BHP (ASX:BHP) has bitten the bullet and will suspend nickel mining in WA, warning of a full-year loss in its nickel business.
The decision, announced Thursday evening, casts doubt over the future of thousands of jobs in WA.
BHP shares closed Thursday at $43.56, up 0.9% on the day. The shares are down nearly 14% year to date.
BHP blamed a global oversupply of nickel from Chinese-backed companies in Indonesia and, to a lesser extent, the Philippines. These companies are producing huge amounts of low-grade nickel matte, which is being exported to China and driving purer forms of the metal out of the market.
In the statement, BHP said it will:
- Suspend mining and processing operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter, and Mt Keith and Leinster operations, as well as the development of the West Musgrave project.
- Implement a care and maintenance program to ensure the ongoing safety and integrity of its mines and related infrastructure.
- Continue to invest in exploration to extend the resource life of Western Australia nickel and preserve optionality.
- Offer Western Australia Nickel frontline employees another role within BHP or the choice of redundancy, and establish a AU$20 million community fund to support local communities during the temporary suspension.
Nickel West employs more than 3,000 people.
"During the temporary suspension, BHP will continue to support its workforce and local communities,” BHP said.
BHP said it will invest approximately $US300 million ($A450 million) per annum following the completion of a transition period to support a potential restart of Western Australia Nickel.
The transition period will commence this month. Operations will be suspended in October 2024, and handover activities for the temporary suspension will be completed by December 2024.
Since 2019-20, BHP has invested approximately $US3 billion ($A4.4 billion) to sustain its Western Australia Nickel operation as an ongoing business and to reorient its production to the battery and electric vehicle market.
"This includes establishing Australia’s first nickel sulphate plant to enhance downstream infrastructure, building two new mines, and investing in the development of two solar farms and battery storage. Western Australia Nickel has recorded negative cash flow every year during this period.
"Despite the significant capital investments, lower global nickel prices have contributed to Western Australia Nickel expecting to report an underlying EBITDA loss of approximately $US300 million in the financial year to 30 June 2024."
In February 2024, BHP announced plans to review Western Australia Nickel and a non-cash impairment charge of approximately $US3.5 billion ($A5.1 billion) pre-tax against the carrying value of Western Australia Nickel.
As a result of the decision to temporarily suspend operations, BHP expects to recognize a further non-cash impairment charge of $US300 million ($A450 million) pre-tax as an exceptional item in the Group’s 2023-24 Financial Statements.
BHP’s decision has been expected for most of this year after several smaller nickel projects were suspended. Panoramic Resources shut down its Savannah nickel-cobalt-copper mine earlier this year. It is in the far north of WA.
IGO has written down the value of its WA nickel mines and suspended production at its Cosmos mine. Wyloo Metals (owned by Andrew Forrest) has closed its WA nickel mines, and Canada’s First Quantum shut its Ravensthorpe mine in the southwest of WA.
