Tax not to blame for BHP decision on Olympic Dam mine, says government

BHP Billiton has announced that it would scrap the current plan of expansion for the Olympic Dam uranium mine. The Leader of the Opposition Tony Abbott, the manager of Opposition business Christopher Pyne and Liberal MPs from South Australia address the media during a press conference at Parliament house in Canberra, Wednesday, Aug. 22, 2012. (AAP Image/Lukas Coch)

The federal government says BHP Billiton’s decision to scrap the massive Olympic Dam mine expansion in its current form has nothing to do with taxes but stems purely from commercial realities.

But the federal opposition says the decision announced on Wednesday shows Labor is putting major projects at risk through its carbon and mining taxes and failure to reform workplace relations.

BHP chief executive Marius Kloppers blamed low commodity prices and higher costs for the decision not to proceed with the $30 billion uranium, copper and gold expansion project that would have created the world’s biggest open-cut mine.

Mr Kloppers said the company would now look at a cheaper alternative to replace the underground mine at Olympic Dam.

Federal Resources Minister Martin Ferguson told reporters in Canberra the decision was “completely unrelated” to the carbon and mining taxes.

“This is a commercial decision, purely a commercial decision,” he said.

The minister said he was not surprised by the decision, given the size of the project and the difficulty at the moment for corporate boards across the country to secure capital.

“But as far as I am concerned the project is still there to be grabbed,” Mr Ferguson said.

“Our responsibility is to work with BHP Billiton to actually get this project in place in the future.”

Opposition Leader Tony Abbott said under a coalition government he would abolish the mining profits tax and the carbon tax to maximise opportunities for projects to go ahead.

While the mining tax did not directly affect uranium mining, it did impact on other parts of BHP Billiton’s business, he said.

“That’s 8000 construction jobs, 4000 permanent jobs, 13,000 associated jobs that South Australia won’t get because of the changed investment climate created in significant measure by the government’s new taxes,” Mr Abbott said.

He said the government also needed to look at flexibility, union militancy and productivity through workplace reform.

In Adelaide, a disappointed Premier Jay Weatherill said the decision was based on global factors, but he still believed the resources would be developed.

“These resources are world class … they belong to us and they will be developed,” he said.

South Australia’s Chamber of Minerals and Energy chief executive Jason Kuchel said he was confident the project would still go ahead and be a major contributor to the economy, just not now.

Mining union boss Tony Maher said the fact that BHP Billiton recorded a $15 billion full-year net profit showed the resources boom remained “in full swing”.

Mr Maher told AAP that BHP Billiton was getting a 23 per cent return on its capital and planning expansion in other areas of its mining business.

“This is not a business in trouble,” Mr Maher said.

He said project start dates were constantly being changed and the main factor going against the company was the high Australian dollar.

Finance Minister Penny Wong says she doesn’t believe BHP Billiton’s decision to delay the expansion spells doom for her home state’s economy.

“It is a deeply disappointing decision and every South Australian knows that Olympic Dam is an incredibly important project for the state,” she said.

She welcomed BHP Billiton’s indication of its intention to extend the Olympic Dam project in due course.

“The Gillard government intends to work closely with the South Australian government and BHP Billiton with the aim of seeing Olympic Dam reach its full potential as soon as it is commercially viable.”