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copper coated uranium for china

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    Copper coated uranium for China

    Matthew Stevens
    July 12, 2007

    BHP Billiton has asked the federal Government to approve the export of uranium-bearing copper concentrate to China, signalling a huge and politically fraught change in planning for the proposed $US5billion-plus ($5.8 billion-plus) expansion of Olympic Dam.
    BHP's next chief executive, Marius Kloppers, met Industry Minister Ian MacFarlane in Melbourne last night to signal a formal request to directly ship up to 1.2 million tonnes of Olympic Dam copper concentrate a year, rather than convert the ore into metal at the mine site.

    The idea means that BHP would be, by stealth, selling uranium directly to China, which is why the company needs to secure federal endorsement.

    The export copper concentrate would contain relatively low levels uranium. But even at the expected 0.01 per cent to 0.15 per cent concentrations, BHP would still be shipping up to 2500 tonnes of uranium to Chinese smelters each year.

    It is not yet clear whether BHP would propose, or be required, to repatriate that uranium.

    Clearly it would make more economic sense for the product to be sold from China and its nuclear industry, if under the Australian Government's restrictions. That would first require the finalisation of the bilateral safeguards agreement which is part of the Australia-China Nuclear Transfer Agreement signed in April this year. When that deal was signed, it was foreshadowed that Australia would eventually export up to 20,000 tonnes of uranium to China.

    BHP's new concentrate-only development option has also been raised with South Australian Premier Mike Rann, who met BHP on Monday.

    The canvassing with both governments of a radically different plan for the crucial Olympic Dam expansion so late in BHP's pre-feasibility process indicates that the economics of the original plan might not be stacking up. There is no question that Olympic Dam is an amazing resource. But getting at it is going to be an engineering feat because the ore body is 350m below the surface and is covered by, among other things, a layer of granite.

    Under option A, which remains under consideration, BHP would increase the smelting capacity at the massive desert mine site by 150 per cent so that all the copper, uranium, gold and silver could be extracted and transformed on site.

    In briefings as recently as December, BHP put the projected output of an expanded Olympic Dam at 500,000 tonnes a year of copper, 15,000 tonnes of relatively low-grade uranium, 500,000 ounces of gold and 2.9 million ounces of silver. At that time BHP said it hoped its extensive pre-feasibility work would be completed by the end of 2007 and that the necessary government approvals would be collected by 2008. Then, given construction runs to schedule, the expanded Olympic Dam would ramp up to the new production levels from 2013.

    The option B proposal, which is still being developed by BHP's 550-strong pre-feasibility team, would effectively export the processing of all the new production at Olympic Dam.

    That means the most likely destination of the concentrate would be China, which is expected to have a serious over-capacity of copper processing for the foreseeable future.

    But BHP's new option, while it might profoundly improve the economics of the project, will at the same time create two huge new political hurdles for the company.

    The Rann Government will clearly be concerned at the potential loss of what would have been a showcase in South Australia's capacity to value-add to its mineral resources.

    The Government might also be concerned at a potential reduction of the expected $80 million royalty flow and the more certain loss of permanent jobs which would be needed should BHP go with option B.

    The original project would require up to 10,000 workers at peak stages of construction and would create 4000 new permanent jobs. But the concentrate-only option would reduce permanent jobs by 10 per cent and the construction workforce by substantially more given that the additional 300,000 tonnes of smelting capacity would not be constructed.

    Obviously that will reduce the total construction cost of the project. But it will also reduce the continuing costs of operation as it will reduce the project's electricity demand by at least 15 per cent.

    Power remains one of the key problems for the project. Olympic Dam currently draws 120MW from the South Australian grid, which represents about 10 per cent of the state's base load.

    That demand had been expected to swell to 400MW, with the new requirement being generated on-site, most likely from gas or co-generation.

    A plan to export concentrate would mean that the greenhouse implications of the processing will also be shifted to China, where it is likely the electricity would be drawn from nuclear-fuelled generation.

    One aspect of the project not changed by this potential new approach is the water demand.

    Olympic Dam will still require 100Ml a day which will be drawn from the Great Artesian Basin and a coastal desalination plant. That plant, which will be the second biggest in the world, will be a joint venture with a state government.

    The Government wants to pipe its share of the output to the north of the state to replace water currently being drawn from the Murray River.

    One other notable aspect of what is going on at Olympic Dam is the depth and breadth of BHP pre-feasibility work.

    BHP has 200 people working on plans in Adelaide with another 350 at the Olympic Dam site. Most of them are busy operating the 20 drill rigs (this is the biggest single drilling program in the world) which continue trying to define a resource that BHP believes is already the second biggest base metal discovery ever.,20867,22058833-643,00.html
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