BHP: Olympic Dam Force Majeure, Full Output in 2010

SYDNEY, Oct. 21 -- Global miner BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) declared force majeure on uranium and copper supplies from its stricken Olympic Dam mine on Wednesday, saying it did not expect to resume full output there until early next year.

    BHP Billiton said the Australian operation, the world's fourth largest copper deposit and largest known uranium deposit, was running at only 25 percent of ore-haulage capacity after a runaway skip took its main shaft out of operation this month.

    "We anticipate that ore-hoisting will be at approximately 25 percent of capacity until full production resumes in the third quarter of the 2010 financial year (July/June)," the company said in its first-quarter production report.

    It also said that output of iron ore, one of its biggest commodities along with copper, rose 1 percent from a year earlier. It gave no guidance for full-year iron ore production.

    Force majeure notices free a miner from liability if it can't meet a contract due to events beyond its control.

    BHP Billiton also said in a statement emailed to Reuters that the main shaft would be out of operation for at least a month.

    "This may change once our investigation is completed. The force majeure notice is based on currently available information," it added.

    Analysts have speculated that repairs could take up to six months and cause the loss of 50,000 tonnes of copper production and 1,000 tonnes of uranium production.

    BHP made no comment on the likely loss of production.

    Output from the mine was down even before the shaft damage: maintenance works had taken production down 31 percent to 37,700 tonnes of cathode in the first quarter from a year earlier.

    A runaway skip, or ore carrier, forced the immediate shutdown of the underground mine's main haulage system. The mine has since been running on a smaller secondary system that can handle only about 20 percent of haulage.

    Olympic Dam produced 194,000 tonnes of copper and 4,000 tonnes of uranium in the year ended June 30, 2009.

    BHP Billiton has been studying a proposal that would lift annual production at the mine to 730,000 tonnes of copper and 19,000 tonnes of uranium.

    BHP said its investigations into the incident was not yet complete and that mining was continuing, with ore being hoisted to the surface via its smaller, secondary Whenan shaft.

    An examination was underway to assess the impact on mine production, planning schedules and budgeting, BHP said.

    At BHP's majority-owned Escondida mine in Chile, production in 2009/10 is forecast to rise 5-10 percent after repairs to its Laguna Seca mill and higher average grade of copper in the ore, BHP said.

    (Source: Reuters)