BHP shelves $3.7bn expansion plan for Olympic Dam mine in SA for a second time
BHP has shelved a plan to spend $3.7 billion expanding the Olympic Dam copper and uranium mine – just months after the colossal project was put on a Federal Government fast-track.
SA Business
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BHP’s $3.7 billion expansion plans for the Olympic Dam mine have been abandoned.
The company had been looking at a Brownfields Expansion Project (BFX) which would have increased production from the current capacity of 200,000 tonnes of copper per year to as much as 300,000.
The project was one of a number of big ticket items earmarked for streamlined approval processes by the Federal Government in June in response to the COVID-19 pandemic and has major project status from the State Government.
The State Government had estimated that 1800 jobs could be created during construction of the project, with 600 extra ongoing jobs at the mine.
It is the second time BHP has scrapped plans for Olympic Dam. In August 2012, the company announced it had shelved its $30 billion expansion and would go back to the drawing board to find a cheaper alternative. Market conditions, subdued commodity prices and higher capital costs led to the decision eight years ago.
Tuesday’s announcement came just hours after the State Government forecast more than 28,000 jobs would be created in South Australia under a strategy to more than double mining and energy export revenue.
But in its quarterly review released this morning, BHP said following more than 400km of underground drilling, which improved the knowledge of the ore body, it had decided to focus on incremental improvements, rather than a step change investment at the site.
“Following more than 400 km of underground drilling associated with the Brownfield Expansion (BFX) project studies, we have improved knowledge of the ore body’s variability,’’ the company said.
“This has provided challenges for the economics of the BFX project, and we have decided the optimal way forward for now is through targeted debottlenecking investments, plant upgrades and modernisation of our infrastructure.
“We will continue to study longer-term options for growth. Over the next two years, our focus will remain on completing our asset integrity program. This will underpin more stable operations and expected copper production of more than 200 ktpa.
“The long-term opportunity for Olympic Dam is unchanged, with our enhanced understanding of the resource in the Southern Mine Area and the promising results from Oak Dam providing strong foundations for unlocking the full growth potential of this asset.’’
BHP said Olympic Dam was performing well, and had posted its best quarterly performance in the past five years in the three months to the end of September.
A $500 million smelter maintenance campaign to improve reliability and capacity had also been approved, which is scheduled to start in the second half of 2021 and which will create a peak workforce of 1500 jobs in addition to the 4000 workers on site as part of normal operations.
BHP’s president, minerals Australia. Edgar Basto said in a statement that Olympic Dam was a world class resource and the company had a positive outlook for the long-term opportunity for the asset.
“Over the next two years, our focus will remain on completing our asset integrity program to underpin more stable operations and copper production of more than 200 ktpa. We have a significant investment program in place to achieve that,’’ Mr Basto said.
“We will continue to study longer-term options for growth. Our enhanced understanding of the underground resources in the Southern Mine Area, promising results from Oak Dam and stronger foundations will help us unlock the full potential of Olympic Dam.
“BHP is a major employer and investor in South Australia. We invest hundreds of millions of dollars in South Australia every year, and play an important role in supporting the economy through jobs, local suppliers, safe operations and export revenue.’’
Opposition mining spokesman Tom Koutsantonis said the announcement was a “shocking blow” to the SA economy.
“When did Steven Marshall first learn of BHP’s plans to dump this $3.7 billion expansion?’’ he said.
“Did he try to do anything to support BHP continuing with the expansion?’’
Mining and Energy Minister Dan van Holst Pellekaan said it was a disappointing decision from BHP, but it was positive that overall, there was a commitment to grow production at the asset.
“That’s disappointing of course, we would like that (expansion) to happen sooner rather than later, but Olympic Dam is the largest mining operation in our state and will continue to make a signficant contribution to our economy,’’ he said.
Mr Pellekann said the expansion “will happen”, which is not backed up by BHP’s public statements.
“It’s not going to happen this year, it’s not going to happen next year, but it will happen. The resources are there. BHP has committed itself, recommitted itself to determing the best way to get the copper out of the ground.
“The approach that they wanted to take they’ve said isn’t viable, so they’re now looking at another option, different ways of getting that copper out of the ground.’’
The Minister said the government had it in writing from BHP that it intended to continue the expansion of Olympic Dam.
In August, BHP announced Olympic Dam had made a full year loss before interest and tax of $US79 million, on revenues of $US1.463 billion. That was up from a loss the previous financial year of $US58 million on revenues of $1.351 billion.
