BHP to spend $277m to modernize Australian copper smelter

BHP said it will spend A$350 million ($277 million) to boost capacity by about 6 percent at its underperforming Olympic Dam copper smelter, cutting production during the upgrade.

The smelter, one of the largest in the Southern Hemisphere, has been hampered by insufficient power supplies and maintenance work since a major power outage last year shut operations for two weeks.

Copper production in fiscal 2017 fell 18 percent to 166,000 tonnes from 203,000 the year before and will slip to 150,000 tonnes this year as work is carried out between August and November, BHP said.

The refit will boost production capacity to 215,000 tonnes per year in fiscal 2019 and to up to 280,000 tonnes in fiscal 2022.

Copper is one of BHP's so-called four "growth pillars" alongside iron ore, coal and petroleum products.

"There will be 1,300 contractors at Olympic Dam during the peak of construction as teams work around the clock to dismantle, rebuild and upgrade integral components of the facility," Jacqui McGill, Olympic Dam president said in a statement.

The work involves demolishing old furnaces used in the refining process for the metal and installing new ones.

The Olympic Dam smelter was brought to a halt when a storm destroyed power transmission lines and blacked out the entire state of South Australia on Sept. 28.

The decision to allocate the funds comes amid a dismal year for BHP's copper operations, due largely to a 44-day strike at the Escondida mine in Chile, resulting in expected writedowns exceeding $500 million.

Overall, BHP saw a 16 percent decline in copper output in fiscal 2017. (Reporting by James Regan; Editing by Richard Pullin)