BHP sticks with Olympic Dam’s ‘mouth-watering’ potential
GLOBAL mining giant BHP’s top bosses have reinforced their long-term faith in the future of South Australia’s largest mining operation, saying it’s a core asset and an opportunity to “move the needle on the whole company”.
GLOBAL mining giant BHP’s top bosses have reinforced their long-term faith in the future of South Australia’s largest mining operation, saying it’s a core asset and an opportunity to “move the needle on the whole company”.
“Olympic Dam is core. Olympic Dam is of BHP scale. It’s a terrific resource.
“Olympic Dam is an opportunity for us to move the needle on the company. We have a plan to move it forward,” chairman Ken MacKenzie told shareholders at BHP’s annual meeting in Adelaide on Thursday.
He said the company was excited about how the fourth largest copper deposit in the world, 560km north of Adelaide, tied into future global demand for copper.
“We like copper. As an asset, there is no doubt that it (Olympic Dam) has been performing below our benchmarks from a return on capital employed perspective, but we see that as opportunity,” he told reporters on the sidelines of the meeting.
“For a company as large as BHP, when we have a large asset like that where there is an opportunity for improvement, it can move the needle on the whole company. That’s a great opportunity for us,” he said.
Last year BHP spent $1 billion on Olympic Dam, which is also home to the largest known single deposit of uranium in the world, in order to “stabilise it and provide a pathway to the future”.
Chief executive Andrew Mackenzie said the above-ground processing site was a highly complicated industrial operation in the outback.
“(But) you have a great ore body, an investor friendly environment, a bit technically challenging but when I think you look at the world and how it’s going to get its copper in the future, there’s a lot hanging off Olympic Dam.
“That’s why in the fullness of time, I believe, it has huge value for the company and we would want to retain it for many many years to come and master the art of running a complicated underground operation with the kind of precision that we take for granted in our open pits.
“You can be absolutely sure that the full force and brilliance of BHP is going to applied to solve that but the solution is we are going to make it work.
“We are not going to go down the sale route with it. We are going to make it work because the potential is quite mouth-watering,” Mr Mackenzie said.
Currently Olympic Dam’s return on capital employed is about 1 per cent, with efforts underway to bring it up to 6 per cent by 2022 — much below the 40 per cent return on capital BHP expects to generate in its iron ore operations in the same time frame and lower than its other copper operations worldwide.
In fiscal 2018, Olympic Dam recorded just $US39 million in earnings before interest and tax.
An acid plant issue in August, which has now been fixed, also led to annual production numbers from the operations being cut back.
Only this year, BHP mined its first ore from the Southern Mine Area (SMA), which was originally the sweet spot for its open-pit expansion plan, shelved in 2012.
Copper has been produced at Olympic Dam for 30 years, representing just the neck of the guitar-shaped ore body. SMA holds the remaining 70 per cent.
In 2020, the BHP board will decide on a $US2.1 billion Brownfields Expansion (BFX) program for the SA site — involving expansion of surface infrastructure, including the recently-upgraded smelter, mill and refinery, while improving the ore quality which will lift the overall productivity of the operation.
But BHP has promised its shareholders every asset, especially those on the cards for expansions, have to earn their place in its portfolio and investment plans.