BHP stops nickel production in Western Australia

BHP stops nickel production in Western Australia

14:55 11/07/24

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BHP announced on Thursday that it will cease operations at Nickel West and the West Musgrave project in Western Australia from October.

The Australian mining giant said its decision was in response to oversupply in the global nickel market and a sharp decline in consensus nickel prices as a result of the increase in alternative, low-cost nickel supplies.

It said it plans to review the decision by February 2027.

Despite significant capital investments of around A$4.4 billion (£2.31 billion) since the 2020 financial year aimed at preserving Western Australia Nickel and refocusing its production on the battery and electric vehicle market, the operation says it has reported negative cash flow every year.

BHP’s investments included the construction of Australia’s first nickel sulphate plant, the construction of two new mines and the development of two solar parks and battery storage facilities.

However, lower global nickel prices resulted in an expected adjusted EBITDA loss of approximately $300 million for the fiscal year ended June 30.

BHP said it would continue to support its workforce and local communities during the suspension.

The company said it would invest A$450 million annually to support a potential restart of Western Australia Nickel following a transition period beginning in July.

Operations would cease in October and handover activities would be completed by December.

During this time, BHP ceased mining and processing at the Kwinana nickel refinery, the Kalgoorlie nickel smelter, and the Mt Keith and Leinster operations, and also ceased development of the West Musgrave project.

The Company announced that it will implement a care and maintenance program to ensure the ongoing safety and integrity of its mines and associated infrastructure and will continue to invest in exploration to extend the life of the Western Australia Nickel resource.

BHP said it would offer front-line employees other roles within BHP or the possibility of redundancy.

In addition, BHP will establish a AUD 20 million community fund to support local communities during the temporary suspension.

In February, BHP announced a review of Western Australia Nickel and a non-cash impairment of $3.5 billion before tax to its carrying value.

Following the decision to temporarily cease operations, BHP expects to record a further non-cash impairment charge of $0.3 billion before tax as an exceptional item in its 2024 financial statements.

Any severance payments and other contractually agreed costs incurred as a result of the suspension would be included in the 2025 half-year financial statements.

“We understand this is a challenging time for the Western Australia Nickel team and the surrounding communities,” said BHP Australia President Geraldine Slattery.

“Each frontline employee will be offered a different role within BHP and we will do our best to find relocation opportunities for other employees involved in the day-to-day operations of Western Australia Nickel.

“We will also work closely with local communities, traditional owners and suppliers to support a responsible transition process, including the establishment of a $20 million Australian community fund.”

Slattery said that since announcing a review of Western Australia Nickel in February, BHP has been exploring options to contain losses in the short term and find a viable path for the company’s future.

“Like other companies in the Australian nickel sector, we have been unable to overcome the significant economic challenges created by a global oversupply of nickel.

“We have made the difficult but necessary decision to temporarily suspend operations at Nickel West and the West Musgrave Project.

“We will continue to invest approximately AUD$450 million annually in Western Australia Nickel’s assets to enable a potential restart.

“Western Australia remains a key investment destination for BHP globally, with investment in the state expected to exceed A$12 billion over the next five years. We will continue to work with all our partners in Western Australia to drive the state’s economic prosperity.”

At 12:14 BST, BHP Group shares were down 0.35% at 2,267 pence in London.

Reporting by Josh White for