Mining giant BHP Billiton (ASX: BHP) has committed $2.6 billion for the development of the Jansen potash project in Canada. The commitment comes at a time that BHP logged a 30 per cent drop in prices due to lower commodity prices and uncertainty over the market for this fertiliser ingredient.
The amount, expected to be spent in 2017, would be used to build shafts and surface infrastructure at Canada's Jansen deposit.
In defending the allocation of a large amount of BHP funds amid a call by the miner's board to have more restraint when it comes to committing capital to new ventures, new BHP Chief Executive Andrew Mackenzie said it reflects BHP's confidence in the long-term fundamentals of the potash industry.
The hesitancy of the BHP board came just after the breaking of the Russian potash cartel Uralkali of its joint venture with its Belarusian supplier, which could lead to a price drop of the commodity.
"Investment at Jansen is creating a valuable assets, and we will continue to pursue a development path that maximizes returns for shareholders," FT quoted Mr Mackenzie.
The move towards other commodities is part of BHP's strategy to rely less on iron ore as demand for the key steelmaking-ingredient by China weakens.
On Tuesday, BHP reported net profit for the year ended June 2013 of $10.88 billion, down from $15.42 billion compared to the previous year, mainly due to weaker prices of iron ore, coking coal, copper and other minerals in the world market.
In throwing his support for funding the potash project, Mr Mackenzie said the decision was made out of the belief that from 2020 onwards, the world would need new potash mines and demand grows at 2-3 per cent yearly.
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