BHP has given the clearest indication yet that it will expand its huge Olympic Dam mine in South Australia.
The mining giant yesterday revealed plans to spend at least $1.2 billion on early work on the project, even though the final decision from the company’s board is still months away.
The announcement came two days after the Federal, South Australian and Northern Territory governments gave the huge $20 billion plus project the environmental go-ahead.
At the same time Rio Tinto’s uranium miner, Energy Resources of Australia revealed plans to raise half a billion dollars in a heavily discounted rights issue that could see Rio tighten its control on the group.
The money will be spent on expanding operations in and around its Ranger uranium mine and processing operation near Darwin.
The two announcements confirm the resources boom continues and is not concentrated in the glamour minerals of coal, iron ore and LNG.
It also confirms that the mining industry isn’t worried about the carbon tax which was approved by the House of Representatives in Canberra yesterday.
BHP said in yesterday’s statement that the funding will facilitate the procurement of long lead items such as trucks and accommodation, infrastructure development and early site works for the first phase of the Olympic Dam Project.
"The majority of the pre-commitment capital is conditional on the successful passage of the Indenture agreement through the South Australian Parliament."
That agreement was signed in Melbourne yesterday by BHP and about to retire South Australian Premier, Mike Rann.
BHP now has 12 months to decide whether to go ahead at Olympic Dam.
BHP said the first phase of the Olympic Dam Project "is currently in feasibility and its progression into execution remains dependant on the completion of all required studies and Board approval, which is likely to be sought by mid next calendar year".
BHP Billiton CEO Marius Klopper said: “The pre-commitment funding is another important milestone in the development of this world class ore-body.
“Given the quality of this resource, the Olympic Dam Project team is completing studies to create one of the world’s largest open pit mines with the potential to increase copper production from around 180,000 tonnes per annum to 750,000 tonnes per annum and beyond.”
BHP shares closed down 31c at $37.08, but they had been as low as $36.48 in early trading.
ERA revealed the fund raising plans after asking for a trading halt yesterday ahead of the capital raising announcement, and the release of its third quarter production report.
ERA said Rio Tinto, which holds a 68.4% in the company is fully supportive of the share offer and has committed to subscribe to its full entitlement and take up any shortfall, which will lift its stake.
ERA will offer 12 new shares for every seven shares held at a price of $1.53 per share, a deep discount to the $3.29 closing price on Tuesday and well down on the levels of a year ago.
The proceeds of the entitlement offer will be used to fund the construction of water management infrastructure and exploration activities at ERA’s Ranger mine.
"It is important that ERA understands the full extent of the resources on the Ranger project area and, as such, has planned to conduct an expanded exploration program to be conducted over the period from 2012 to 2014," CEO Rob Atkinson said in a statement.
"Following the Northern Territory government’s recent approval, site preparation work for the Ranger 3 Deeps exploration decline will begin shortly, with construction of the box cut and decline scheduled to commence in May 2012.
"In parallel, ERA will undertake evaluation studies on the potential development of the Ranger 3 Deeps mine."
A final decision on the Ranger 3 Deeps mine is expected by 2014, he said.
The Deeps exploration project is ERA’s best hope of retaining Ranger as a long term, profitable mining operation, after several tough years of heavy rain, flooding and financial pressures and losses.
A severe 2011 wet season flooded the mine and caused significant interruptions to production at Ranger. The flooding and heavy rain created operational headaches by swelling the toxic tailings dams close to capacity.
ERA reported a 2011 operating loss of $22.3 million which jumped to a $121.75 million overall loss on the back of a downgrading of the company’s ore stockpiles.
In its September quarter production report the company said that uranium oxide produced in the period was 1,010 tonnes.
"This was 11 per cent higher than the corresponding period in 2010 and significantly higher than the previous quarter during which processing operations were limited to 15 days.
"Year to date production has been affected by a temporary plant suspension which commenced on 28 January 2011, taken in response to the significantly above average wet season experienced in the Northern Territory.
"Strong plant performance has been achieved since recommencement of processing operations on 15 June 2011.
"Improvements implemented during the processing suspension resulted in ore
