JPMorgan tips long delays to BHP's Olympic Dam expansion
"ANALYSTS have cast doubts over BHP Billiton's $US20 billion ($20.4bn) Olympic Dam copper and gold expansion project in South Australia, with JPMorgan now tipping it will not go ahead for at least three or four years, if at all."
IMO, if the expansion of Olympic Dam is indeed delayed, it will have very serious ramifications for the uranium industry and the uranium price potentially as big as the Cigar Lake flooding that occured in 2007.
The Olympic Dam expansion is supposed to increase uranium production by nearly 42 million lbs of uranium PER YEAR and this additional production is originally supposed to come online in 2018. If you review all demand supply forecasts for uranium by the various analyst that cover the sector, you will note that BHP's Olympic Dam expansion is one of the main reasons why there is not supposed to be a demand supply imbalance in uranium after 2018.
If the expansion is indeed delayed, the supply shortfall that will result would be massive and as Nuclear Power operators normally try to lock in some of their uranium supplies 5 years in advance, a scramble for uranium could occur as soon as 2013 IF the Olympic Dam expansion is indeed put on hold.
It is really quite an interesting predicament because Olympic Dam is primarily a Copper Mine with uranium as a by-product. As a result of the world economy slowing down, there is a real risk that there may not be sufficient copper demand to justify committing to the expansion of Olympic Dam eventhough the uranium that would also be produced from the expansion is definitely needed to cover the expected surge in uranium demand from China, South Korea, Russia and India.
Definitely something to follow closely.
BMN Price at posting:
14.5¢ Sentiment: LT Buy Disclosure: Held
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