After months of speculation about whether or not BHP would commit to the open cut expansion at the end of the year, the company finally confirmed it would reassess the move.

South Australian premier Jay Weatherill said the decision had been a major setback for the state.

"There is no doubt this is a major disappointment for South Australia and the nation- especially for those workers and businesses who had set themselves to work on the expansion project," he said.

This isn't the first time the SA government has been let down by BHP, with a similar scenario experienced about six years ago.

"What I have explained to BHP is that beyond their regulatory approvals, they also need community permission to develop this resource," Weatherill said.

"Given that this is the second time they have disappointed South Australians, there can be no doubt that this community permission will come at a cost.

BHP told to the government that its decision was based on "global factors" outside their control, contrary to federal opposition leader Tony Abbot blaming the move on the carbon tax.

While doubts surface about whether or not the planned expansion will ever proceed, Weatherill said BHP had already communicated that the expansion would still go ahead in the future.

"They have told me that they will continue the site preparation work at Olympic Dam, and engineering works to ensure that they are ready to proceed in a major way," he said.

"They have told me that they will undertake a series of pilot tests on the new technologies that will assist them to bring this project on."

While the SA government remains optimistic, opposition leader Isobel Redmond said the state's economy was now in trouble.

"This is not just a major disappointment for South Australia - this is a major disaster for our economy," Redmond said.

"Given that Labor's budgetary forecasts are all based on the Olympic Dam expansion going ahead, South Australia is now in an economic crisis.



"Premier Weatherill and his government have thrown all their eggs in one basket with no Plan B."