Olympic Dam: Official Assessment out today

21 10 2009

BHP Billiton declared force majeure following a mechanical failure on October 6th of Olympic Dam haulage system. The company released its damage assessment today along with its September quarter production report and Australia’s work safety’s officials’ probe. Causes of the incident are yet unknown as the investigation is not yet completed however damages have been assessed.

BHP Billiton confirmed today that it expects months of outage at Olympic Dam as the mine will continue to function at a 25 percent ore-haulage capacity until the first quarter of 2010. This announcement confirmed most analysts’ preliminary assessments as in most expected the mine to operate only at 20% capacity which would reduce the supply of copper by approximately 50 000 tonnes this year as the situation was expected to take up to six months to return to normal. BHP Billiton could have had to purchase copper and uranium to meet contractual obligations however declaring force majeure frees the company from any liability if cannot supply its customers.

Olympic Dam’s copper is sold in Europe, Australia and Asia under contracts negotiated annually based on monthly LME cash settlement prices. Its uranium is sold in Britain, France, Sweden, Finland, Belgium, Japan, South Korea, Canada, the United States and Spain.

On October 6th, the haulage system in the Clark Shaft brings the ore from underground to surface processing facilities. Due to the system derailing, BHP has restarted a smaller shaft capable of maintaining just 20% of the mine’s usual capacity since the incident took place.

Olympic Dam is the world’s largest uranium resource, the world’s fourth largest copper and gold play. The mine became an asset of BHP Billiton when the company acquired WMC Resources in 2005. Expansion plans at Olympic Dam were given the green light in late 2008 with the Stage 1 being in production by 2013. The expansion will lead to a five-fold increase in the ore volume extracted.

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