Antinuclear

Olympic Dam uranium uneconomic? might not proceed, but they will try to blame Australian government

the talk in the market is how big a write-down the company will have to make on these two acquisitions in the next 12 months, how much longer Kloppers will remain CEO, and what will happen to BHP’s pipeline of mega-growth projects. 

Miners review plans as tax bites, The Age,  Adele Ferguson, May 7, 2012  IN THE countdown to the federal budget miners have made a lot of noise about cost blowouts threatening tens of billions of dollars of projects due for final investment approval this year……..the budget may try and save itself billions of dollars a year by removing the diesel fuel excise rebate…..

The problem facing the government is a two-speed economy in which manufacturing, retail and tourism are being battered, while the mining sector and associated industries continue to do well but at a slowing pace.

This means if the government goes too far taxing the miners, it may give the miners the excuse they are looking for to pull the pin on some projects that are on the borderline of being uneconomic.

BHP, for instance, has a pipeline of huge projects, some of which may not happen; or, if they do, they are likely to be developed over a longer period due to changing global and domestic market conditions and the spectre of new taxes such as the carbon tax.

These projects include the Olympic Dam expansion, which could cost up to $30 billion…

A committee is believed to be sizing up the cost of these projects as well as market conditions before they go to the board for final approval later in the year.

If the talk is right and Olympic Dam is $30 billion, it would not surprise if BHP tried to find a generous Chinese partner to help bankroll the project.

There is already talk that BHP is looking at pushing out the Olympic Dam expansion timetable given the mounting pressure from investors not to spend too much capital on projects that have become increasingly expensive. One contractor who is doing work for BHP said people on the ground had told him to expect extensions to his company’s contracts. This suggests BHP may slow down the open-cut expansion.

The Sunday Times recently wrote that BHP faced a $5 billion write-down after two ill-timed acquisitions in America, raising doubts over the future of Marius Kloppers, the chief executive. One analyst in Australia suggested the write-down could be closer to $10 billion, depending how much oil it can drill.

It is not the first time there has been speculation about Kloppers’ future, but it has intensified since his ill-timed $20 billion buying spree on two shale gas acquisitions….

This, coupled with other factors, has prompted some investors to reduce their weighting in BHP. In March, the world’s largest money manager, Blackrock, announced it had reduced its weighting in BHP.

In the same month, Macquarie released an equity strategy report that indicated it had reduced its portfolio position in BHP from neutral to underweight. ”BHP is suffering from rapidly rising costs, less than successful expensive forays and very expensive capex commitments with very long lead times. In our view [earnings-per-share] growth for BHP will be deeply negative in FY12 (lower than -20 per cent) and investors are not being compensated for holding the stock given the low payout ratio and low dividend yield.”…

Whatever the case, the talk in the market is how big a write-down the company will have to make on these two acquisitions in the next 12 months, how much longer Kloppers will remain CEO, and what will happen to BHP’s pipeline of mega-growth projects.  http://www.theage.com.au/business/miners-review-plans-as-tax-bites-20120506-1y71r.html#ixzz1uDaqLIRm

May 7, 2012 - Posted by Christina Macpherson | AUSTRALIA - NATIONAL, business, uranium