As the deadline for choosing to approve a further $5.7 billion in spending to bring Jansen into production approaches, BHP has begun talks with Canadian rival Nutrien (TSE, NYSE: NTR). The companies are exploring a potential partnership that could help make the project less risky and provide critical infrastructure.
While it is not clear what kind of deal BHP and Nutrien could ink, analysts see a range of options, including BHP swapping a minority stake in the project for access to Nutrien’s rail and port facilities.
“We can come up with many partnership combinations and permutations, but ultimately, the goals of each side are straightforward,” Scotiabank’s Ben Isaacson told Financial Times.
The analyst believes an agreement with Nutrien would also help BHP appease some unhappy shareholders, including Elliott, the activist investor that has lambasted the project in the past.
BMO Capital Markets’ Joel Jackson wrote last week that if rumours of Nutrien buying into the project were to be believed, the deal would be a negative one for both actors.
“If any discussions between BHP and NTR are happening on potash, we imagine it would not just be about Jansen but rather a broader JV of potash assets,” Jackson said.
BHP has repeatedly said it’s open to bringing a partner into the project, especially one with expertise in the fertilizer market or potash. The company doesn’t currently produce the commodity, but sees it as a potential cornerstone of its future business.
Should an agreement be reached with BHP, it would mark a sharp reversal in Nutrien’s attitude.
The Saskatoon-based miner has been an open critic of the Jansen project for years, as it believes developing it would flood cause an unwelcome oversupply. Yet Nutrien’s tone has changed since Mayo Schmidt took the helm of the company earlier this year, replacing Chuck Magro.
BHP, which tried to buy Potash Corp. in 2010, is expected to make a final decision before the publication of annual results in August.
