wmc was a steel, page-3

September 24, 2007 12:00am
BHP Billiton is expected to announce this week that it has uncovered what is potentially the largest gold resources in the world at its Olympic Dam mine in South Australia.

The company will release its resource upgrade for the copper, gold and uranium mine, as part of its annual report on Wednesday.

This comes as gold prices on the global markets are at a 27-year high as investors seek a haven from a falling US dollar and shaky stock markets.

Last week, gold futures pushed to a high of $US747 an ounce.

Since January, gold has risen 16 per cent and is set to record its seventh consecutive year of price gains.

BHP has been operating up to 20 drilling rigs at the mine in a bid to delineate the resources necessary to justify spending more than $6 billion expanding the mine.

The mine already sits atop the world's largest uranium resource and is among the world's largest copper and silver deposits.

A BHP spokeswoman would yesterday not confirm whether the gold resource was a world record, as the information could influence the company's stock price.

The last released figures for the deposit showed that it held 4430 million tonnes of ore, containing 1.1 per cent copper, 0.5 grams per tonne of gold, and 0.4 kg per tonne of uranium oxide.

Previous estimates of how much the mine contains could be conservative however, with a BHP spokesperson telling a dinner in Adelaide recently that the new figure could be could be 50 per cent higher than previous estimates.

BHP management is not expected to make a decision until the middle of next year on whether to go ahead with the mine expansion, which will turn it from an underground mine into the world's largest open pit mining operation.

BHP chief executive Marius Kloppers said recently that while the development timeline for Olympic Dam had slipped a little, it was important to get the job done right.

"We remain absolutely confident that Olympic Dam will be the pre-eminent supplier of uranium, underpinning much of the nuclear renaissance that is being experienced as a response to the greenhouse concerns that the world currently is seeking solutions for," Mr Kloppers said.

"We just want to make sure that we do it right, that the technology will work, that the scale-up factors are the right ones, and so on.

"It's going to be there for generations and you're laying the foundation for that."

Last week's US Federal Reserve decision to cut interest rates by 50 basis points to 4.75 per cent was the catalyst for gold's latest price climb.

Fed chairman Ben Bernanke's decision sent the US dollar spiralling downwards against most of the major currencies.

But short-term fears that gold has been over-bought as protection against a sliding US dollar has seen the precious metal's five-week rally ease back in global trading and it will start the week at $US739 an ounce.

"If the (US) dollar starts to rebound a little, we'd probably see some selling of gold," said Eagle Futures gold trader Nick Ruggiero.

Despite the potential for a short-term reversal from its current high, economist are forecasting gold prices will rise further as US interest rates are expected to drop again.

AMP Capital Investors chief economist Shane Oliver said gold prices may even threaten its January 1980 record of $US850 an ounce.

"Higher commodity prices and a widening interest rate differential versus the US dollar, all support the Australian dollar," Dr Oliver said.

He forecast the Aussie may hit US90 within the next few months.

Olympic Dam is currently the world's 16th largest copper producer and third largest uranium producer.

The expansion is expected to increase copper production by two and a half times to 500,000 tonnes per year, increase gold from 80,000 ounces to 500,000 and uranium from 4500 tonnes to 15,000.

The Kalgoorlie super pit in Western Australia currently produces up to 850,000 ounces of gold per year, and Newcrest Mining's Telfer mine, which is aiming for more than 800,000 ounces this financial year.

BHP closed the week at $41 after hitting a record high on Thursday of $41.50.

- with Stephen McMahon