Rio foresees copper deficit as BHP shelves Olympic Dam expansion...

Rio foresees copper deficit as BHP shelves Olympic Dam expansion Matt Chambers August 25, 2012 12:00AM RIO Tinto copper chief Andrew Harding says BHP Billiton's decision to shelve the $30 billion expansion of the Olympic Dam copper and uranium mine in South Australia will contribute to a coming copper supply deficit, potentially making other developments more attractive. But he would not confirm it made Rio investments, such as the second stage of the giant Oyu Tolgoi copper and gold mine in Mongolia, more likely. He said the effect of the Olympic Dam decision on prices and Rio's plans depended on whether it changed previous market or company assessments of whether the giant Australian expansion was going ahead. The London-based copper chief also said Rio might reduce the size of or delay building a concentrator for the $US4bn ($3.8bn) second stage of Oyu Tolgoi as part of moves to lower spending amid the current environment of rising expenses and lower costs. Mr Harding, an Australian who started his career with Rio 20 years ago in the Pilbara region of Western Australia, said copper demand fundamentals remained strong. The most notable thing about the sector in the past year was a continued struggle to meet new mine ambitions. Advertisement On Olympic Dam, he said: "In the latter part of this decade, if they are not putting as much copper out as they were planning to put out, that has an impact on supply. "If that decision, or any decision, causes less supply to come on than you were expecting, then that has an impact." He would not say whether Rio had already factored in the shelving of the Olympic Dam expansion. But as Rio's supply scenario for copper (in slides presented by Mr Harding yesterday at the Northparkes copper mine in NSW) has not changed since June, it seems Rio has, like many in the market, long given up thinking the expansion would go ahead. Rio is tightening its belt at its global operations and trying to rein in capital spending as commodities prices slide and costs remain high. Rio was looking more closely at reduced or delayed spending on a concentrator expansion at Oyu Tolgoi, Mr Harding said. Rio would work to push the 100,000-tonnes-a-year copper concentrator in the under-construction first phase harder before deciding whether a second, 60,000-tonnes-a-year plant was needed. "The concentrator may not be a 60,000-tonne concentrator; it may be 45,000-50,000 tonnes," Mr Harding said. "You may have a year's delay as well (if more could be squeezed out of the first concentrator)." He stressed the second stage, an underground operation, was where most of the net present value lay, so the company was keen to bring it on "at a good pace". Mr Harding said Rio was happy with its stake in Oyu Tolgoi, which it holds through its controlling stake in the mine's 66 per cent owner, Turquoise Hill (the former Ivanhoe Mines). He echoed comments from Rio chief Tom Albanese earlier in the month that Rio was confident it would secure a power supply deal from China that was necessary for the giant mine to hit its first production target next year.