Oct 2012

http://www.theaustralian.com.au/business/opinion/bhp-billiton-sets-its-sights-on-copper-after-assessment-of-bull-market/story-fnciil7d-1226486892717

BHP Billiton sets its sights on copper

BHP Billiton has been wining and dining analysts on a tour of its copper assets, telling them that it expects to be producing an additional 350,000 tonnes of the red metal from 2015.

Olympic Dam in South Australia is not part of BHP's copper expansion plans for the simple reason that its $30 billion price tag is too expensive, even for the likes of BHP. But expanding in copper BHP is, with the additional output to come from the South American and US mines in its portfolio.

The big copper push by BHP is backed by its bullish assessment of where the copper market is going. Others share its bullish assessment, as has been reflected in copper withstanding all of the global economic challenges that have made other commodities go weak at the knees. It is trading at $US3.75 a pound, which is as good as the producers can hope for when (on average) their cash costs of production come in at about $US1.60 a pound.

BHP -- and the broader market -- expects present global output of 15 million tonnes will continue to decline because of depletion of resources and lower ore grades.

Throw in some resource nationalisation, environmental constraints and operating cost escalation, and it is clear there has to be some big-time investment in new mines and expansions of existing operations with the supporting reserve base. Why, even Olympic Dam will have its day in the sun.