BHP Group experienced a sharp decline in market value on Friday following a series of operational and labor challenges that overshadow the company’s outlook ahead of Brandon Craig’s imminent appointment as chief executive. The mining giant’s shares fell 5.6 percent to $61.40, marking the steepest one-day drop in more than a year and erasing approximately $18.5 billion from its market capitalization.

The immediate catalyst for the sell-off was a significant cost overrun at BHP’s Jansen potash project in Saskatchewan, Canada. The company revised the estimated expenditure for stage two of the project upward, from US$4.9 billion (A$7 billion) to US$6.9 billion, representing a US$2 billion increase that exceeded market expectations. This follows a previous announcement nearly a year ago, when the cost of stage one ballooned from US$5.7 billion to a range of US$7 billion to US$7.4 billion.

Industry analysts have expressed concern over the magnitude of the latest overrun. Citigroup noted that investors had anticipated a US$1.5 billion increase, significantly less than the amount now projected. BMO Capital Markets described the revised guidance as 13 percent above its estimates and 41 percent higher than BHP’s earlier forecasts. Barclays analysts also pointed to a US$2.3 billion writedown on the project, which compounds doubts about the long-term returns from Jansen, a venture that has become a focus under outgoing CEO Mike Henry.

BHP attributes the cost escalation primarily to increased construction hours and a greater-than-expected use of materials. However, questions remain about why the company did not incorporate lessons from stage one, which was affected by harsh winter conditions during peak construction activity involving roughly 3,500 workers.

Alongside the project challenges in Canada, BHP faces growing industrial action risks in Australia. The company is engaged in critical negotiations with unions representing approximately 450 workers involved in shipping iron ore from Port Hedland, Western Australia. Unions have threatened strike action that could halt exports, potentially costing the company around A$126 million per day.

BHP executives have agreed to a face-to-face meeting with union leaders scheduled for Tuesday, as they attempt to avert a costly disruption. The labor tensions add pressure on the company at a pivotal moment, just days before Brandon Craig is set to succeed Mike Henry as BHP's chief executive.

Craig recently navigated a complex dispute with China Mineral Resources Group over iron ore pricing and contractual terms, signaling his immediate challenges as he takes the helm. Meanwhile, the Jansen potash project represents an ambitious and unfamiliar diversification for BHP, which has yet to operate a potash mine or market fertilizer products at scale, adding to investor concerns amid the current setbacks.