Global mining giant BHP Billiton on Wednesday upgraded the size of its total ore resource at the giant Australian Olympic Dam uranium, copper and gold mine by 75% to 7.7 billion tons.
However, BHP shares fell 2% to A$43.67 in morning trade after overheated expectations about an Olympic Dam upgrade had helped push the stock up nearly 9% in recent days.
"The shares have run too hard, too quickly and have breached all measures of valuation. We think they were due a breather anyway," said JP Morgan analyst David George. "Part of that was on the hype of the upgrade, but the significance of this is a long way down the track in terms of developing the project."
After recent drilling to further define the size of the Olympic Dam orebody, BHP nearly doubled the size of the measured resource -- which can be estimated with a high level of confidence -- to 1.3 billion tons from 680 million tons a year ago.
However, the proved and probable ore reserve -- the economically mineable part of an ore resource -- rose only 7% to 400 million tons.
BHP Billiton has earmarked gradual increases in production at Olympic Dam as it encounters richer ore grades to take advantage of increased metals prices. It is also keeping an eye on growing demand for uranium, which is trading just below record high prices at around $90 a pound.
"They've delivered an upgrade in resource that give grounds to proceed with the feasibility study to expand the operations," said JP Morgan's George.
Worked predominately as a copper and uranium mine since 1988, the latest figures showed Olympic Dam also held about 30.6 million ounces of gold on an indicated resource basis, up from 17.5 million ounces a year earlier. An indicated resource is one that can be measured with a reasonable level of confidence.
However, proved and probable gold reserves fell slightly to 8.7 million ounces from 9.2 million ounces a year ago, the company said.
In its annual report, BHP Billiton also said the global outlook remained robust, driven by solid activity in Asia and Europe, while growth in China's demand for raw materials should continue.
"Over the medium term we expect commodity prices to move towards long-run marginal costs of supply but, in the interim, prices are likely to stay high relative to historical levels, albeit with increased volatility," Chairman Don Argus said.