Long outage expected for Olympic Dam

BHP Billiton has confirmed that damage to its Olympic Dam underground copper and uranium mine, caused by a plummeting fully loaded ore skip, will keep the operation at one-quarter capacity for up to six months. While a big increase on BHP's previous guidance of at least a month's impact, the miner's latest forecast of a three to six-month delay was in line with analysts' expectations. The outage will not be material for BHP, but could mean a hit of more than $20million to the coffers of the South Australian government, which takes a 3.5 per cent royalty from mine gate sales, netting it $61.2m last financial year. "We expect ore hoisting will be at approximately 25 per cent capacity until full production resumes in the third quarter of the 2010 financial year," BHP said yesterday in its first-quarter production report. The damage happened on October 6 when a breakdown in the hoisting system sent a full skip of ore hurtling to the bottom of the 800m deep Clarke mine shaft, which was the bigger of the two at Olympic Dam. The weight of the loaded ore skip that fell sent another skip on a linked cable shooting up into the headframe at the top of the Clark shaft. It is understood BHP energy coal boss Jimmy Wilson, who until last month was head of the company's nickel operations, has been chosen to head an investigation into the cause of the breakdown in the haulage system. Yesterday, The Australian revealed force majeure had been declared on some of the company's copper and uranium contracts, with customers told sales would be affected for at least a month. The mine produces about 200,000 tonnes of copper a year and 4000 tonnes of uranium, but the outage is expected to support uranium prices more because the mine makes up about 7 per cent of global mine production. BHP would give no information on the fate of the more than 3000 workers at the operation during the outage of up to six months. It would also not say whether the smelter could be economically run at just 25 per cent capacity, or what the impact on metal and concentrate sales would be.