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Picture: REUTERS/DADO RUVIC
Picture: REUTERS/DADO RUVIC

Resources group BHP will temporarily suspend operations at the Nickel West operations and West Musgrave project in Western Australia from October following oversupply in the global nickel market.

BHP said on Thursday that it intended to review the decision to temporarily suspend Western Australia Nickel by February 2027.

Forward consensus nickel prices over the next half of the decade had fallen sharply reflecting strong growth of alternative low-cost nickel supply, it said.

During the temporary suspension, BHP will keep supporting its workforce and local communities. It will invest about $300m  a year following completion of a transition period to support a potential restart of Western Australia Nickel.

The transition period would start in July and operations would be suspended in October and handover activities for temporary suspension would be completed by December, it said.

During the temporary suspension, BHP will suspend mining and processing operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter and Mt Keith and Leinster operations and the development of the West Musgrave project.

It will implement a care and maintenance programme of work to ensure the safety and integrity of its mines and related infrastructure. It will also continue to invest in exploration to extend the resource life of Western Australia Nickel and preserve optionality.

“We understand this is a challenging period for the Western Australia Nickel team and surrounding communities,” said BHP president Australia, Geraldine Slattery. “Every frontline employee will be offered another role within BHP, and best endeavours will also be made to identify redeployment opportunities for other employees engaged in the day-to-day operations of Western Australia Nickel.”

She said the company would work closely with local communities, traditional owners and suppliers to support a responsible transition process, which would include the establishment of a A$20m community fund.

Since 2020 BHP has invested about $3bn to sustain Western Australia Nickel as an ongoing business and to reorientate its production to the battery and electric vehicle (EV) market.

This included 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 the operation expecting to report an underlying earnings before interest, taxes, depreciation, and amortisation (ebitda) loss of about $300m in the financial year to end-June 2024.

In February, BHP announced plans to review Western Australia Nickel and a non-cash impairment charge of about $3.5bn pretax against the carrying value of the operations. As a result of the decision to temporarily suspend operations, BHP expects to recognise a further non-cash impairment charge of $0.3bn pretax as an exceptional item in the group’s financial year 2024 results.”

mackenziej@arena.africa 

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