BHP has canned Olympic Dam. I have no idea why. The company has $4.7 billion in cash (albeit from $10 billion last year), almost no debt and can borrow at 3% for twelve year bonds.
Copper and uranium are supposed to be a part of the next wave of Chinese growth, with copper a central ingredient in consumer goods and uranium a central ingredient in greening energy. Olympic Dam is the fourth largest copper deposit and largest uranium deposit on earth.
Based on these metrics, Olympic Dam is a no-brainer, even if production costs are inflated right now. Yet here’s what they said:
BHP is returning money to shareholders by increasing its dividend. The lucky folks can go stick it in some bond somewhere and get 3%, even 5% if it’s here. Are you telling me BHP can’t make a better return on equity than that? I mean, it’s been averaging returns on equity above 30%:
And the stockmarket, otherwise known as the village idiot, cheered this on:
Something has gone very wrong with this boom.