South Australia Gives BHP Billiton 4 More Years to Decide on Olympic Dam Expansion

The South Australian (SA) government provided on Tuesday some relief to mining giant BHP Billiton (ASX: BHP) by granting it a four-year extension to decide on the multibillion dollar Olympic Dam expansion project.

In turn, BHP committed to the state government a $650-million package designed to give the venture's expansion the best chance of pushing through. Part of that deal is a $110-million investment in the SA community.

SA Premier Jay Weatherill explained the grant of the four-year extension to BHP's recommitment to SA. He said the package of measures, which concerns jobs for the present and future, help restore the state government's confidence in BHP.

While BHP Chief Executive Marius Kloppers acknowledged that the four-year extension is not a guarantee the expansion would be pursued, he said BHP is working hard for the venture to push through.

"We're committing over half a billion dollars for new technology in order to do so. We shouldn't be doing so if we weren't very serious about trying to make this a reality," he said in a statement.

Besides the $650 million, BHP also allocated another $1.2 billion for advanced work on the uranium, gold and copper mining project expansion. The amount would mainly be used to purchase mining trucks and equipment, accommodation and early site works. The $650 is for proving mining and processing techniques to make the expansion more cost-effective than earlier plans.

A metallurgical research company in Adelaide will begin digging at Olympic Dam for on-site trials.

The previous deadline given by SA was Dec 15, 2012, but the BHP board in mid-August said it needs to restudy the expansion plans and admitted the miner could not meet the deadline. The decision was partly caused by the declining prices of commodities in the global market.

Also on Tuesday, BHP said it would purchase more shale acreage in the U.S. as BHP Chief of Petroleum Mike Yeager confirmed that the valuation improvements would most likely be on two of the company's onshore shale assets in the United States, the Eagle Ford and Permian Basin.