BHP's Olympic Dam Project



BHP's Olympic Dam Project

Introduction

BHP Billiton is one of the leading global companies which work to continue its growth by on the basis of their strong operational, financial and strategic functions and activities. The organization emphasizes to maximize long term value of its shareholders through discovering, acquiring, developing and marketing of natural resources. This organization focuses on creating and maintaining a culture that would reflect respect for others, corporate and personal integrity and ethical standards (Thompson, 2009, pp. 12).

BHP has planned to build the world's largest uranium and copper mine in South Australia being aware of the losses that they would probably be facing in future. The losses would incur because of the slowing down of economy of the resources which will need to construct the dam. The dam which the organization was planning to build was around 30 square kilometers in the selected area of South Australia. Te dam was planned to be constructed with a length of 4 feet and depth of 1 foot. The total expenses that were estimated to complete this project were £ 20 billion (Olympic Dam Expansion, 2009, pp. 14).

It was noticed that the prices of the main material that were required by BHP decreased which caused a problem in the continuation of this project. China is the world's largest consumer of metals, but they also experienced a major fall in the prices of copper and uranium during the past several months. These fall in prices caused difficulties for BHP in continuing this project. BHP has already committed to invest $22.8 billion in this project during this financial year. The changes in economy and prices of important commodities like uranium, copper, coal and iron ore made it difficult for BHP to gain profit on the business activities relating to this project, instead they were only left to live within their limits.

The Australian government was relying heavily on this project that this project will be providing job opportunities for people in the country and boosts the local economy. It was said by the senior management of the organization that their decision to scrap the expansion plans of this project was not influenced by political factors but they pointed that the high value of Australian dollar made it difficult to afford the wages expense related to the project.

After studying and researching continuously about the current market conditions, the strategy of the organization and their capital management priorities, it was realized that the share holders and the organization would benefit if a plan is developed that would incur less capital and replace the underground mine with at Olympic Dam (Olympic Dam Expansion, 2011, pp. 25).

It was observed and pointed by BHP that the main reason that influenced their decision of shelving the Olympic dam copper-uranium expansion was the decreased commodity prices and rising capital expenses relating to the project. So, it was a major decision to be made by BHP how to continue the expansion of its Olympic dam ...