BHP's copper ambitions

Company News

by Glenn Dyer

If BHP (ASX:BHP) had managed to win control of Anglo American and its 700,000 or so tonnes of annual copper production, would the company’s head of copper in South Australia, Anna Wiley, have stepped up this week and laid down a very upbeat outlook for the company’s position in the red metal?

Anglo might have been an all-paper bid, but it would have taxed the company's resources to integrate it, cut costs, and spend to bring its operations up to BHP’s standards.

It remains doubtful that if BHP had snatched control of Anglo American (and it may still do so), the ambitious plans for developing its mostly copper assets in South Australia would not have been delayed for years.

Including the $9.7 billion spent on taking over OZ Minerals, the $2 billion-plus spent on expanding and revitalizing Olympic Dam, and the money spent on exploring at Olympic Dam as well as the nearby Oak Dam prospect, BHP has spent close to $12 billion on expanding its copper footprint in Australia (with a nice golden flavor, plus uranium).

OZ Minerals brought with it Carrapateena and Prominent Hill mines, which are being integrated into Olympic Dam’s operations (with major spending on expansion projects) as part of looking to spend billions more over the next decade on a possible fourth mine at Oak Dam.

There is a new mine under development in eastern WA at West Musgrave. It's a nickel-copper mine but didn’t rate a mention in this week’s speech by Ms. Wiley at the Copper to the World conference in Adelaide. In March, BHP cut contractor numbers at West Musgrave, which will slow development work.

In addition to the significant ongoing investment required to run the company's existing operations, Ms. Wiley outlined a number of growth options in copper in South Australia.

"Within the next two years, BHP will have multiple growth projects across our operations either being studied or actively underway. These projects represent significant new investment in South Australia and include:
  • Progress and completion of the Prominent Hill shaft that will haul ore to the surface from 1.3 kilometers deep.
  • Transition to a block cave at Carrapateena following the recent commissioning of a second underground crusher this year.
  • Further underground development at Olympic Dam.
  • Ongoing studies into a smelter/refinery expansion at Olympic Dam.
  • A new decline at Oak Dam to complete underground exploration and pave the way for a potential underground mine development.

"We are on track to produce between 310 to 340 thousand tonnes of copper this financial year, as well as producing globally significant quantities of co-products, uranium, gold, and silver every year.

"To date, we have unlocked synergies of more than $US50 million per year from our newly combined operations in SA,” she said.

"More synergies are coming through as we process concentrate from Prominent Hill and Carrapateena through our central smelter. This places additional importance on ensuring we economically extract as much copper as possible from our current operations."

Olympic Dam is the heart of BHP’s SA copper province. Wiley said the company is hoping to grow with the help of additional smelting and refining plants.

“This has the potential to result in production of greater than 500 kilotonnes per annum of copper – and more than 700 kilotonnes of copper equivalent per annum when you include the by-products of gold, silver, and uranium.

"At Olympic Dam, we have invested $1.8 billion over the past five years improving the safety, stability, and reliability of our surface processing facilities to provide a firm foundation for growth.

"Right now, BHP is running one of the largest copper exploration and drilling programs in Australia.

"We currently have 13 rigs and hope to construct a new decline as part of our exploration progress at Oak Dam, which we hope could become the fourth mine in our Copper SA operations in the years to come.

"We have also had up to 6 rigs at Olympic Dam, where for the past couple of years we have been exploring the area beneath Olympic Dam – OD Deeps – which has exhibited attractive mineralization at one to two percent copper grade.

"It’s one of the amazing things about Olympic Dam – we haven’t found the bottom of it yet.

"Now if BHP had gained control of Anglo American, would we have heard this optimism about expanding copper in South Australia?"

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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