BHP shares fall after Jansen project expansion costs surge to $9.5b

The news: Shares in BHP tumbled in morning trade after the mining giant flagged a massive cost blowout on its Jansen Potash project in Canada, increasing the capital expenditure to USD6.7 billion ($9.5 billion) from its previous USD4.9 billion budget after the company confirmed the second-stage expansion would take longer and cost more to complete.

Shares fell 3.14% to $63 at 11:11am AEST.

The context: The project, initially approved in October 2023, was estimated to cost USD4.9 billion. However BHP announced a two-year extension for the second stage of the project, shifting its targeted first production from FY29 to late FY31.

The miner stated that the majority of the cost increase stems from additional construction hours and higher quantities of materials required to complete the stage 2 expansion.

BHP expects Jansen stage 2 to deliver approximately 4.36 million tonnes per annum (Mtpa) of production. This will bring the combined total output from the Jansen asset to 8.5 Mtpa, which is projected to account for 10% of total global potash production.