The enormous potential still tucked up inside BHP Billiton was emphaised by the release of its 2008-09 annual report.
Times might be tough in the global economy and commodity plays are on the nose, except if they have a stake in supplying growing China, India and Brazil, plus a host of other economies in the region.
But there’s no company with quite the spread of current and future interests, and the financial clout.
The annual report reveals lots of snippets about the company and its ambitions.
There are three, possibly four new coal mines being looked in Queensland coking coal belt with additional tonnages of 20 million tonnes a year within a few years. Not all the coal will be for BHP and its partner, Mitsubishi, but that could be another $7 to $10 billion of spending over the next few years.
BHP also revealed it had boosted marketable thermal coal reserves at the Mount Arthur mine in the Hunter Valley from 168 million tonnes to 753 million tonnes: it already announced a small $260 million expansion at the mine in July.
That will increase the life of the mine to more than 50 years.
And the company also said it had made a new discovery near its Jimblebar iron ore mine in Western Australia’s Pilbara region that would add 30 years to production at current rates.
This mine has a life of 92 years.
But the most dramatic bit of news from the report was the huge upgrade for Olympic Dam to the point where it could be fair to describe it as the "Gorgon" on mainland resource projects.
BHP Billiton boosted the estimated ore reserve at the Olympic Dam copper, gold and uranium mine in outback South Australia by 25% in the report.
Proven and probable reserves of ore increased to 589 million tonnes at June 30, the company revealed in its 2008-09 annual report.
That compares with last year’s estimate of 473 million tonnes for the world’s biggest uranium deposit and fourth-largest copper reserve.
The expansion would take 11 years to build and increase copper output at the mine almost fourfold to 750,000 tons a year, boost gold production eightfold and uranium by almost fivefold, according to the report.
BHP said the reserves increase boosts the estimated mine life to 54 years, up from last year’s forecast of 43 years.
The gain is “due to additional mineralization being available for conversion to probable reserves,” the company said.
BHP released its draft environmental impact statement for Olympic Dam on May 1 and expects government decisions on the draft statement by mid-2010, it said in the report.
Last week Morgan Stanley said in a note to clients that developing the mine to full potential could cost an estimated $16 billion and take years.
Pre-feasibility study work on the proposed expansion of Olympic Dam is complete, BHP said.
The study has addressed production capacities, mining methods, processing (including smelting) options and supporting infrastructure requirements.
"Based on this work, a project configuration has been described in a draft Environmental Impact Statement (EIS) provided to the Federal, South Australian and Northern Territory governments which was publicly released on 1 May 2009.
"The proposed expansion would be a progressive development requiring construction activity over a period of 11 years to increase production to up to 750,000 tonnes per annum of copper, 19,000 tonnes per annum of uranium oxide and 800,000 ounces of gold.
"Government decisions on the draft EIS are expected by mid 2010. After that, the expansion project will depend on successfully completing all required feasibility studies and on BHP Billiton Board approval of the final investment case."
On top of that, BHP has again confirmed there’s more mineralisation at its huge Escondida copper mine in Chile (57% owned).
"Exploration of the Escondida lease and early drilling results suggest that there is extensive additional mineralisation in close proximity to existing infrastructure and processing facilities, including a new prospect known as Pampa Escondida.
"Further study will be required before we establish whether it can be economically extracted. Escondida is planning to invest an estimated US$198 million (US$114 million our share) in drilling, assaying and metallurgical test work in exploration across the mining lease over the next five years."
Escondida has a life of another 21 years at current extraction rates: the new areas, if proven up, would extend that.
In Peru, BHP and its partners in the Antamina copper/zinc project are considering expansion alternatives after a near-doubling in the reserve base. Currently it has a life of 21 years. BHP has 33% of this mine.
As daunting as some of these schemes sound on paper (11 years to develop Olympic Dam to full potential!) comments by the company’s CEO, Marius Kloppers, make it clear BHP remains optimistic, even if it can’t see a return to pre 2007-08 levels of demand for some years.
"The major economies are starting to rebuild their inventories in sequence, led by an early recovery in China; and we may see a more predictable demand scenario for our products in the coming financial year.
"However, we do not expect a return to the same buoyant demand conditions that prevailed before the global financial crisis, or a return to record global growth rates within our forecasting horizon.
"Given that China represents approximately 20 per cent of BHP Billiton’s revenue, and up to 50 per cent of the world’s raw material consumption, it merits additional
