Analyst confident massive Sask. potash mine will be approved as deadline approaches

While a final decision has not been given on a proposed large potash mine project in Saskatchewan, one financial analyst says he is quite confident it will be approved in the next few months.

Originally announced in 2010, BHP's Jansen mine was once hailed as the largest potash project in the world. The site is located about 140 kilometres east of Saskatoon.

Low potash prices meant the company never gave the mine final approval. While production and service shafts have been dug, and are almost fully completed, BHP has yet to produce any mineral from the site.

The massive mining company has now promised its shareholders that it will go to its board to make a final decision on the project sometime in the middle of this year.

In an investors note, Scotia Capital analyst Ben Isaacson put the chance that the mine will be approved to start production within the next three to four months at 90 per cent.

Isaacson noted that the company's CEO continues to tout the prospects of the potash market in the long term, especially when it comes to population growth and changing diets.

The analyst also noted that potash prices continue to rise and predicted potash production will soon be at its highest level since 2007.

Still, Isaacson wrote that BHP investors remain skeptical about the project. He said he spoke with roughly 25 investors and that they believed the project would be approved, but the majority of them did not want it to go ahead.

So far, the company has spent approximately $4 billion US on the project, which includes buying the land, exploration work and digging the mine shafts. The company expects to spend $5.3 billion to $5.7 billion US to build Phase One of the mine.

The huge investment required over a lengthy period of time without any financial benefit has concerned the company for years.

In a year-end call for investors and analysts in December, BHP CEO Mike Henry said the company will move ahead with the project only if it makes sense.

"The fact that we've got $4.5 billion [US] sunk into Jansen, and the time it's taken us to get here, is something that we're certainly not pleased with," he said.

"But as CEO, I'm accountable for ensuring that we make the right decisions in respect of fresh shareholder capital. ... The decision we take in the middle of the year, it will be based on what we think the best application of shareholder capital is, given what we can see in the project, and given the opportunities we see."

If approved, Phase One of the project would produce between 4.3 million and 4.5 million tonnes of potash per year. The mine shafts have a total potential capacity of 16 million tonnes per year, but any future stages would need further approval from the company.

If approved, the mine could start production in about five years.