BHP Sees Return to Full Output at Olympic Dam by End of March

By Rebecca Keenan and Jesse Riseborough

Oct. 21 (Bloomberg) -- BHP Billiton Ltd., the world’s largest mining company, expects full output from its Olympic Dam copper, uranium and gold mine in Australia to resume by the end of March after repairs to a damaged shaft.

“We anticipate that ore hoisting will be at approximately 25 percent of capacity” until then, Melbourne-based BHP said today in a statement, without specifying any output cuts. A study has begun to determine the extent of the damage, BHP said.

BHP said yesterday it had declared force majeure on some supply contracts at the world’s largest uranium deposit and the fourth-biggest copper lode after mechanical failure forced the shutdown of the main haulage shaft at the underground mine on Oct. 6. An extended outage is likely to push uranium prices higher because the mine accounts for about 5 percent of global supply, JPMorgan Chase & Co. said this month in a report.

Uranium rose 0.3 percent to $47.13 a pound, the highest in two months, on Oct. 16, according to MF Global Energy’s index.

First-quarter copper cathode output from the mine in South Australia state dropped 31 percent to 37,700 tons, while uranium production was little changed at 1,130 tons, the company said today in a production report. Gold output from the mine declined 5 percent to 26,006 ounces, it said.

The mine produced 181,800 metric tons of copper cathode, 108,039 ounces of gold and 4,007 tons of uranium oxide in the year ended June 30. A six-month repair period may cut BHP’s earnings before interest and tax by $31 million in the year ending June 30, 2010, JPMorgan said. An extended outage may also support copper prices, which climbed to a six week high in Shanghai yesterday, the bank said.

Global Customers

All gold and silver from Olympic Dam is sold to the Perth Mint in Western Australia. The copper goes to customers in Europe, Australia and Asia, and uranium oxide is sold to the U.K., France, Sweden, Finland, Belgium, Japan, South Korea, Taiwan, Canada, U.S. and Spain.

Ore is crushed underground before being hauled to the surface where it is fed into one of two grinding circuits, according to BHP’s Web site. Almost all the ore is normally hoisted through the Clark shaft and the secondary shaft, Whenan, is used when mining is close by, according to BHP. The company has been using the smaller shaft to haul ore since the incident.

Force majeure is a legal clause that allows a company to miss deliveries because of circumstances beyond its control.

BHP is considering an expansion that would convert the existing underground mine operation into an open pit. The mine is 560 kilometers (348 miles) north of Adelaide.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net.