BHP Billiton Ltd. (BHP), the world’s largest mining company, won’t be able to make an investment decision on the estimated $33 billion Olympic Dam mine expansion project in South Australia state for years.
“We’ve been very clear that on Olympic Dam we’re not in a position to take any decisions for years,” Chief Executive Officer Marius Kloppers told reporters today in London. Time is needed to allow for the results of new leaching technologies that facilitate extraction of minerals from ore, he said.
BHP, with $22.8 billion of projects in execution, said in August it would continue spending on iron ore expansions already approved while deferring other large projects after revenue and commodity prices fell. Ventures put on hold then included Olympic Dam, estimated by Credit Suisse Group AG to cost $33 billion, where BHP had been due to make an investment decision by the end of this year.
The expansion plans for Olympic Dam, located 560 kilometers (348 miles) north of the state capital Adelaide, would’ve made it the world’s largest uranium mine within 11 years. BHP had also been due to decide this year on its outer harbor iron ore project in Western Australia and the Jansen potash operation in Canada. The three projects were estimated to cost a combined $68 billion, according to Deutsche Bank AG.
Kloppers expects all of the development documents for the outer harbor project in Western Australia to be filed by the end of next year. Building the harbor has been estimated to cost $22 billion by Credit Suisse.
‘Quite Some Time’
The Jansen project in Saskatchewan, the world’s largest potash-producing region, may cost $14 billion, BMO Capital Markets wrote in an Oct. 22 report. BHP is waiting for lease approvals over the project as well as a “substantial amount” of engineering work to complete, Kloppers said.
“We think we’ve got a good project,” he said following the company’s annual general meeting of shareholders. “We do have quite some time ahead of us before we need to consider additional approvals.”
The company is developing two underground shafts that would support production of at least 8 million tons a year, Kloppers said at an analyst briefing in London in August. BMO estimates global potash demand to be “adequately covered” to the mid- 2020s and BHP would be best served by returning cash to shareholders rather than building the mine.
“We estimate that Jansen is just as unattractive as the two recently canceled projects - Olympic Dam and Outer Harbor,” BMO analysts Joel Jackson and Tony Robson said in the report. “We believe that the worst option is to build Jansen, although this may well be what BHP intends to do.”
Buying an existing producer, such as North American supplier Mosaic Co. (MOS:US), would also be a better option for BHP rather than building Jansen, the analysts said.
BHP was little changed at 1,995 pence in London today. It earlier gained 0.2 percent to A$34.37 in Sydney trading.
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