BHP to suspend nickel operations as oversupply hampers business
Make us a preferred source
Make us a preferred source on Google
The news: BHP has temporarily suspended nickel operations in Western Australia due to an oversupply in the global nickel market and strong growth of alternative low-cost nickel.
The numbers: The Nickel West operations and West Musgrave project (Western Australian Nickel) will be suspended from October 2024 and BHP will review the suspension by February 2027.
BHP said it would invest about USD300 million ($450 million) per annum following the completion of a transition period to support a potential re-start of Western Australian Nickel. The transition period will commence from July 2024, operations will be suspended in October 2024, and handover activities for the suspension will be completed by December 2024.
BHP noted it had invested about USD3 billion to sustain its nickel operations as an ongoing business to reorient its production to the battery and electric vehicle market.
It is expected that Western Australia Nickel will report an underlying EBITDA loss of around USD300 million for FY24. BHP also expects a further non-cash impairment charge of USD300 million pre-tax as an exceptional item for FY24. This is on top of a non-cash impairment charge of USD3.5 billion announced in February.
The context: During the suspension, BHP will suspend mining and processing operations, implement a care and maintenance program, invest in exploration to extend the resource life of Western Australia Nickel, offer frontline employees another role within BHP or a choice of a redundancy, and establish a $20 million community fund to support local communities.
What they said: BHP Australia president Geraldine Slattery said: “Since BHP announced a review of Western Australia Nickel in February, we have explored options to stem losses in the short-term and identify a viable path forward for the business”.
“Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel,” she said.
The source: ASX announcement
