BHP COM­MITS TO OLYMPIC DAM DE­SPITE ITS IS­SUES

The Gold Coast Bulletin - - BUSINESS - JOHN DAGGE

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.

Chair­man of BHP Ken MacKen­zie and CEO An­drew Macken­zie after the BHP AGM in Ade­laide

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