‘Record copper royalties’ as Premier preps BHP ‘prenup’
The Premier wants a “prenup” with copper giant BHP before jointly funding a billion-dollar desalination plant – revealing a record royalty payment from the mining giant.
SA Premier Peter Malinauskas today announced that the government has received the “single biggest ever royalty payment that has been given to the people of South Australia in the history of our state” from mining giant BHP.
The payment was worth $25.6 million for the month of April, the Premier at a press conference saying it was a record amount and “it’s a number that is set to grow if we continue to work collaboratively with BHP”.
Malinauskas also talked about wanting a “prenup” with BHP before making a final investment decision about jointly funding the construction of a $5 billion 260 megalitre per day desalination plan and a 600km pipeline to transport water to the Far North to support the miner’s activity.
In December last year, the location of the mega project was selected by the state government south of Whyalla.
BHP has previously pulled out of promised expansions of its Olympic Dam mine, notably in 2020 when it dumped a $3.5 billion plan that might have increased copper production by 150,000 tonnes.
“What I want to avoid is getting to the altar and BHP realising they don’t have a partner in the government or the government finding out it doesn’t have a partner in BHP,” the Premier said this morning.
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He said the government needed to secure an off-take agreement with BHP to “make sure that Northern Water is consistent with taxpayers’ interests”.
“We’ve been very deliberate as a government about making sure that we don’t over inflate or seek to exaggerate expectations we have for the opportunity here,” the Premier said.
He hoped to arrive at a final investment decision on Northern Water at the same time that BHP determines whether it will fund an expansion of Olympic Dam.
“We’ve got teams working on seeking to align that FID, because we’re not going to sign up to Northern Water unless we have got a binding offtake agreement with BHP… to make sure that that’s an economic investment for South Australia,” Malinauskas said.
“We’re only going to do that if it makes sense for South Australia into the long term.”
It follows booming copper mining activity at BHP’s Roxby Downs mines, with the company recently announcing a record was broken at Olympic Dam with the largest amount of material mined, ore milled and concentrate smelted in the third quarter of the financial year.
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And it achieved record gold production at the far north site near Roxby Downs, the centrepiece of the company’s global copper business, which is the largest in the world.
The Premier also announced today that the government had signed a landmark agreement with BHP that was expected to modernise a 40-year-old bilateral framework guiding development at Olympic Dam.
This ‘Olympic Dam and Stuart Shelf Indenture’ will “enable better integration of the existing copper production… while establishing a clearer pathway for negotiations for further expansions”, the Premier said.
The legislative changes update the framework that underpins activities at BHP’s enormous copper precinct in the state’s Far North.
Changes include commitments to transitioning to the current Aboriginal Heritage Act, water extraction, maximising local jobs and business opportunities, financial assurances and royalties.
“We’ve been partnering with BHP now for a number of years to get to the point where we are today to be able to introduce legislation into the parliament to amend the Indenture, unlock all of the capability of the Mining Act to ensure we maximise the likelihood of BHP making a multibillion-dollar investment in the northern part of our state, ” Malinauskas said.
BHP is the largest producer of copper globally and currently employs around 8,000 South Australians.
The Indenture will not dictate or guarantee BHP’s planned copper mine expansion plans – including developing a two-stage smelter and increasing copper production to 500 ktpa.
But “it does radically increase its likelihood”, Malinauskas said.
In October, BHP announced it would be spending $840 million to expand its Olympic Dam mine, including building a new access tunnel, a more extensive underground train network with six new trains and the installation of an oxygen plant.
While Olympic Dam already extends hundreds of metres underground, the company was yet to find the bottom of its deposit.
The company has already announced a smelter refinery project to expand refinery capacity and increase copper production to approximately 500 ktpa, and potentially up to 650 ktpa. This would involve the development of a two-stage smelting process, and expand refining facilities to produce cathode copper, gold and silver.
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