BHP Billiton is poised to create one of the world’s biggest mines following government approval of its long-awaited Olympic Dam expansion in South Australia.
If the mining giant’s board decides to proceed with the expansion next year, as expected, Olympic Dam will be the second biggest mine in Australia behind the Morwell open cut coal operation in Victoria’s Latrobe Valley.
The expansion will be done in three stages over 11 years involving the addition of a massive open pit operation to the existing underground mine.
It will eventually span 4.1km long, 3.5km wide and 1km deep.
Comparatively, the Barrick/Newmont-operated Super Pit gold mine in Kalgoorlie, Western Australia will eventually stretch 3.8km long, 1.5km wide and more than 600m deep.
Newmont’s Boddington gold mine in WA’s south is 4km long, 1km wide and will ultimately be 700m deep.
Federal Resources and Energy Minister Martin Ferguson said Olympic Dam had the potential to become one of the world’s largest mines, if not the largest.
The existing underground mine is already Australia’s biggest.
“Olympic Dam is a standout, its size and scale unprecedented for a single mining project in Australia,” Mr Ferguson said in a statement. “The potential benefits of the Olympic Dam development are immense … from 40 to 100 years.”
BHP Billiton is unlikely to reveal a development cost estimate for the expansion until its board makes a final investment decision, but observers speculate it will cost between $22 billion and $30 billion.
The expansion will boost copper production at Olympic Dam by more than four-fold to about 750,000 tonnes per annum, while uranium production will rise from 4,500 tonnes per annum (tpa) to 19,000tpa.
The increased output could have a significant impact on global supply of the commodities, pushing down prices, Morningstar senior research analyst Mark Taylor said.
“It’s a very risky undertaking for them because it is such a long period of time before there is payback, and at the same time, you’re bringing new product to … a thin market where exceptional margins are being made at the moment because it is so tight,” Mr Taylor told AAP.
Gavin Wendt, head of mining and resources research at Mine Life Pty Ltd, said productivity and grades were falling at the world’s biggest copper mines including Grasberg in Indonesia, Kennecott Utah in the United States and Escondida in Chile.
This meant global copper supply was set to fall in coming years, a gap that should be filled by output from an expanded Olympic Dam, Mr Wendt said.
“We’re probably looking at 2015 (for first production from the expansion) and there is certainly going to strong demand, so with issues on the supply side, BHP Billiton will be very happy to be able to expand and bring this additional copper to market,” he told AAP.
Mr Taylor said tight labour markets and high materials costs meant the expansion would not be easy for BHP Billiton.
The global miner would be competing with major oil and gas projects in Queensland and Australia’s far northwest for these resources, he said.
Australian Uranium Association chief executive Michael Angwin said it was the third time federal Labor had approved a uranium project since 2007.
During this period, the government gave the green light to the soon-to-be commissioned Honeymoon mine and Beverley mine extension, both in South Australia.
Shares in BHP Billiton closed 10 cents softer at $37.10.
