urg:::WMC : Roxby 2 go 600,000 t Cu / 13,000 t U3O8

[Gavin Mudd]

WMC boss talks up expansion

By Barry FitzGerald
Resources Editor
June 19 2002

- Hugh Morgan was in an expansive mood at WMC's annual meeting in Melbourne
yesterday. Picture: VIKI LASCARIS


Aggressive expansion plans outlined by WMC chief Hugh Morgan yesterday at
the group's Melbourne annual meeting include a multi-billion-dollar
expansion of the Olympic Dam copper/uranium mine in South Australia.

Early planning anticipates annual copper production being more than doubled,
from 235,000 tonnes to 600,000 tonnes, making the remote operation one of
the world's biggest copper producers.

Uranium production would also more than double to 8000 tonnes a year, making
Olympic Dam the biggest uranium mine in the world. WMC does face, however,
the challenge of finding buyers for the radioactive material.

WMC has previously talked about the potential of the Olympic Dam ore body to
support a major expansion. But that talk has usually stopped at 350,000
tonnes a year of copper - the operation's present limit under government
environmental authorisations.

At the meeting, Mr Morgan said WMC was "actively investigating a major
change in operations to lift production to at least 350,000 tonnes of copper
a year".

"We are also investigating annual production of 600,000 tonnes and higher,"
he said.

Olympic Dam already ranks as the world's second-lowest-cost producer, a
position that would be enhanced with expansions.

It also happens to be WMC Resources' biggest and best growth opportunity,
and the new upside target of 600,000 tonnes of copper has implications for
the market's valuation of the project.

WMC Resources is the group that will house all WMC's non-alumina interests
after the group's planned demerger later this year. The alumina interests -
40 per cent of the Alcoa-managed AWAC business - will be held by a
separately listed company called Alumina Ltd.

Much of yesterday's meeting was spent promoting the demerger to
shareholders, although the vote on the plan has been delayed pending the
passing of federal demerger tax-relief legislation in late August or early
September.

WMC chairman Ian Burgess told shareholders that once the legislation was
passed, a general meeting of shareholders to approve the demerger plan would
be held within about six weeks.

The late October/early November start date for the demerged companies is
widely expected to trigger a bidding war for WMC Resources. Likely
contenders are BHP Billiton, Rio Tinto, Anglo American, Xstrata and Inco.

Alumina Ltd is considered to be off limits to all but Alcoa because of its
managing share of the AWAC business and the 1994 agreement dictating that
AWAC can be the sole owner of bauxite/alumina assets for Alcoa and WMC.

It was that situation that prompted WMC to go down the demerger path after
Alcoa made an unsolicited offer of $10.20 a share for the group late last
year. WMC rejected the offer on the basis that an independent valuation
priced its shares at $11.18 to $12.91.

"Alcoa left us with no choice but to pursue a strategy that would introduce
an element of competition, in the event of a further approach. And that
would allow the AWAC and WMC Resources businesses to be transparently and
fully valued by the market," Mr Burgess told shareholders.

He said Alcoa had not gone away and was still interested in the 40 per cent
AWAC stake, its only growth-by-acquisition opportunity because of antitrust
constraints.

In response to a shareholder suggestion that WMC consider a merger with MIM
as an alternative to the demerger, Mr Burgess said the company "had not
ruled out anything".


Copyright © 2002 The Age Company Ltd