10/24/2012 03:01 EDT | Updated 12/24/2012 05:12 EST

Saskatchewan premier hopeful BHP will go ahead with potash megaproject

REGINA - Saskatchewan's premier says he's hopeful an Australian mining giant will go ahead with a potash megaproject despite a report that suggests it's not a good idea.

A report from BMO on Tuesday said BHP Billiton (NYSE:BHP) should not go forward with the Jansen potash mine near Saskatoon. BMO said its research shows the world does not need Jansen's capacity for at least another decade and that building the mine would be the worst option for BHP.

Premier Brad Wall said BHP will make its own decision.

"I'm sure BHP has at its disposal some pretty good advice for what it should do in terms of its own investments," Wall said Wednesday at the Saskatchewan legislature.

"We're still hopeful that this project is going ahead for the reasons we've said we were hopeful in the past."

Wall also said the BMO report is just one opinion in the marketplace.

"We have the Potash Corporation, the largest potash company in the world, we have Mosaic, one of the largest fertilizer companies in the world, and Agrium all expanding and continuing to expand, who probably don't necessarily agree (with the report)."

Joel Jackson, vice-president of BMO's fertilizer research team, said the Jansen mine would not give great returns in a market already oversupplied. He said the best decision would be for BHP not to build or buy its way into the potash industry.

A research report from Europe-based Rabobank warned in June that global supplies of potash could outstrip demand by between 59 and 100 per cent by the end of the decade.

Potash is a valuable mineral mainly used in fertilizer. Saskatchewan has one of the world's largest supplies and exports have been a major tax revenue for the province.

BHP has already allocated $1.2 billion for what the Conference Board of Canada has estimated could be a $12-billion project. BHP itself has not publicly put a total price tag on the Jansen mine.

The company announced in August that it was delaying final approval of the mine due to economic concerns, but it also stressed that work would move ahead.

CEO Marius Kloppers said in a conference call at the time that potash is "a very good product for the long term."