A decade ago, BHP Billiton was gearing up to dig the world’s biggest hole in the Australian outback.
In 2011, BHP delivered the largest annual profit in Australian corporate history and like its peers, was flush with cash as China sucked up metals and minerals at never before seen rates.
Iron ore prices appeared headed to $200 a tonne, copper was setting records above $4.50 per pound/$10,000 a tonne and uranium averaged double today’s levels.
While other industries were still struggling to emerge from the global financial crisis, the late noughts and early 2010s were the acme of global mining.
And with megabucks came megadeals and megaprojects.
BHP acquired Olympic Dam, located 560km north of Adelaide in South Australia in 2005 and quickly looked for ways to expand, delivering a draft economic impact study for public scrutiny four years later.
The copper resource at Olympic Dam (a livestock watering hole named after the 1956 Melbourne Olympic Games) is considered the world’s fourth largest, and its uranium resources number one.
There is also more than a decent amount of gold and silver at Olympic Dam, and the expansion sailed through state and federal government permitting. An Olympic Dam Task Force was even set up to streamline the process further.
Olympic Dam Expansion – ODX – would place the operation in the top three globally, adding 515,000 tonnes of copper to underground output of over 200,000 tonnes.
But even during those heady days, the project came with an eye-popping price tag: $30 billion – US.
Everything about ODX, which had its own glossy 22-page brochure, was grand in scale.
A new desalination plant running 100% on renewable energy with a 320km pipeline, a 270km transmission line, a 105km rail line, a new airport to cater for large jets, a worker village, and an 8,000-strong workforce.
The project would also double the size of the nearby Roxby Downs township. There would be robots, too.
ODX was going to take olympian effort just to get to the orebody – the first six years would have been spent on removing overburden.
By 2050, the pit would grow to be 4.1 kilometres (2.55 miles) long, 3.5 kilometres wide and 1 kilometre deep.
Waste rock piled 150 metres high would cover approximately 6,720 hectares (26 square miles).
The final feasibility was completed in May 2012, but by the time the Australian winter arrived BHP was freezing capex budgets and institutional investors told companies spending like drunken sailors to chill.
Deadlines for board approval were quietly missed as the industry tightened belts and by August then CEO, Marius Kloppers, declared the company would look for less capital intensive options.
One of those options, a previously discarded plan to add a giant heap leach operation, was put back on the drawing board, where it remains today. The heap leach development trial only ended in June last year with results deemed “promising” but not much besides.
Kloppers’ successor Andrew Mackenzie was less than enthusiastic about the project, saying Olympic Dam needed a technological breakthrough before the economics would make sense.
In 2017 another inspiring acronym was introduced at Olympic Dam – BFX –or Brownfield Expansion.
Modest in its ambitions – expanding surface infrastructure and extracting higher grade ore from the southern zone – the projected cost was less than a tenth of the open pit.
A level of uncertainty about the outcome of BFX was noticeable from the outset with potential annual output put anywhere from 240,000 to 350,000 tonnes. $2.5 billion for perhaps only 40,000 tonnes more makes ODX a comparative bargain.
Then last week, after three years of study and more than 400 kilometres of drilling, BFX was axed, a decision tucked away in BHP’s quarterly production review.
“The studies have shown that the copper resources in the southern mine area are more structurally complex, and the higher grade zones less continuous than previously thought,” was BHP trying to rationalize what a cruel mistress exploration can be.
“We have decided the optimal way forward for now is through targeted debottlenecking investments, plant upgrades and modernisation of our infrastructure,” was BHP softening the body blow to South Australia and Roxby Downs with management catchphrases.
Not that Olympic Dam is not firing right now, with the mine’s best production results in years, and a life still measured in decades.
There are also other options for BHP in the region. Perhaps sensing defeat for BFX, the company has, uncharacteristically, made much of its exploration success at Oak Dam, 60km from the underground mine.
BHP also said last week “the long-term opportunity for Olympic Dam is unchanged.”
But if long term optimism about copper demand and prices, a narrow global pipeline of major projects, grades the envy of most large-scale mines, juicy gold credits and a uranium price that won’t go lower from here, are not enough to clear a brownfield investment hurdle, what would?
With BFX cactus, the era of mining megaprojects seems well and truly over.