BHP warns of earnings hit due to nickel crash, Samarco dam case
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The news: BHP has warned that an impairment of the value of its WA nickel division, and the class action against BHP Brasil over the fatal Samarco dam disaster, will result in hefty write-downs in its first-half results.
The numbers: In a market release ahead of the company's half-year results due on 20 February, BHP said it will recognise a post-tax impairment charge of around USD2.5 billion ($3.85 billion) against the carrying value of Western Australia Nickel, due to the sharp fall in nickel prices. The impairment will reduce the value of Western Australia Nickel's net operating assets to negative USD0.3 billion.
BHP said it will also recognise a post-tax income statement charge of USD3.2 billion in relation to the Samarco dam failure in 2015, which killed 19 people and destroyed surrounding villages. BHP Brasil's provision will be USD6.5 billion as at 31 December 2023.
The context: The Melbourne-based miner said it has lowered its nickel price assumptions due to the "deterioration in the short-term and medium-term outlook for nickel" while capital costs for Western Australia Nickel have also increased due to inflation.
Meanwhile, Brazil's federal prosecution office is seeking seeking approximately USD3.2 billion for reparation, compensation and moral damages in relation to the Samarco dam failure.
What they said: BHP's CEO Mike Henry said: "This is an uncertain time for the Western Australia nickel industry and we are taking action to address the current market conditions. We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave".
The source: ASX announcement
