It seems that literally, no one would offer a nickel for BHP Billiton’s (BHP) underperforming nickel operations in Western Australia. So now the company will hold on to them as a ’non-core’ asset, meaning they will be sold to if anyone wants to buy them.
But will they end up in the spin off of unwanted mining assets BHP is putting together? On what was being said yesterday, the answer would have to be no for the time being. But that could very well change as we move closer to the spin off in early 2015.
BHP put the nickel business on the market six months ago with a reported valuation range of $500 million to $800 million valuation.
That was a knockdown price (BHP paid a lot more for them), but BHP said yesterday the sale had not been achieved on an acceptable basis and the company would only pursue options that maximise value for shareholders.
BHP shares fell more than 97 cents, or 2.8% to $33.20 – not on this news, but on another round of downgrades of iron ore price forecasts.
BHP YTD – BHP ditches Nickel West sale
The business employs about 1,800 people and comprises the Mt Keith, Cliffs and Leinster mines and associated concentrators, the Kalgoorlie smelter, the Kambalda concentrator and the Kwinana refinery.
Nickel West asset president Paul Harvey said the asset would remain in BHP’s portfolio asset non-core asset.
“The focus of Nickel West will remain on delivering safe and efficient production whilst pursuing every opportunity to maximize productivity, to reduce operating costs and to increase free cash flow,” he said yesterday.
BHP has had an unfortunate experience with nickel. It wrote down the best part of $US3.6 billion on the Ravensthorpe mine and associated facilities in WA, and sold the Townsville nickel refinery at a knockdown price to Clive Palmer.
Raventhorpe cost an estimated $US2.2 billion, but was sold in 2009 to a Canadian company for just $US340 million.
After the big run up in nickel prices in the first half of the year, things looked positive for the sale of BHP’s nickel business.
Prices jumped 56% in the wake of Indonesia banning the export of nickel ores.
But since May prices have fallen 27%, meaning the metal moved into a bear market in September (that’s where prices fall 20% or more from their peak).
That weakening in prices and the outlook for the metal helped ruin any sale prospects BHP had.
And it’s not the first time that a major Australian miner has tried to sell unwanted assets, but found buyers scare.
Several years ago Rio Tinto ended the sale of unwanted aluminium, alumina and bauxite assets, mostly in Australia and NZ, when there were no serious buyers.
