BHP says it can double copper production in Australia without increasing the volume of uranium that comes from the same mines, hosing down investor fears that a multibillion-dollar expansion of Olympic Dam would create a flood of unwanted supply.
BHP made that disclosure in the paperwork submitted to authorities as part of the proposal to expand the smelter at the South Australian mine, a revelation described as “phenomenal” news by uranium investors who had expected the project to boost supply and lower prices for the nuclear fuel.
BHP’s Olympic Dam, Carrapateena and Prominent Hill mines prioritise copper production, but also extract gold, silver and uranium as byproducts. The focus on copper means the mines extract and sell those byproducts regardless of whether prices for those commodities are attractive.
The prospect of a big Olympic Dam expansion has loomed as a bogeyman over uranium markets for more than a decade, with investors traditionally fearing that such an expansion would grow uranium supply regardless of whether demand and commodity prices warranted the extra volumes.
But BHP told regulators that production of uranium would not necessarily rise in lockstep with copper production under its plan.
BHP produced 322,000 tonnes of copper in SA in the year to June 2024 but told regulators last week that volumes could double to 650,000 tonnes per year if the smelter project – dubbed SRE – went ahead.
Uranium volumes have traditionally moved in lockstep with copper volumes at Olympic Dam, but BHP said volumes of saleable uranium oxide would barely change as a result of the new expansion plan.
“The SRE project does not materially change existing uranium production with an increase of approximately 1 per cent expected,” said the miner in documents filed to regulators.
Olympic Dam produced 3600 tonnes of uranium oxide last year, and BHP told the regulators that production volumes would not exceed 4000 tonnes if the expansion went ahead.
Guy Keller, who runs Tribeca Investment Partners’ Nuclear Energy Opportunities, said this would be a surprise to those who feared a flood of uranium supply would accompany a copper expansion at Olympic Dam.
“It is definitely at odds with the end users’ [the uranium customers] expectations. They have always thought there was going to be more uranium coming from Olympic Dam,” he said. “It will probably shock the analyst community as well because even if they’ve got rubbery numbers in there, they have still got expansion numbers in their models.”
BHP could yet grow uranium volumes by choosing to expand its hydrometallurgical plant at Olympic Dam. Even if it expands the plant, the rise in uranium volumes will lag copper because the smelter will increasingly be fed from Carrapateena and Prominent Hill. Concentrate from those mines contains less uranium than that from Olympic Dam.
The uranium sector suffered an elongated bear market after the 2011 Fukushima nuclear meltdown, with daily market prices for uranium oxide plunging to extreme lows below $US30 per pound in 2018.
Renewed interest in nuclear power
But prices for the nuclear fuel roared back to life in late 2023, as a decade of under-investment in new mines coincided with renewed interest in nuclear power’s ability to provide reliable, carbon-free electricity.
Uranium prices were $US93 per pound in January.
Canaccord analyst Katie Lachappelle told clients last week there were 440 nuclear power reactors worldwide and 65 new ones under construction, meaning a record for nuclear power generation would likely be set in 2025.
Ms Lachappelle expects prices for uranium to average $US90 per pound long term.
The nuclear revival has made uranium stocks like Boss Energy and Paladin Energy among the best performers on the ASX over the past five years.
But sceptics remain. Short-sellers, who bet on share prices falling, have made Boss and Paladin the two most shorted stocks on the ASX, while a third uranium stock – Deep Yellow – was not far behind.
Despite suggesting it can raise copper volumes at Olympic Dam without raising uranium volumes, BHP said an expansion of the smelter would deliver higher volumes of the other byproducts.
BHP produced about 370,000 ounces of gold in SA last year but told regulators it would grow volumes to about 600,000 ounces per year under the expansion plan. That would make BHP the fourth-biggest gold producer on the ASX.
Source: Financial Review
