Shares in FTSE 100 mining giant BHP (BHP) fell 0.8% to £16.01 after it scrapped a $2.5 billion expansion plan for its Olympic Dam mine in Australia.
The mine, which is one of the world’s biggest deposits of copper, gold, silver and uranium, had actually recorded its best production performance in five years but BHP has decided against a brownfield expansion project after conducting over 400 kilometres of underground drilling, which has improved its knowledge of the ore body.
BHP said: ‘This has provided challenges for the economics of the project, and we have decided the optimal way forward for now is through targeted debottlenecking investments, plant upgrades and modernisation of our infrastructure. We will continue to study longer-term options for growth.’
But the miner insisted the long-term opportunity for Olympic Dam is unchanged, with its enhanced understanding providing ‘strong foundations for unlocking the full growth potential of this asset’.
BHP’s decision was major news in Australia, with the now scrapped project having been one of 15 picked in June by Australian Prime Minister Scott Morrison to be fast-tracked through the approvals process in a bid to spur job development, as it would’ve created 1,800 jobs through construction and 600 ongoing roles.
Olympic Dam has been loss-making for BHP for the past two years and is seen as needing an expansion and big upgrades to deliver returns on investment. But the high uranium levels also mean mining is more complicated at the site compared to other locations.
PRODUCTION GUIDANCE MAINTAINED
Meanwhile, in its quarterly production review BHP said all production and unit cost guidance remains unchanged for its 2021 financial year, except for its Cerrejón open pit coal mine in Colombia where production guidance is under review due to an ongoing strike.
Among other things, workers at the mine are reportedly protesting over working conditions and the reduction or end of many employee benefits.
Group copper equivalent production increased by 2% in the September 2020 quarter, BHP said, while iron ore production fell 1% to 66 million tonnes quarter-on-quarter but was up 8% year-on-year. Petroleum output rose 1% quarter-on-quarter, though slipped 9% year-on-year.