Article by Robert Gottliebsen, courtesy of The Australian
26.08.2025
The announcement was barely mentioned in Australia, but it would not have been lost on the President of Argentina, Javier Milei, because his country is the main beneficiary from the delay in Australia. Milei is watching with delight as Australians turn their backs on developing new mining revenue at a fast pace.
When Milei was campaigning to become Argentina’s President in 2023, BHP was spending $9.6bn on buying OZ Minerals so that it could proceed quickly developing OZ projects with BHP resources creating a massive copper uranium project that would transform the long-term outlook for mining revenue in Australia – particularly in South Australia – for decades to come.
But then the timing priorities changed. At the start of this year, BHP combined with Canada’s Lundin group in a joint venture to make an early start on a massive copper and gold deposit in Argentina, bordering Chile.
It was an early sign that the South Australian development was clearly in trouble. The reasons for the priority swing from Australia to Argentina would have been understood clearly by the Argentinian President, they didn’t even rate a mention in the Productivity Summit.
BHP still plans to go ahead with the South Australian expansion, but it will be in the next decade and Milei will have his eye on more victories especially as the reasons for the delay still exist and are set to impact other mining developments in Australia and represent the core of Australia’s future revenue problems. Jim Chalmers selected a band of delegates who never got to the core of this Australian problem, let alone work on solutions There were five key reasons for the delay.
First and most obviously – unions. Armed with powers in the new industrial relations act, unions have been making a determined thrust to achieve a much greater degree of management control over BHP’s highly profitable WA iron ore mines. Almost certainly if BHP went ahead with a massive investment in South Australia it would be used by the unions as a weapon.
While the South Australian government has one of the best mining departments in the nation, almost certainly South Australia would be hit with environmental and land rights problems. The proposed changes to the environmental act could head anywhere
Essential to the project was an updated smelter, which would require energy. BHP had never finalised its source of energy, but nuclear was off the table and there was doubt about gas. BlueScope (formerly BHP Steel) revealed that Australian energy prices are three to four times the level of the US. There is no way any major energy-based project in Australia can survive against overseas competition with that sort of burden.
While the government might subsidise important projects, its social spending is rising dramatically, so subsidies are not sustainable.
The cost of construction in Australia is at very high levels and is likely to rise even further because the unions control the action and construction company management is usually weak.
Finally, the enormous royalties placed on BHP’s metallurgical coal mines in Queensland (to help pay for the Olympics) means its coal profits are being taxed in combination at around 67 per cent. Unless the price of coal goes very high, BHP will obviously look hard at a shutdown. While that doesn’t affect South Australia, it adds to the danger of investing in Australia because other states may follow.
Milei knew that to beat Australia and be an early big winner in the expected copper boom, he had to create a very different environment. And so, he laid out the red carpet for the Lundin BHP joint venture, and they accepted his offer.
Historically, one of the problems with developing South Australia was the depressed price of the co-product uranium, but as the world realises that the potential of nuclear to cut both emissions and energy costs, the price of uranium has risen sharply.
In theory, that should have inspired BHP to speed up South Australia, but the five hurdles were too high. Still, BHP will operate the existing facilities to the maximum, including investing to improve efficiencies. The high uranium price will create cash flow to add to the iron ore cash to help finance Argentina, Canadian potash and further copper expansion in Chile. And President Donald Trump is determined to get the huge joint Rio Tinto and BHP Resolution mine in the US off and running. He will almost certainly succeed, and it will absorb even more of Australia’s mining cash. To have a productivity summit that did not mention this dramatic development given that our tax revenues are dominated by minerals means that the Chalmers’ committee could never get to the nub of the problem and was left to look at rearranging taxes rather than growing the revenue base. Argentina was once like Australia but has learnt its lesson and Milei will be looking for other opportunities to take advantage of the fact that our leaders do not understand how the mining industry works even though mining revenue is the reason we have a standard of living that is the envy of most countries. Unless we wake up, that standard of living will not be maintained.
As the Productivity Summit delegates began their deliberations, BHP confirmed that Australia’s largest recent mineral development would be deferred.