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From Staff Reports
After reporting a near-doubling of the ore reserves at its massive Olympic Dam ore deposit in Southern, BHP Billiton Ltd. (BHP) yesterday (Wednesday) said it is sitting on more than $877 billion worth of copper, uranium and gold, according to published reports in The Australian newspaper.
In Australian dollars, the reserves are worth "$1 trillion,” as the headlines in Australian newspapers blared yesterday and early today (Thursday).
The increase is set to support mining at Olympic Dam and the tiny town of Roxby Downs, for 100 years or more. And it will likely spur incoming BHP chief Marius Kloppers to boost the size of a planned expansion, analysts and published reports predict.
It is likely to encourage incoming BHP boss Marius Kloppers to perhaps double the size of a planned expansion – although analysts say that will boost the aleady massive anticipated construction costs to $15 billion.
The high market value of commodities and the speculation about the expanded ore reserves has many analysts speculating that Kloppers will want to maximize the size of the construction project, or possibly even increase it. And that could have a global impact on the mining industry.
"The potential to expand the size of the project could be an opportunity to mitigate the clear capital and operating cost pressures affecting all projects globally," Macquarie Equities resource analyst Brendan Harris told The Australian.
Investment bank Merrill Lynch (MER) is tipping copper production to 1 million tons a year. Such an expansion would yield 30,000 tons of uranium dioxide, 500,000 ounces of gold.
Merrill speculated that BHP may seek to maximise value by spinning off the gold and silver production into a separately listed company, or selling it as a gold royalty. Pure precious metal assets commonly attract a higher market valuation than base metal mining assets, according to the report by The Australian.
Deutsche Bank AG (DB) says that BHP has determined that a discrete gold-only resource amounting to 4.4 million ounces could be worth as much as $500 million in a separately listed vehicle.
News and Related Story Links:
- The Daily Reckoning.com-Australia:
An Analysis of BHP Billiton’s Olympic Dam Upgrade: What Does it Really Mean for Investors?
- The Australian:
Trillion-Dollar Mine for BHP.
- Money Morning Investing Report:
Fund Managers Favors BHP, Which is Striking it Big in India.
- Money Morning News:
BHP Earnings Soar 28.4%.