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November 13, 2012 11:37 am
BHP Billiton has insisted that it is serious about expanding its Olympic Dam copper, gold and uranium mine in South Australia, after securing a four-year extension to a key development deadline from the state government.
However, BHP chief executive Marius Kloppers said he could not guarantee the world’s biggest resources company would go ahead with the $20bn project, although it was committed to a big investment programme to “make it a reality”.
“All the parties, specifically BHP Billiton, are working very hard . . . we are committing over half a billion dollars in new technology in order to do so,” he said after the company was given until October 2016 to start work on the project. “We wouldn’t be doing so if we were not very serious”.
As a condition of the indenture extension, BHP has agreed to spend A$650m (US$676m) over the next four years to develop new technologies that may improve the economics of the ambitious project.
The original plan to expand Olympic Dam to an open pit from an underground mine required BHP to remove more than 400m tonnes of earth, or overburden, a process that would have taken at least five years.
But the project was put on hold earlier this year after BHP said it would miss a December 2012 deadline because it needed time to investigate an alternative, less capital-intensive design of the Olympic Dam open-pit expansion.
Mr Kloppers blamed subdued commodity prices, higher construction costs and the strength of the Australian dollar for the decision.
Olympic Dam is one of several high profile Australian resource projects that have either been scrapped or mothballed in the past six months, including plans by BHP to build an A$10bn iron ore port in Western Australia, because of cost pressures and currency moves.
Jay Weatherill, the premier of South Australia, said the decision to extend the agreement by four years would put BHP in the best position to develop a plan to secure the mine’s expansion and “future prosperity of our state”.
“The independent advice I received showed BHP did face unforeseen economics circumstances that prevented them from approving the original proposal by the December 15 deadline,” he said.
Separately, BHP refused to quash reports that it was considering shipping some of its US shale gas output to Asia, a move that would place the company in direct competition with exports from Australia’s liquefied natural gas projects.
“While participation in global gas markets is open area of potential upside for our US onshore [gas] business, it is simply one of many opportunities that we see ahead as the natural gas market evolves,” BHP said.
BHP spent $20bn acquiring US shale gas assets last year, deals that shareholders said were badly timed. In August, the company was forced to write down the value of some of the assets by $2.8bn.
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