BHP Axes Olympic Dam Expansion

It looks like the boom days of BHP Billiton are over. The company has announced that it is axing the expansion plans for the Olympic Dam project. The expansion would have cost US$30 billion.

The decision to axe the Olympic Dam expansion came after the company’s net profit declined 35 percent. Its shares were also lower by 0.3 percent, ending at $33.16.

According to Gavin Wendt, the move of BHP is sound because it does not make sense to invest in a major capital spending program when the prices are softening. Wendt is the publisher of Mine Life, a resource newsletter.

Wendt added that BHP’s decision would give the company some flexibility in terms of financial resource.

According to data, the net profit of BHP reached US$15.4 billion. The figure is much lower as last year’s net profit was at US$22.46 billion.

On top of the decision to halt the Olympic Dam expansion, BHP has earlier announced that it would not be able to meet the December 15 deadline. The date was scheduled for BHP’s approval of its uranium and copper mine expansion.

BHP said that instead of pursuing that expansion, the company would explore less-expensive methods to increase production in its South Australian mine.

The Olympic Dam project was awarded to BHP in October 2011 with BHP expected to approve the project by June 2012. Commodity prices, however, began to slump and BHP was tied in a bind.

The company also said it would not approve any major project within the year.