BHP Mine Resources Rise 75 Percent BUSINESS ASIA By Bloomberg

By Jesse Riseborough

BHP Billiton says copper, gold and uranium resources at its Olympic Dam mine in Australia are 75 percent higher than its previous estimate. The total resources of the mine are estimated at 7.7 billion dry metric tons of ore from 4.4 billion tons last year, BHP said in its 2007 annual report. BHP shares rose to a record Tuesday on speculation of an estimate increase at the mine, the largest uranium deposit in the world.

The resources upgrade comes as BHP’s chairman, Don Argus, said Wednesday that demand from China for raw materials should continue and place pressure on the global supply of commodities. BHP is studying an expansion of at least $5 billion at the mine, which may double its copper output and almost triple uranium production as prices surge.

“The key issue is not how big it is but what are the economics of the project,” said Peter Chilton, a fund manager at Constellation Capital Management. “A lot of capital will be involved before they can even get it into production.”

The company plans to complete an environmental study of the proposed expansion next year with the first output from the expansion scheduled for 2013, the company said.

BHP acquired Olympic Dam when it bought WMC Resources in 2005 for 9.2 billion Australian dollars, or $8 billion. The ore deposit dates back 1.5 billion years.

The upgraded resource estimates the deposit contains 79 million ounces of gold, making it the biggest gold resource in Australia and the fifth-largest in the world, said Samantha Evans, a spokeswoman for BHP.

Copper at the mine, previously the fourth-largest deposit in the world, rose to 67 million tons from the estimate last year of 48.7 million tons, Evans said. The uranium resource rose to 2.2 million tons of uranium oxide, from 1.7 million tons, she said.

The ore reserve estimate rose to 399 million tons from 374 million tons, the company said.

An ore resource estimate is a broad calculation of minerals contained underground, while a reserve estimate is a measure of minerals that can be profitably mined.

Olympic Dam is located 570 kilometers, or 354 miles, from Adelaide, the capital of South Australia state, and contains about 34 percent of the world’s known uranium reserves. BHP is drilling more than two kilometers beneath the surface as part of a two-year expansion study at the mine.

Mining companies are struggling to increase production capacity to meet surging demand from China that has spurred a five year rally in metals. RBC Capital Markets increased its 2008 copper price forecast by 16 percent this month, citing supply constraints.

“Over the medium term we expect commodity prices to move towards long-run marginal costs of supply but, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility,” Argus, the chairman, said in the company’s annual review.

Spot uranium prices reached a record in June, copper has jumped more than fivefold in the past five years and gold is trading at its highest since 1980.

The previous resource estimate at the mine stands at 4.4 billion dry metric tons of ore at 1.1 percent copper, 0.4 kilograms, or 0.9 pounds, a ton of uranium and 0.5 grams a ton of gold, according to the company.

Originally published by Bloomberg News.

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