Adelaide South Australia


BHP mine expansion a big boost for South Australian economy

BHP Billiton announces huge expansion of underground copper mine at South Australia's Olympic Dam

November 2014

The Olympic Dam mine will be expanded to produce more than twice as much as it does now by the middle of next decade, BHP Billiton has flagged.

The expansion will all come from underground mining rather than a revision of the open-pit plan. Nonetheless, the expansion will be huge.

“We do want to get this right but no matter what, it’s going to be a lot of money,” BHP’s chief financial officer Peter Beaven said.

In a first step, BHP has decided to spend more than $US200 million to increase production by about a third by June 2018. This is line with BHP chief executive Andrew Mackenzie saying last week the company wanted Olympic Dam to be running at the optimum rate its existing processing plant was built for, or 235,000 tonnes of copper a year.

BHP said after it reached that milestone it wanted to increase production to 450,000 tonnes of copper by 2024 when it expects the world market to be hungry for more of the metal which is essential for urban living and use of electricity.The copper/uranium/gold/silver processing plant near the Olympic Dam mine in South Austra

The copper/uranium/gold/silver processing plant near the Olympic Dam mine in South Australia. Picture: BHP

The mine now employs about 3500 people and produced 184,000 tonnes of copper last financial year.

BHP said it was too early to estimate costs of lifting capacity or predict how many jobs would be created.

However, it is expected they would be considerable.

Mr Beaven said the expansion plan depended on successful outcomes of trials now under way using so-called heap leach processing. The method involves dribbling solvent through piles of crushed ore to extract uranium and most of the copper.

It would make Olympic Dam one of the most cost-competitive copper mines in the world when the byproducts of uranium, gold and silver were added to the equation.

He stressed the expansion would require board approval and Olympic Dam would have to compete internally for capital.

“Importantly this is a very big (deposit) of 9 billion tonnes,” he said.

“Nothing that we’re going to here is going to inhibit the option to pursue eventually, at some day, an open pit development if that makes sense,” he said.

Mineral Resources and Energy Minister Tom Koutsantonis said the government welcomed BHP Billiton’s “commitment to unlocking the value of this great ore body and the potential jobs and economic activity it can bring to the state”.

“BHP Billiton recognises Olympic Dam as a resource of enormous value and it continues down the path of developing technological and design alternatives that have the potential to substantially improve the economics of an expansion,” he said.

SA Chamber of Mines and Energy chief executive Jason Kuchel said the expansion would be positive for the state.

“This is a pragmatic approach which doesn’t have as much of the risk and long period without a return that was inherent in the open pit plan,” he said.

“It does allow for an open pit in the future.

“An investment in more processing infrastructure now would have that available for the future and help with cashflow.”

The huge question hanging over the South Australian economy for the past two years — will the Olympic Dam expansion go ahead — has been resolved.

The answer is yes, the expansion will go ahead although not in the way the public might have imagined it.

To put the expansion in context, the planned increase in copper production from 184,000 tonnes to 450,000 tonnes a year is the equivalent of adding two and a half Prominent Hill mines to South Australia.

Prominent Hill, owned by OZ Minerals, is the state’s second biggest copper mine, employing 1400 people.

It would be too simplistic to multiply and calculate an extra 3500 jobs at the expanded Olympic Dam — but it would be reasonable to estimate a number in the thousands, even with BHP Billiton’s ruthless drive for greater productivity.

In addition to jobs, a bigger mine will pay more royalties and taxes which totalled $86 million last financial year.

That will be welcome news for Treasurer Tom Koutsantonis as he looks for money to balance the budget.

The new expansion plan does not rule out the massive open pit, but it puts it many years away.

The $30 billion figure touted for the open pit expansion was never published by BHP. It was an estimate from politicians and stock market analysts.

Similarly, BHP will not give a figure for its new plan because it has not been locked in.

But it does say the supporting infrastructure will be more “modest”.

BHP has repeatedly said Olympic Dam is one of the best deposits in the world and will be a great mine lasting for more than a century if it can get the costings right.

For South Australia, it will not be the panacea for all economic ills, but it will be a solid cornerstone for many generations to come.

Source: Adelaide Now, 25 November 2014