South Australia has quietly emerged as BHP’s (ASX:BHP) future, with the company's December quarter and half-year report hinting at a massive extension of its already huge Olympic Dam copper, gold, silver, and uranium deposit.
Olympic Dam is already a giant, but BHP also has the highly prospective Oak Dam deposit nearby and two major copper and gold mines in Carapateena and Prominent Hill, along with several areas of mineralization acquired in the $9.6 billion takeover of OZ Minerals.
Adding to these riches, BHP acquired the copper-nickel project near the WA-South Australian border called West Musgrave, which is currently under construction.
While Thursday's quarterly and half-year production and sales report rightly drew investor focus to the problems BHP is having in its WA nickel business as it looks to stay in the metal while reacting to low world prices, the news on the exploration front from Olympic Dam was tantalizing.
Olympic Dam is already a major part of BHP’s copper business, helping the company become the world’s biggest miner of the red metal, along with being a global major in uranium (Olympic Dam is the world’s largest single deposit of uranium).
The Olympic Dam is an extremely large iron oxide copper-gold deposit with estimated reserves of 2.95 billion tonnes of ore grading 1.2% copper, 0.04% uranium, 0.5 grams of gold per tonne, and 6 grams of silver per tonne.
In 2018, a smaller version of Olympic Dam, named Oak Dam, was confirmed 65 kilometers southeast of Olympic Dam, with higher initial copper grades of up to 6%. BHP drilled a hole in 1976 and discovered Oak Dam East, which was small.
The Western area of the deposit was later found, and occasional drilling campaigns were conducted with various partners over the next decades.
After delays caused by the pandemic, BHP stepped up exploration work there, and in the December quarter report, they mentioned having 12 drilling rigs (up from 10) working at Oak Dam to prove up a mineral resource estimate for release sometime this year.
In the latest report, BHP revealed surprising news about Olympic Dam and a new campaign with the results from 28 holes drilled under the bottom of the existing working zone.
Some of the holes encountered intervals of between 100 and 580 meters of mineralization – copper, uranium, gold, and silver (there were plenty of intervals less than 100 meters as well) as BHP said the mineralized area outline runs for two kilometers with a depth of up to a kilometer. And it remains open as to length and depth.
The idea to drill under the existing ore body at Olympic Dam came from geologists at the mine reviewing the results of three very deep holes drilled back in 2007.
BHP said, "three deep holes were drilled (in 2006-07) below known Olympic Dam mineralization, testing a modeled density anomaly, and subsequently intersected mineralization. These holes returned mineralized intercepts.”
The results were similar to the known mineralization at Olympic Dam, with similar readings of copper, uranium, gold, and silver.
But they were not followed up until 2021 because BHP was trying to right-size the mine after the takeover of WMC, its original owner, in 2005, then expand it in a plan for a massive open cut, that was abandoned and then survive a downturn before spending heavily on a $600 million-plus expansion starting in 2017.
"In 2020-21 BHP Olympic Dam geologists reviewed mineralization potential at depth and commenced exploration drilling in 2022 in the area known as the ODD (Olympic Dam Deeps).
"As of September 9, 2023, total drilling of the OD Deeps mineralization, including historic drilling, was approximately 62 km, with nominal drill space ranging from 160 m to 320 m.
"All holes completed to target depth intersected mineralization and have outlined mineralization extending more than 2 km along strike, and more than 1 km in depth. Mineralization continues to be open along strike and at depth.
"The iron oxide copper-gold (IOCG) mineralization style of the OD Deeps appears similar to the main body of Olympic Dam. Mineralization is dominantly chalcopyrite with some areas of bornite.
"To date, and noting wide-spaced drilling, continuity continues to appear favorable above 1% copper grade. The absolute extent of mineralization has not been discovered. However, along strike, there are geological indications of decreasing brecciation as well as decreasing iron content. These suggest a diminishing system along strike.
"This release reflects progress in our exploration activities at Olympic Dam. Further work will be required to enable an estimate of Mineral Resources,“ BHP said.
The best copper intersection was 126 meters at 4.1% in a hole where 580 meters of mineralization was intersected, which would be enough to get anyone interested.
Now BHP has the dilemma of how much money to invest in its South Australian copper areas – known and prospective.
As of 2022, Olympic Dam had a life (based on known reserves) of 57 years. The new drilling results will extend that significantly.
