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SA Government and BHP Billiton sign Olympic Dam deal

News Release

www.premier.sa.gov.au

twitter.com/PremierMikeRann

 

Premier Mike Rann

and

Hon Kevin Foley

Minister Assisting the Premier with the Olympic Dam Expansion Project

Wednesday, 12 October 2011

Premier Mike Rann and BHP Billiton Chief Executive Marius Kloppers today signed a landmark agreement amending the existing Roxby Downs Indenture to enable the construction and operation of the multi-billion dollar Olympic Dam expansion project.

The signing of the agreement coincides with an announcement that the company will invest $1.2 billion in preliminary infrastructure works and equipment to kick-start the project.

Mr Rann said a Bill to ratify the amendments to the Indenture will be introduced next week to both Houses of Parliament by Minister Assisting the Premier with the Olympic Dam Expansion Project Kevin Foley so that this document is backed by the full force of South Australian law.

“The Indenture amendments are the culmination of years of thorough and detailed negotiations that have resulted in the best possible deal for South Australia,” Mr Rann said.

“It provides a solid foundation for a project that will deliver long-term prosperity to South Australia throughout the life of the Indenture.

“It will boost the State’s economy through the tens of thousands of direct and indirect jobs that it will generate and through contracts for local suppliers and opportunities for associated commercial activities.

Premier Rann said most importantly the Bill includes a 12-month sunset clause.

“That means the company has one year from when Parliament passes the Bill and it comes into operation to get the approval from its Board of Directors to formally begin the expansion,” he said.

“Therefore we can expect project approval in 2012.”

The Indenture is a legally binding agreement between the State of South Australia and BHP Billiton that facilitates the conduct of mining operations and processing at Olympic Dam as well as the construction and operation of infrastructure necessary for this purpose.

It follows Monday’s environmental approval from the Commonwealth, State and Northern Territory Governments, after a comprehensive environmental assessment process that began six years ago and involved extensive public consultation.

The Premier said he was pleased by BHP Billiton’s commitment to providing expanded opportunities for local companies and South Australian workers for the expansion.

Mr Rann said the Indenture Agreement commits the company to using South Australian suppliers, manufacturers and contractors where economically practicable as well as report annually on their use of local suppliers and local workers.

BHP Billiton believes the project will create business opportunities for South Australian suppliers and contractors as outlined in its Environmental Impact Statement. The Company has already undertaken a series of supplier information forums in Adelaide, the Upper Spencer Gulf, Roxby Downs and Port Lincoln with more planned.
Mr Kloppers said he believed this agreement is a positive outcome for BHP Billiton and South Australia.

"If approved, the Project will generate significant new employment opportunities for South Australia in terms of direct employment, construction jobs, and additional flow-on employment across the state for many years to come" Mr Kloppers said.

“Our Company has a strong commitment to the communities where we operate. We will continue to support those communities including Roxby Downs and the Upper Spencer Gulf region with significant investment in education, the environment and cultural sectors and in training and job creation for local indigenous communities.

“We now look forward to having this agreement approved by the South Australian Parliament and then completing the work we need to do to enable the BHP Billiton Board to consider this project in the first half of next year.”

The Company estimates the Olympic Dam expansion will generate up to 6000 new jobs during construction, a further 4000 full time positions at the expanded open pit mine and an estimated 15,000 new indirect jobs. Furthermore, this could include approximately 6,500 jobs in Whyalla, Port Augusta, Port Pirie and Roxby Downs.

The Premier said he was pleased that BHP Billiton had stated in its Environmental Impact Statement that was approved on 10 October that the Company plans to double on-site processing.

The commitment to double processing is critically important to me as is the 12-month sunset clause,” he said.

Mr Foley said the Indenture also provides the terms for an increased stream of royalties for our mineral wealth from the vastly expanded production of copper, gold, uranium and silver.

“A long term royalty rate of 5 per cent for uranium and 3.5 per cent for other metals is consistent with the royalty regime set out in the State’s Mining Act,” he says.

“We are not cutting royalty rates to get this project up and running.”

The Indenture also provides for strict environmental management and compliance regimes. BHP must develop a stringent program for the protection, management and rehabilitation of the environment that is subject to a strong compliance and enforcement regime.

Under the Indenture, the Olympic Dam mine will be subject to the Environmental Protection Act for environmental authorisations for the project, preserving the independence of the Environmental Protection Authority for environment approvals, licensing and necessary compliance action.

In addition, BHP Billiton is obliged to produce a Greenhouse Gas and Energy Management Plan, which will detail their commitments to greenhouse reduction, such as using renewable energy to power the desalination plant and water pipeline, and solar hot water systems or equivalent at Hiltaba village.

The company additionally will sign up to South Australia’s nation-leading greenhouse gas reduction strategy.

The Indenture addresses other environmental concerns including water extraction from the Great Artesian Basin.

“BHP Billiton will now be levied for water extracted from the Basin, providing revenue that will enable the Government to better manage this precious natural resource,” Mr Rann said.

Mr Foley said the company would also have to provide a substantial rehabilitation bond as security, which will ensure the final rehabilitation of the mine site at the completion of the project.

The bond will be calculated using a formula that includes an incentive for the company to carry out progressive rehabilitation during the life of the mine.

“The bond liability will be recalculated annually and the bond value adjusted accordingly,” Mr Foley said.

“In return for meeting its Indenture obligations, BHP Billiton is provided with the long-term security required to proceed with its investment in a project with high upfront capital costs.”

Mr Foley said this certainty is provided by the granting of freehold over the expanded mining lease, leasehold with an option for freehold for the site of the desalination plant and support for acquisition of infrastructure corridors.

BHP Billiton will only be subject to Commonwealth third party access regimes, he said.

Under a separate agreement, BHP Billiton will contribute $25 million to an upgrade to the Stuart Highway between Port Augusta and the mine site.

Premier Rann said the amended Indenture Agreement recognised the unique nature of the Olympic Dam expansion project.

“This is a project which will see many billions of dollars invested in South Australia, create tens of thousands of direct and indirect jobs and change the face of the State’s economy over the coming decades,” he said.