Speculation Grows BHP Won't Push Ahead With Olympic Dam Project

   By Robb M. Stewart 
 

MELBOURNE--Speculation is mounting BHP Billiton Ltd. (BHP) will scale back or defer a decision on the near-US$30 billion expansion of its Olympic Dam copper and uranium mine in South Australia after the state's premier scheduled a press conference for shortly after the mining giant releases full-year earnings.

The conference will address an impending statement from BHP, a spokesman for Premier Jay Weatherill said, without elaborating further on what will be discussed.

A BHP spokeswoman in Melbourne declined to comment when asked about the status of the project. The company had previously said a board decision on Olympic Dam, as well as two other US$10 billion-plus projects the company is developing in Western Australia state and Canada, was due at the end of the year.

"Nothing would surprise me," said Tim Schroeders, a fund manager at Pengana Capital, which owns shares in BHP, adding he would expect the company and government have agreed a deal for a slower pace of development.

A decision on building a massive open-pit mining operation alongside the existing underground operation comes against a sharp fall in prices for industrial commodities, including copper, in recent months that is eating into mining companies' cash flow.

Analysts and investors in BHP have increasingly expected the company will postpone at least one of its big expansion projects until the outlook for commodities is clearer and the company has worked through projects already approved.

BHP hasn't given a figure for how much the expansion will cost, but late last year committed more than $US1 billion to preparation work ahead of a final decision.

If the expansion goes ahead, BHP has said the capacity to produce copper would rise fourfold over two decades to about 2.4 million metric tons a year and uranium output by even more to 19,000 tons.

To support the enlarged operation, BHP first needs to remove a deep layer of rock and soil before it can extract the ore and also needs to build a coastal desalination plant, new airport, additional port facilities and further accommodation for its workers.

Fund managers in recent weeks have said they would welcome signs of capital discipline from BHP Chief Executive Marius Kloppers, given the uncertainty over near-term demand for metals and minerals. Analysts widely expect BHP to post a decline in its profit for the year through June later Wednesday, the first drop in earnings in three years due partly to softer prices.

Write to Robb M. Stewart at [e-mail]

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