BHP COMMITS TO OLYMPIC DAM DESPITE ITS ISSUES
BHP says its underperforming Olympic Dam mine will remain a “core” asset for many years and there are no plans to sell it.
The mining titan has also said it will be able to fill all of its iron ore contracts despite the closure of its Pilbara rail network due to a runaway train it was forced to derail this week.
BHP chair Ken MacKenzie has moved decisively to snuff out speculation the miner is considering selling the Olympic Dam copper and uranium mine in South Australia.
Speaking at BHP’s annual meeting in Adelaide yesterday, Mr MacKenzie said that while the mine’s profitability needed to improve, it offered a major long-term growth opportunity.
“Olympic Dam is core and we have a plan to move it forward,” he said. “In a company the size of BHP, it’s difficult to find an asset which can move the needle … Olympic Dam is an opportunity for us to move the needle.”
Some analysts have suggested BHP should consider selling the mine, given the strong interest copper assets are generating.
Speculation the asset was on the chopping block increased when BHP Minerals Australia president Mike Henry last month said “there is a clear recognition that the Olympic Dam of today isn’t what we want to have in the future”.
The mine, which could last for the next 500 years at its existing rate of production, makes a 1 per cent return on capital – a key measure of profitability.
That compares to a 20 per cent return from BHP’s Escondida copper mine in Chile, a 30 per cent return from its iron ore operations and a 31 per cent return from its Queensland coal mines.
BHP is studying a $US2.1 billion ($2.9 billion) expansion of Olympic Dam that would increase copper production from 220,000 tonnes to 330,000 tones a year and dramatically lower its production costs.
“We are going to make it work – we are not going to go down the sale route,” chief executive Andrew Mackenzie said after the meeting.
“Now we have simplified our portfolio and we have one area of challenge which is Olympic Dam you can be completely assured that the full force ... of BHP is going to be applied to solve that.”
Mr Mackenzie said BHP would be able to fulfil all its iron ore sales contracts despite its rail operations being closed since Monday after it was forced to deliberately derail a train that had runaway from its driver.
Shareholders at the meeting also voted to formally drop Billiton from the miner’s official name.