BHP Group Limited: Greenfield projects are hard: Jansen capex +41% to $6.9 bn.

Research evidence excerpt

BHP Group Limited: Greenfield projects are hard: Jansen capex +41% to $6.9 bn.

age 1 approval

estimate of US$5.7bn in August 2021, the subsequent Stage 1 reset to US$8.4bn, and

the historical pre-Stage 1 investment in shafts and early infrastructure.

Combined Stage 1 and 2 investment now >US$15bn

On a cumulative basis, total approved investment for Jansen Stages 1 and 2 is therefore

c. US $15.3 bn, excluding the c.US$4.5bn of pre-Stage 1 investment historically incurred.

Stage 1 is expected to deliver c. 4.1-4.2 Mtpa from mid-2027, while Stage 2 is now

expected to deliver first production in late FY2031, followed by an expected two year

ramp up. Once Stage 2 ramps up, BHP expects combined Jansen output of 8.5Mtpa,

equivalent to around 10% of total global potash production. BHP now estimates Stage 2

has an updated 11% post-tax nominal IRR, an expected 8 year payback and EBITDA

margins >65%.

US$2.3bn impairment reflects higher forecast capital intensity

We note that, BHP now expects to recognise an impairment charge of approximately

US$2.3bn, against the aggregate Jansen asset base. BHP links this to higher forecast

capital intensity across Stages 1 and 2 and potential future expansions. This reinforces

the view that, while Jansen remains strategically important and low cost once

operational, the capital intensity reset has materially weakened the original investment

narrative

Future expansion optionality remains

For subsequent expansions (Jansen Stages 3 and 4), BHP has not taken investment

decisions and has provided no formal cost guidance. Management commentary and

technical disclosures suggest that future stages would benefit materially from shared

infrastructure, but the latest Stage 2 reset indicates capital intensity of c. US$1,580/t