BHP Billiton this week shelved plans for the $20bn expansion of its Olympic Dam copper-uranium mine in South Australia, causing political hand-wringing about whether the country’s mining boom was over.
Marius Kloppers, chief executive of the world’s biggest mining group, said BHP would “continue studies to develop a less capital-intensive option” to replace the existing Olympic Dam underground mine, citing the gloomy outlook for commodity prices and rising costs of project development.
The news came as BHP’s full-year profit before tax fell from $31.3bn in 2011 to $23bn, hit by lower base metals and iron ore prices and writedowns on its US shale gas assets.
There has been a broad pullback from ambitious expansion plans by big mining groups, as slowing growth in China casts doubt on the strength of demand for commodities such as iron ore, coal and copper.
On Thursday Xstrata said it might delay the start of production at its $5.9bn Tampakan copper-gold project in the southern Philippines because of regulatory and security concerns.
BHP’s decision on Olympic Dam is a severe blow to South Australia, which was stripped of its triple A credit rating earlier this year. The project was expected to create 15,000 jobs in addition to a 4,000-strong construction workforce.
Martin Ferguson, Australia’s resources minister, responded to the news by saying in a radio interview that people had to “understand the resources boom was over”. As a political row escalated over Olympic Dam, however, Mr Ferguson moved to qualify his earlier comments, saying he was only talking about commodity prices and that investment in the mining sector was still strong.
“The boom in commodity prices is over,” he told reporters. “But the mining boom, in terms of construction, is not over.”