- BHP Billiton halts $20B copper-uranium development in S. Australia as commodities prices fall
- Mining groups reining in expansion as China's slowing growth casts doubt on commodities demand
- Project was expected to create 15,000 jobs and 4,000-strong construction workforce in S. Australia
BHP Billiton has called a halt to one of its so-called "mega-projects", going back to the drawing board on its $20bn Olympic Dam copper-uranium development in South Australia as falling commodities prices weighed on the miner's full-year results.
Marius Kloppers, the BHP chief executive who has been under pressure from shareholders to provide details on the miner's spending plans, cited the gloomy outlook for commodity prices and rising costs of project development for the decision not to expand the mine.
BHP would "continue studies to develop a less capital-intensive option to replace the underground mine", Mr Kloppers said, adding that the company could take two years to test leaching technology to determine whether it could help make the project cost effective.
BHP's decision to shelve Olympic Dam comes amid a broad pullback from ambitious growth plans by big mining groups, with Anglo American and Xstrata recently pruning spending plans, as slowing growth in China casts doubt on the strength of demand for commodities such as iron ore, coal and copper.
But the move is a severe blow to South Australia, which was stripped of its triple A credit rating earlier this year. The project was expected to create 15,000 jobs in addition to a 4,000-strong construction workforce.
Mr Kloppers was quick to praise the state's government, which he said had been "fantastic" in creating the right conditions for the development.
But Jay Weatherill, South Australian premier, warned that future public backing for the project would come "at a cost", with BHP's existing approval due to expire in December.
BHP said it would not give the go-ahead to any other projects this financial year, with about $22bn in spending already approved.
The mining group will now focus on expanding iron ore capacity at the inner harbour at Port Hedland, in Western Australia, it added, rather than pursuing the $20bn Outer Harbour project. It also said it now expects the Jansen potash project in Canada to be a longer-term development.
BHP's net profit, including writedowns on its US shale gas assets and a $346m before-tax charge on the Olympic Dam project, fell 34.8 per cent to $15.4bn for the year ended June 30. BHP's London-listed shares fell 1.67 per cent to £19.47.
Mr Kloppers said he saw scope for commodity prices to recover in the second half of this year, as Chinese stimulus measures started to take effect.
BHP's revenues were largely flat year on year at $72.2bn, while profit before tax fell from $31.3bn in 2011 to $23bn. The miner announced an 11 per cent rise in its dividend to 112 cents.
Meanwhile, iron ore prices have fallen to their lowest since late 2009 as steelmakers in Europe curtail purchases, forcing miners to sell into the Asian market just as Chinese consumption slows down, creating a glut.
Benchmark iron ore prices fell on Wednesday to $105.75 a tonne for material containing 62 per cent iron delivered in China, down roughly 30 per cent over the past four months, according to Platts, the price reporting agency.