Article by Eric Johnston, courtesy of The Australian.
26.11.2025
Mining giant BHP is cautiously advancing its $20bn-plus investment to dramatically expand copper production in South Australia – a mega-project that could deliver another nation-defining resource play to rival the Pilbara.
“Cautious” is the operative word. Just years ago, the miner had high conviction around the planned copper precinct it calls “Copper SA”.
On paper, the project is compelling. It consolidates several of the former OZ Minerals existing and greenfield mines, anchored by BHP’s massive Olympic Dam copper-gold deposit, and expands value-added smelter and refining capacity. High-grade ore sits underground, and the prize is substantial: doubling copper production to more than 650,000 tonnes by mid-next decade with mining lasting well into the end of the century. BHP would be delivering vastly more copper precisely as prices surge, with an electrified world scrambling for every tonne.
What’s changed? BHP is a global capital allocator and, unlike domestically focused retailers or banks, it has options. While the Pilbara iron ore infrastructure is fixed here, many of BHP’s growth options involve copper outside Australia – and pound-for-pound these are becoming far more attractive on a long-term measure of return on investment.
BHP boss Mike Henry and his top executives have been openly criticising Australia’s fading investment appeal for some time. But Copper SA – whether BHP commits fully or only partially – will represent the biggest investment test yet for Team Australia.
BHP is now approaching a critical decision on the type of smelter and refinery it builds to support increased copper production.
Ideally, Henry wants the two-step process: costly to build and energy-intensive to run, but delivering the highest-purity copper and commanding a sales premium. It’s heavy manufacturing and value-addition – fitting squarely within Anthony Albanese’s vision of making more things in Australia.
However, BHP has quietly given itself a one-year extension to the feasibility study on the smelter-refinery expansion.
This cascades through the project timeline, pushing back any Copper SA expansion, with a potential financial decision on the smelter now delayed until 2028. This means it will be BHP’s next chief executive to decide on the project.
Simultaneously, the timing on the long-mooted southern expansion of the Olympic Dam mine is also slipping backwards.
BHP isn’t standing idle. Remember the point around options? As Copper SA drifts, the miner is fast-tracking expansion at Escondida, the world’s biggest copper mine, in Chile. In the past 12 months, it’s also placed a substantial bet on Vicuna – a rich copper deposit high in the Andes, straddling Chile and Argentina.
Currently Vicuna is nothing but mountains, but BHP is powering ahead with a technical study due early next year. It’s already joining the dots of a world-class deposit with dedicated processing plants and desalination facilities, and increasingly considers the risks of Argentina’s volatile economy – as much as altitude – manageable.
Finally, BHP has personal backing from US President Donald Trump to develop the long-stalled Resolution mine in Arizona – potentially America’s biggest copper mine. BHP is junior shareholder in the project, with Rio Tinto owning the majority, but both miners are fully committed to the deposit that promises to meet 20 per cent of US copper demand.
As BHP weighs how to proceed with Copper SA, four genuine concerns about investing billions in Australia are flashing between amber and red.
First are labour costs – blisteringly high compared to other operations, with productivity lagging significantly.
Looking years ahead, BHP retains some control over operating labour costs. These will inevitably be offset by automation, robotics and more workers based in operating centres hundreds – even thousands – of kilometres away.
The other three concerns – energy, permitting and planning, and tax – rest entirely with government. Which is why BHP is worried.
The energy crisis is stark. ABS inflation figures this week show electricity costs in Australia have surged 22 per cent in two years, excluding rebates. Costs here are two or more times higher than in Canada and other countries where BHP operates, and 50-100 per cent higher than in the US.
This backdrop simply doesn’t support an energy-intensive refining plant. But it’s the complete absence of national energy policy beyond decarbonisation – with states running their own race – that’s truly frustrating.
Decarbonisation is front-loading energy costs, and Australia has no coherent policy response to what’s becoming an economic crisis point.
Tax fears are acute. At 30 per cent, Australia has the second-highest corporate tax rate in the developed world, and incremental taxes continue eroding returns. South Australia’s Malinauskas government strongly supports Copper SA, but what prevents a future state government from imposing a super-royalty on copper?
BHP’s bruising experience with Queensland’s coal royalty tax – and the Crisafulli government’s insistence on maintaining it – has rattled the miner more than many realise. This lack of trust is now starting to shape its broader planning.
It is understood any move towards a cashflow tax, as proposed by the Productivity Commission, would result in the miner shelving Copper SA entirely.
Regulation and permitting is just a slow grind in Australia, thanks to overlapping state and federal agencies. Legal challenges are also real. For years, politicians have been promising the streamlining of applications, including the proposed National Environment Protection Agency (first flagged five years ago). Processes are getting bogged down for years and this adds to time and cost of construction.
Australia is not an outlier here: Rio and BHP have been trying to get the Resolution mine up for decades, and even Trump’s own determination to get the Arizona mine started has become stalled in another legal challenge. Any outcome could take between months or years.
Treasurer Jim Chalmers has talked a big game on productivity. Where BHP finally lands with Copper SA will reveal whether any of these forces are holding Australia back.
