BHP cancels Olympic Dam project

BHP Billiton has decided against spending up to 30bn US dollars on a uranium and copper mine extension in South Australia.

The site, known as Olympic Dam, had been a major part of the world's biggest mining group's development strategy but BHP admitted "subdued commodity prices and higher capital costs" have made the project uneconomic.

It's a huge blow for the South Australia government which had been expecting extra revenues of around AUS$350m annually from the expansion. The decision also suggests the Australian commodity boom, which has led to breakneck economic growth, may be coming to an end, or at least a temporary halt.

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BHP says it is now considering "an alternative, less capital-intensive design" for the Olympic Dam, but that no decision will be reached by the December 15th deadline the Australian authorities had imposed.

BHP's Chief Executive, Marius Kloppers, said he felt the decision reflected an "appropriate, prudent and disciplined course of action." While that may be the case, it will cost BHP $346m in impairment charges, which will have to be recognised in the full year results.

In its half yearly figures released on the same day as the Olympic Dam announcement, BHP revealed underlying earnings before interest, tax, depreciation and amortisation (EBITDA) declined 9% to $33.74bn from $37.1bn in the previous year.

At 8:35 the shares had declined 1.8%.

BS