BHP Billiton sets aside Olympic Dam project as profit drops

BHP Billiton Olympic Dam project

BHP Billiton Olympic Dam project

BHP Billiton, the top global miner, informed that its Olympic Dam cooper expansion project was delayed. BHP officials added that no major projects would be approved till June 2013. BHP called off one of its “mega projects” called Olympic Dam, which had aimed to expand the company’s copper-uranium development is South Australia as it has to face increasing capital costs.

According to some sources, the China’s slowdown was one of main reasons of calling off the Olympic Dam project. Moreover the company also announced a 35 percent drop in net profit.

Change of plans

BHP officials announced a 35 percent drop in second-half dropping commodity prices. Marius Kloppers, chief executive at BHP Billiton, has noted that both commodity prices and rising costs are not the best conditions for expanding BHP Billiton businesses and plans, especially the mine.

But it has to be stated that expansion of Olympic Dam, which is the world’s fourth-largest copper deposit and largest uranium source at the same time, was one the three BHP “mega projects”. Those  BHP “mega projects” were to be approved by December 2012. However BHP Billiton informed that major projects would be approved by June 2013.

Marius Kloppers, chief executive at BHP Billiton, noted: “As we finalized details of the project in the context of current market conditions, our strategy and capital management priorities, it became clear that the right decision for the company and its shareholders was to continue studies to develop a less capital intensive option to replace the underground mine.”

On Wednesday BHP Billiton informed that net profit, including a write-down on its American shale gas assets and a $346m before-tax charge on the Olympic Dam project fee, dropped 34.8 percent to $15.4 billion for the year ended on 30th of June.

The decision regarding calling off the Olympic Dam project means that BHP Billiton wants to retreat from its program of a $20 billion investment per year on projects for several years. The BHP Billiton decision is a hit to South Australia. The Olympic Dam project was said to create approximately 15,000 new jobs.

BHP decision impacts the economy

Decisions, which have been recently made by BHP Billiton, will likely have an impact on global commodity prices. If BHP competitors follow the trend and call off their planned expansion, it will also increase the probability of a gain in commodity prices. Big miners have, basically, a great influence in terms of supply and sentiment as well. However the decision to hold on the expansion also may result in public thinking that the supply side is doubtful which can take effect in stimulating commodity prices.

And as it was stated before, the decision to delay the Olympic Dam project is a major hit for South Australia.  State authorities had expected to receive about $350 million in royalties each year from the BHP Billiton project. In October 2011 company announced $US1.2 billion in pre-commitment capital for its flagship investment in Australia.

Avatar
Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Self-Driving Cars: Meet the Industry Leaders & Laggards

Self-Driving Cars: Meet the Industry Leaders & Laggards

Much like the flying car, the self-driving car has appeared frequently in sci-fi movies and TV shows. Who could forget Bruce Wayne’s favor...
9 hours ago
EU’s Data Protection act inadequate to meet new world tech need, says policy drafter

EU’s Data Protection act inadequate to meet new world tech need, says policy drafter

Europe’s data protection laws under the General Data Protection Regulation need to be revised to meet the post-pandemic world’s ...
13 hours ago
Volvo Cars’ path to an all-electric future just got bigger, bolder and better

Volvo Cars’ path to an all-electric future just got bigger, bolder and better

Volvo Cars will stop producing gas and diesel cars over the next 9 years, replacing the fleet with all-electric cars. ...
2 days ago
Gamestop Share Volatility May Return With Russell Index Readjustment

Gamestop Share Volatility May Return With Russell Index Readjustment

The addition or deletion of stocks to stock market indexes can lead to havoc in the trading world. There is speculation about the GameStop s...
2 days ago
Reduce, Reuse, Recycle: 5 Carbon Capture & Storage Startups Saving the World!

Reduce, Reuse, Recycle: 5 Carbon Capture & Storage Startups Saving the World!

From capturing and reducing carbon dioxide to creating negative emissions, we’ve found the five carbon capture and storage startups pu...
2 days ago
Walmart poaches Goldman honchos to run financial arm Ribbit Capital

Walmart poaches Goldman honchos to run financial arm Ribbit Capital

Walmart Inc. has lured two Goldman Sachs top executives to run its fintech startup floated in conjunction with Ribbit Capital. Omer Ismail, ...
3 days ago