The most influential investor in BHP Billiton has warned that spending billions on a new potash expansion would be a "misguided" move for the company at a time when potash prices appear set to fall.
BlackRock fund manager Evy Hambro told Bloomberg that BHP chief Andrew Mackenzie would be going against some of his guidance on investability hurdles if he announced new money for Canada's Jansen potash mine later this month.
BHP will report its full-year results on August 20 and the company is due to give some guidance about the direction of Jansen, which could include a tranche of new spending to sink shafts at the mine.
The investment decision on the expansion - which is expected to cost more than $US10 billion - has been complicated over the past week by the collapse of a potash cartel in eastern Europe, which has dragged down forward estimates of the potash price.
Mr Hambro said the likelihood of falling potash prices should make the project unattractive for now.
"If you do see a lower price scenario as a result of what's going on in the potash space, then the rate of return on that project would be well below [BHP's] hurdle rate," he said, in reference to BHP's self-imposed targets.
"To be committing significant amounts of capex to that, on their own, without a partner, into a market that now looks like it's going into increased volumes, and they would just be adding to the problems there, would probably be a misguided decision.
"It would go against what the new CEO of BHP has been guiding to."
It's not the first time that Mr Hambro has campaigned for outcomes at BHP, where BlackRock has long been the biggest shareholder.
In 2011 and 2012 he led a shareholder push for more dividends, which helped stifle BHP's plans to develop a series of mega projects such as the Olympic Dam expansion.
The trend for greater shareholder returns has now spread across most of the resources industry.
Potash is converted into fertiliser, and is seen as a long-term investment based on the world's growing appetite for food.
Mr Mackenzie said BHP had not been surprised by last week's cartel collapse. "We've always said potash is a business which will lose some of its cartel-like structure in time and will become more globally traded like everything else, so we to some extent predicted what has happened," he said. "We think very long-term; this is something that has happened short-term."
He said he would be better placed to speak on BHP's outlook for potash during its full-year results later this month.