BHP Billiton has scrapped its $US30 billion ($A28.73 billion) Olympic Dam expansion and is now investigating a cheaper alternative.
BHP chief executive Marius Kloppers today blamed low commodity prices and higher costs for the decision not to proceed with the massive copper-uranium open-pit project that would have been one of the world‘s biggest mines.
Those market conditions also led to BHP Billiton’s full year net profit slumping by more than a third to $US15.42 billion ($A14.77 billion).
Lower commodity prices and about $US2.5 billion in write-downs on US shale, Australian nickel and Olympic Dam have contributed to the loss.
"As we finalised all the details of the project in the context of current market conditions, our strategy and capital management priorities, it became clear that the right decision for the company and its shareholders was to continue studies to develop a less capital intensive option to replace the underground mine at Olympic Dam,” Mr Kloppers said in a statement.
He said that would involve new technology to improve the project’s economics and make it less capital intensive.
BHP will recognise impairment and other charges of $US346 million before tax (US$242 million after tax) in respect of the Olympic Dam project.
Morningstar analyst Mark Taylor said he was surprised at the timing of the delay but thought it was a positive to do it now rather than later.
"There was too much money bleeding into too much uncertainty,” he told AAP.
"It is a positive for returns on invested capital ... in the current environment capital costs are so high, they’re better off waiting until the heat comes out of the market."
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.
He said the federal government needed to realise they cannot take the mining boom for granted.
The decision was a commercial one based on global conditions unrelated to mining or carbon taxes, Resources Minister Martin Ferguson said.
Meanwhile there was a 15 per cent decline in underlying earnings before interest and tax and a 21 per cent fall in net profit (excluding exceptional items) in the 2012 financial year.
The miner increased its final dividend by two cents a share to US 57 cents a share.BHP Billiton closed down 11 cents at $33.16.