Tuesday, October 11, 2011

Uranium: "BHP's Olympic Dam expansion plans a threat to prices" (BHP)

It is a big 'un.
Maybe the biggest project in the world.
From The Australian:
BHP Billiton's extensive expansion of its world-class Olympic Dam mine will push uranium prices lower, with the company set to become the dominant global supplier. 
The expansion plans at the South Australian copper, gold and uranium mine moved a step closer this week when the federal, South Australian and Northern Territory governments gave it the green light after assessing BHP's environmental impact statement.

Tom Price, UBS global commodity analyst, said the biggest impact from BHP's expansion would be on the uranium market, with the miner's output of the product expected to account for about 10 per cent of forecast global supply in about 2020.

"That is so big you will start seeing prices in the uranium market fall before it even comes into the market because everyone will be taking positions on it," he said.

"I'll be interested to see how BHP handle that because it must be an issue for them. BHP will have to say things like they are not delivering all these tonnes to the market and that they will manage the flow.

"No one wants to deliver a commodity to the market in a way that devalues that commodity and that is exactly what BHP faces."

Foster Stockbroking analyst Harris Khaliqi was more negative on the impact to the uranium sector, predicting that the expected uranium output of 19,000 tonnes per annum when the expansion is complete meant that BHP could potentially account for 35 per cent of global demand, based on today's supply numbers.

"That has the potential to flood the market and obviously there would be an adverse impact on long-term uranium prices, which have already been under pressure post-Fukushima," he said.
BHP has said the expansion project, which will develop an open-pit copper, uranium and gold mine, has the potential to boost copper production from about 180,000 tonnes a year to 750,000 tonnes a year for decades.

Uranium output could be lifted from 4000 tonnes per annum to about 19,000.

BHP is yet to put a value on the expansion project but analysts have widely tipped it could cost up to $30 billion for the development, which would involve building an airport, a gas-fired power station, a 105km rail line and a coastal desalination plant....MORE