the $10 billion initial expansion of Olympic Dam may be stretched out over a longer period, analysts and investors said….. BHP would have to seek an extension from the South Australian state government if it fails to commit to the Olympic Dam project by December, or else it would lose its approvals for the project….
BHP may delay at least two mega projects to rein in spending, By Sonali Paul MELBOURNE May 17 (Reuters) - BHP Billiton, the world’s biggest miner, is likely to delay signing off on at least two mega projects after its chairman put the brakes on an $80 billion plan to grow the company’s iron ore, copper and energy operations, analysts say.
Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto in reconsidering the pace of their long-term expansion in countries such as Australia and Canada. ”The major message is: ‘We can’t approve anything right now. We don’t have a spare cent to spend,’” UBS analyst Glyn Lawcock said.
In BHP’s bleakest outlook yet, Chairman Jacques Nasser said on Wednesday the company expects commodity markets to deteriorate further and that investors have lost confidence in the longer-term health of the global economy.
Nasser stopped short of announcing a spending cut, but said BHP was
re-thinking its expansion plans “everyday” and that the company won’t
spend $80 billion over five years as outlined by Chief Executive
Marius Kloppers in 2011.
The miner was planning to finance the expansion with its cash flows,
which analysts forecast may fall 20 percent to around $24 billion in
the year ending June.
BHP has long maintained that it is committed to keeping its single-A
credit rating, another constraint on spending. As of December, the
company had net debt of $21.5 billion.
Three projects are vulnerable: the Outer Harbour development at Port
Hedland in Western Australia crucial to its iron ore growth, the
expansion of the Olympic Dam copper and uranium mine in South
Australia, and its Jansen potash project in Canada.
BHP has said it plans to take all three projects to the board later
this year and has not backed away from that yet….. the $10 billion initial expansion of Olympic Dam may be stretched out over a longer period, analysts and investors said….. BHP would have to seek an extension from the South Australian state government if it fails to commit to the Olympic Dam project by December, or else it would lose its approvals for the project….
The government would be hard-pressed to deny BHP an extension for
starting the development, given that no one else would be in a better
position to take over the project, expected to cost as much as $30
billion to fully develop. …
“If the economics are not working for BHP, it’s unlikely to work for
Rio, Anglo or Xstrata,” said Patkar, referring to BHP’s main copper
rivals… Analysts said any delays on Olympic Dam or Jansen would not
affect their forecasts for the company as they have not included those
projects in their numbers yet.