BHP Billiton has called a halt to one of its “mega-projects”, going back to the drawing board on its $20 billion Olympic Dam copper-uranium development in South Australia as falling commodities prices weigh on the miner’s full-year results.
Marius Kloppers, chief executive, cited the gloomy outlook for commodity prices and rising costs for project development and equipment for the decision not to go ahead with plans to expand the mine.
“As we finalised 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,” Mr Kloppers said.
The company yesterday said net profit, including writedowns on its US shale gas assets and a $346 million before-tax charge on the Olympic Dam project, fell 34.8 per cent to $15.4 billion for the year to June 30th.
The decision comes as BHP signalled a broad-based retreat from plans to spend $20 billion a year on large growth projects for several years. It is a severe blow to South Australia, which was stripped of its triple-A credit rating this year. The expansion of Olympic Dam would have created 15,000 jobs directly and indirectly, and would have been a major contributor to the state’s economy, estimated to be worth some $90 billion Australian dollars in the 2010/11 financial year.
The mining group, the world’s largest by market value, said its Jansen potash project in Saskatchewan, Canada, would be a longer-term development, and that it would focus on increasing iron ore capacity at the inner harbour at Port Hedland in Western Australia rather than pursuing the $20 billion outer harbour project in the same Australian state.
BHP said it would not approve any other major projects in the financial year.
BHP said revenues were largely flat year-to-year at $72.2 billion, while profit before tax fell to $23 billion from $31.3 billion in 2011.
The miner announced an 11 per cent rise in its dividend to 112 cents.
