SYDNEY: BHP Billiton is laying the groundwork for a dramatic rise in copper production in a drive to buffer its exposure to sagging iron ore, oil and coal markets.
BHP Billiton Chief Financial Officer Peter Beaven said $4 billion in new equipment under construction at the company's Escondida mine in Chile, coupled with expansion work at the Olympic Dam mine in Australia could yield hundreds of thousands of additional tonnes of copper per year.
Iron ore prices <.IO62-CNI=SI> have tumbled 48 percent this year, while oil has tumbled 23 percent.
Copper, on the other hand, is down a more modest 9 percent since January and is poised to better withstand changes in emerging economices such as China, Beaven told reporters.
"Emerging economies are transitioning to consumption-led growth and that's not a problem for copper because copper is used in the build part of growth as well as in the consumption part," he said.
Copper is found in everything from building materials to plumbing to mobile phones.
Miners such as Rio Tinto and Brazil's Vale have banked on iron ore for the vast bulk of their profits. BHP has touted the benefits of greater diversification, but iron ore still made up 52 percent of its operaitonal profit in the year to June, 2014.
Goldman Sachs in September called the end of the 'Iron Age', saying a mounting supply surplus and a weak demand outlook in China make a recovery unlikely.
In coal, despite the removal of some 50 million tonnes of capacity worldwide, prices remain the lowest in more than a half-decade.
Meanwhile, fear of prolonged low prices for oil have pushed some US producers to budget less on drilling next year.
Fiscal 2016 would represent the low point in output for the remainder of the decade from BHP's 57.5 percent-owned Escondida mine, the world's largest copper mine, as ores containing less copper are mined, Beaven said.
After that, new ore concentrating equipment will allow for a 70 percent rise in the tonnage of ore processed, more than compensating for the lower grades.
In Australia, Beaven said studies were underway to lift the Olympic Dam's annual yield to as much as 450,000 tonnes from 180,000 tonnes this year.
BHP two years ago abandoned expansion work there, citing high capital costs. Any new expansion would need approval by BHP' board, according to Beaven.
"It's no slam dunk," he said.
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