Believe it not BHP is looking to invest more in its underperforming West Australian nickel project at Mount Keith.
At a time when the company’s under pressure from New York activist investor, Elliott Advisors to attack costs more robustly, the decision to examine extending the life of the Mount Keith mining operations will raise eyebrows because nickel has hardly been a sterling performer as a commodity in recent years – except in mid 2016 when action by the Philippines government saw a number of mines shut and production curtailed.
The Mt Keith operations are around 100 kilometres north of Leinster, in the WA goldfields. They are approaching the end of their economic life and to extend them into the 2030s BHP is now looking to develop the Yakabindie satellite deposit.
The company has applied to the WA’s Environmental Protection Authority (http://www.epa.wa.gov.au/proposals/mt-keith-satellite-project) to clear a 842 hectare for two open pits, Six Mile Well and Goliath.
The new mine will supplement and replace ore from Mt Keith, which will starting running down over the next five years.
There’s a logic in spending more on Mount Keith and at the Venus deposit nearer Kalgoorlie. BHP estimated several years ago it would cost more than $A1 billion to close down the Nickel West operations and clean up the various mining and processing sites.
That’s why money is being spent on the Venus project, and on the new mine at Mount Keith – it is a cheaper option.
BHP plans to transport nickel ore from the two new pits 20 kilometres to the Mt Keith concentrator, delivering up to 40,000 tonnes a year of nickel concentrate over a 10-15 year mine life.
Nickel West hopes to start pit development in mid 2019, with first production expected in the early 2020s.
The new development will also keep Nickel West staff employed at Mt Keith, as well as creating new jobs in the development phase.
BHP has not yet costed the development but it is considered the lowest-cost option to maintain Nickel West’s production at existing rates into the future.
Nickel West employs about 2500 people across its Mt Keith and Leinster nickel mines, the Kambalda nickel concentrator, the Kalgoorlie nickel smelter and the Kwinana nickel refinery.
In presentation last October (http://www.bhpbilliton.com/-/media/bhp/documents/investors/reports/2016/161020_nickelwestreimaginingthefuture2.pdf?), BHP Nickel West president Eddie Haegel said BHP had converted 96 million tonnes of “Yakabindie resource into reserves, which provides additional confidence for the period to 2032.
“We are now turning our mind to opportunities for Mt Keith and satellites to 2038, to make full use of the option provided to us by the 2023 first rebuild.” “Our study has determined that Yakabindie is value accretive, when treated as a simple satellite pit and extension of existing assets at Mt Keith,” Mr Haegel said.
“By considering Yakabindie in this way, making no changes to the concentrator, and therefore requiring no changes to services.
BHP shares fell 1.1% to $24.34 yesterday.
