BHP to Temporarily Suspend Western Australia Nickel Operations Amid Global Oversupply

BHP Group Limited has announced the temporary suspension of its Western Australia Nickel operations. The suspension includes the Nickel West […]

BHP Group Limited has announced the temporary suspension of its Western Australia Nickel operations. The suspension includes the Nickel West operations and West Musgrave project. This decision comes in response to an oversupply in the global nickel market. Operations are set to halt from October 2024, with a review planned by February 2027.

Reasons for Suspension

The global nickel market has experienced significant oversupply. Forward consensus nickel prices have plummeted, reflecting increased low-cost supply. This market condition has pressured BHP to take drastic measures.

Impact on Operations

Affected Sites:

  • Kwinana nickel refinery
  • Kalgoorlie nickel smelter
  • Mt Keith operations
  • Leinster operations
  • West Musgrave project

Key Actions:

  • Suspend mining and processing operations
  • Implement a care and maintenance program
  • Continue exploration to extend resource life
  • Offer employees alternative roles or redundancy options

Financial Implications

Investment and Support:

  • BHP will invest US$300 million (AU$450 million) annually to support potential restart.
  • A transition period will begin in July 2024, with operations suspending in October 2024.

Historical Investments:

Since FY2020, BHP has invested US$3 billion (AU$4.4 billion) in Western Australia Nickel. This includes establishing Australia’s first nickel sulphate plant and building new mines. Despite these investments, Western Australia Nickel has faced negative cash flow yearly.

Projected Losses:

  • Western Australia Nickel is expected to report an underlying EBITDA loss of US$300 million for the financial year ending June 2024.
  • A non-cash impairment charge of US$3.5 billion was announced in February 2024.
  • An additional non-cash impairment charge of US$0.3 billion will be recognized as an exceptional item in FY2024.
Financial ImpactAmount (US$ billion)Amount (AU$ billion)
Investment since FY20203.04.4
FY2024 Underlying EBITDA Loss0.30.45
February 2024 Impairment3.55.1
Additional FY2024 Impairment0.30.45

Workforce and Community Support

BHP will continue to support its workforce and local communities during the suspension. A AU$20 million Community Fund will be established to aid local communities. Frontline employees will be offered new roles within BHP or redundancy options.

Support Measures:

  • AU$20 million Community Fund
  • Alternative roles or redundancy for employees
  • Continued investment in exploration and resource extension

Future Plans

Despite the suspension, BHP remains committed to Western Australia. The company will invest approximately AU$12 billion over the next five years in the state. The goal is to ensure economic prosperity and sustain long-term investments.

Statements from BHP

Geraldine Slattery, BHP’s President Australia, acknowledged the challenges faced by the Western Australia Nickel team and surrounding communities. Slattery emphasized BHP’s commitment to supporting employees and local communities during this transition.

Conclusion

BHP’s decision to suspend its Western Australia Nickel operations is a significant move in response to market conditions. The company aims to review this decision by February 2027. Meanwhile, BHP will invest in maintaining the facilities and supporting the workforce and local communities.


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