strategy and offers exposure to a "future-facing commodity," as reported by the Financial Times.
He pointed to strong demand fundamentals for potash.
BHP pushed first production from Stage 2 to late fiscal 2031, two years later than its original target, BNN Bloomberg reported.
Reuters reported that Stage 1 remains on track for mid-2027 and is expected to cost US$8.4bn, nearly 50 percent more than approved in 2021.
By the end of May, Stage 2 was 16 percent complete with engineering 83 percent complete.
The company maintained its annual capital expenditure forecast at US$11bn for fiscal 2027.
The Financial Times reported the writedown is among the final acts of Mike Henry’s tenure as chief executive before Craig succeeds him on July 1.
Economist Erin Weir, a former member of parliament for Regina-Lewvan, told CTV News the overruns will not dent BHP’s bottom line because the Government of Saskatchewan lets the company write off 120 percent of its capital construction costs against future taxes.
“Since the Government of Saskatchewan allows BHP to write off 120 percent of the amounts invested, Jansen will not pay potash production tax for many years,” Weir said, arguing the province has forgone nearly $12bn in potash revenue over the past decade.
