BHP Sees A Potash Deficit. Could This Canadian Miner Help Fill The Gap?

Key Points

• BHP (BHP) expects potash demand to grow 2% to 3% a year and sees a possible market deficit by 2035.
• The forecast comes from a company that's building much of the new supply it refers to.
• Buffalo Potash (TSXV:BUFF) is a much smaller developer, and its first module has finished drilling but not begun production.
• Buffalo's later phases depend on a feasibility study and a construction decision.

BHP isn’t the first name most investors think of when they hear “potash.” But the mining giant is spending heavily to become a major player, and it has a view on where the market is heading.

For investors, there’s an interesting wrinkle: BHP isn’t just forecasting a tighter potash market. It’s also helping build the supply it says the world will need.

That makes its forecast worth watching, but also worth examining closely.

What BHP is forecasting

In a March interview with Bloomberg, BHP's head of potash, Karina Gistelinck, said the company expects demand for the crop nutrient to grow around 2% to 3% a year, with little new supply beyond BHP's own Jansen project in Saskatchewan. She said the market could move into deficit by 2035. BHP's stated reasons for long-term demand, from its January Jansen update, are population growth, better diets, rising living standards and the need for more productive use of arable land.

It's worth remembering this is a company forecast. BHP is developing much of the new supply it refers to, so investors may want to weigh it accordingly. The USGS also expects world potash capacity to rise from 66.1 million to 77.4 million tonnes (K2O equivalent) by 2029, mostly from projects in Laos and Russia.

Jansen has also become more expensive. BHP now puts the first-stage investment at US$8.4 billion, up from US$5.7 billion when it was approved in 2021, with first production back on a mid-2027 schedule. Whatever happens with the deficit forecast, it shows how costly and slow new potash supply can be to build.

Where this small Canadian miner fits

Buffalo Potash is working on the Disley project in Saskatchewan, roughly 50 kilometres northwest of Regina. Its Initial Production Module (IPM) is designed to produce 125,000 tonnes of soluble-grade potash a year, with first production targeted for Q1 2027.

The scale gap is significant. Jansen’s first stage is meant to reach 4.1 million tonnes a year within two years of starting up, so the IPM alone would be roughly 3% of that. Buffalo's preliminary economic assessment contemplates up to 1.125 million tonnes a year across three facilities, for US$639 million in initial capital.

On paper, the PEA’s schedule would have all three facilities operating before 2035, with Disley West and Disley East starting in July and October 2029. But that assumes a positive construction decision, and Buffalo says a feasibility study is the key gate for it.

The case for Buffalo isn’t that it fills a deficit on its own. It’s that a tighter market could create room for smaller, modular sources of supply.

Progress so far

On September 25, Buffalo announced it had finished the third and final horizontal well at the IPM, bringing the project to five wells, with each horizontal well reporting about 95% contact with the target clay seam.

Drilling is done. The next test is whether the system can turn that infrastructure into production.

Brine circulation will test whether the Horizontal Line-Drive system works as designed.

Buffalo says the method hasn’t operated at commercial scale, so successful drilling does not establish that brine circulation or commercial production will work as intended. No mineral reserves have been established at Disley, and the project’s broader development plan remains dependent on further technical and economic work.

There’s also a timing gap. A 2035 deficit forecast does little for a company that needs to reach production in 2027, and potash prices could move against a developer well before any shortage appears.

Most-followed narrative

The most followed Simply Wall St community narrative on this front puts Buffalo's fair value at CA$1.06 per share, approximately 20% above the Buffalo Potash stock price at the time of writing. It rests on Disley being developed, the Horizontal Line-Drive method working commercially and Buffalo scaling beyond the first module.

What investors may watch next

• Results from initial brine circulation.
• Whether the method sustains dissolution and production rates at the IPM.
• First production, targeted for Q1 2027.
• The feasibility study and construction decision for Disley East and Disley West.
• How Buffalo funds construction beyond the IPM, and whether it dilutes shareholders.

BHP is betting the world will need substantially more potash. Buffalo is one of the smaller developers hoping to supply some of it.

The bigger question is whether a forecasted supply gap creates an opportunity for smaller producers, or whether the economics and timing of bringing new potash supply online prove more difficult than the headline suggests.

BHP expects potash demand to outrun new supply by 2035, but with the company building much of that supply. How much weight would you put on a forecast from the producer?

Explore Buffalo Potash’s valuation, financial health and latest community analysis on Simply Wall St.

Disclaimer

This article was written independently by the author, without issuer input or approval. Buffalo Potash Corp. has a marketing services agreement with Simply Wall St. Details on compensation and other important information can be found in the disclosure and disclaimer at the end of this narrative.

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Simply Wall St analyst Chrissy Paradis and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.