By Rhiannon Hoyle

BHP Group expects to find other buyers for potash from a new mine that it is building in Canada if the U.S. follows through on a threat to hit its neighbor with tariffs, saying American farmers would be the ones hurt by the policy.

The world's biggest miner by market value is spending more than $10 billion to build its Jansen potash project in Canada's Saskatchewan province, betting the fertilizer ingredient will be in high demand in the decades ahead, as food consumption increases.

The potash project reflects a shift by the mining giant away from fossil fuels to investments in commodities that it expects will benefit from population growth, rising living standards and the transition to a low-carbon economy. Copper is the company's other investment priority.

Chief Executive Mike Henry said it remains unclear how potash sales from Canada to the U.S. might be affected by U.S. President Trump's aggressive trade agenda, while adding that he is confident in BHP's ability to source buyers elsewhere if required.

"To the extent that there was a constraint on the flow of Canadian potash into the U.S., then we would expect to see the global market reorder," Henry told reporters on Tuesday. "We're confident we'll be able to ship all of our potash tons and that the impact on the business would not be material," he said.

The U.S. imports 80% of its potash from Canada, so any restrictions that make it more expensive would hit American farmers, said Henry.

For BHP, he said there is still some time to monitor how trade policies evolve ahead of the Jansen operations, which the company expects to be producing potash by the end of 2026.

Henry's comments on the threats of tariffs from the U.S. come after BHP reported a jump in first-half net profit, but dialed back its dividend, with weaker commodity prices eroding underlying earnings.

The Melbourne-based miner said it made a net profit of $4.42 billion in the six months through December. That compared to a profit of $927 million a year ago, when the company wrote down the value of its nickel operations and set aside more cash to cover costs associated with the 2015 Samarco disaster.

Underlying profit, a closely watched measure of profitability that strips out some one-time charges, fell by 23% to $5.08 billion. Directors of the company declared an interim dividend of 50 cents a share, down from 72 cents a share a year ago.

Prices for the steelmaking commodities that BHP sells, such as iron ore, have weakened amid concerns over growth. China's property market, a big user of steel, has been in turmoil because of a massive glut.

Henry said there are early signs of a recovery in China and that India continues to be a standout for commodities demand. However, trade tensions could threaten a recovery in developed economies and more broadly, worldwide, according to BHP.

"Nobody quite knows where things are going to land," Henry said.

"The focus is more on the overall level of uncertainty that's created, as the U.S. makes its determinations around what tariffs to put in place, and as you see some countries talking about counter tariffs," he said.

Trade wars risk reverberating through the world market for iron ore, which accounted for 56% of BHP's underlying earnings in the half-year period. BHP sells the vast majority of its iron ore to China, to be turned into steel.

"Depending on how tariffs and counter tariffs play out, if that slowed the rate of global growth, there could be some impact on all commodities, inclusive of iron ore," Henry said.

BHP is currently studying a further expansion of its mammoth Australian iron-ore mining operations. Henry said the outlook for the global economy will help determine whether BHP goes ahead with that expansion.

The direct impacts on BHP's business from planned U.S. tariffs are not significant, he said, "We only have about 3% of the company's revenue into the U.S."

One potential win for BHP could be at the Resolution copper project in Arizona that it jointly owns with Anglo-Australian miner Rio Tinto. The project has been beset by legal challenges because of opposition from a group of local Apaches.

According to BHP, it is one of the largest undeveloped copper projects in the world, with the potential to become a significant copper producer in North America.

"By all accounts, the Trump administration is supportive of more mining domestically in the U.S.," Henry said.

U.S. copper prices have also recently climbed, fanned by the talk of tariffs, "which all bodes well then for the potential to develop Resolution," he said.

BHP has been betting on a strong outlook for copper demand, which it expects to rise by roughly 70% by 2050. Copper is a key component of electric vehicles, renewable energy and grid infrastructure.

In January, BHP formed a joint venture with Lundin Mining to develop the Filo del Sol and Josemaria projects in Argentina, which it says appears to be one of the most significant global copper discoveries in decades. Henry said that it could become a top 10 source of copper globally.

Last year, BHP sought to buy Anglo American with a roughly $50 billion takeover bid, but was rebuffed by directors at the rival firm. BHP is now "100% focused" on developing its own projects, rather than expanding via acquisitions, Henry said.

"In the current market, it is increasingly challenging to do large global M&A for value, for shareholder value, and that's what BHP is about at the end of the day," he said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

February 17, 2025 21:53 ET (02:53 GMT)

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