Mining titan BHP Billiton has said that it will not approve any major projects in the current financial year, as it revealed that the 30bn-dollar expansion of a uranium and copper mine in South Australia has been delayed in order to 'improve the economics of the project'.
The company blamed current market conditions, including lower commodity prices and rising capital costs, for the revision of the Olympic Dam open-pit expansion.
"As we finalised all the 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 at Olympic Dam," said BHP's Chief Executive Officer Marius Kloppers.
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"Value is always our primary consideration. We believe today's decision reflects an appropriate, prudent and disciplined course of action," he said.
BHP said that it won't be ready to approve the project expansion by the December 15th deadline agreed with the South Australian Government and, as such, it incurred charges and impairments totalling $346m, recognised as exceptional items in last year's results (for the 12 months to June 30th). These were part of the $1.7bn total exceptional charges that the company realised last year, which took a large bite out of its bottom line.
Attributable profit plunged by 34.8% to $15,417m from $24,648m the previous year, leading to a fall in basic earnings per share (EPS) to 289.6 cents from 429.1 cents a year earlier. Excluding the exceptional items, EPS still fell 18.3% to 321.6 cents from 393.5 cents the year before.
Meanwhile, revenue in the year to the end of June edged up to $72,226m from $71,739m the year before.
The company currently has 20 large projects in execution with a combined budget of $22.8bn, the majority of which are expected to deliver first production before the end of the 2015 financial year. These low-risk, largely brownfield projects will be the driver of near-term momentum and create value for shareholders, the group said.
However, while the company reassured that it was "largely committed for the 2013 financial year", it revealed that no major project approvals are expected over this timeframe.
The approval of the Olympic Dam, in addition to an iron ore port expansion in Australia and a Canadian potash project, were estimated to cost the miner a total of $68bn, according to Deutsche Bank earlier this year.
The company said in its full-year results this morning: "BHP Billiton has an unrivalled portfolio of development options beyond those projects in execution and a significant number of these are embedded within our existing footprint. As our current expenditure commitments decline, future capital will be allocated to those options that maximise shareholder value, while also considering the balance between short and long-term returns."
Shares were trading 1.74% lower at 1,945.5p by 15:48 on Wednesday afternoon.
