On Thursday, BHP, a leading commodities firm, announced the suspension of production at its Western Australian nickel operations, attributing the decision to an oversupply in the global nickel market.
The suspension follows a comprehensive review initiated by BHP in February of its Australian nickel operations.
Geraldine Slattery, BHP Australia president, highlighted the economic challenges posed by the oversupply of nickel, despite efforts to explore short-term solutions and chart a sustainable path forward for the business.
Operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter, as well as the Mt Keith and Leinster operations, including the West Musgrave project development, will be temporarily suspended starting October, with handover activities expected to conclude by December.
During the suspension period, BHP will continue to invest in exploration to extend the resource life of Western Australia Nickel, ensuring future operational flexibility.
In supporting its workforce and local communities, BHP plans to invest approximately A$450 million annually to facilitate a potential restart of operations.
Frontline employees affected by the suspension will be offered redeployment opportunities within BHP or redundancy packages.
To mitigate the impact on local communities, BHP will establish a A$20-million Community Fund during the suspension period.
Despite significant investments totaling A$4.4 billion since the 2020 financial year, aimed at enhancing downstream infrastructure and reorienting production towards the battery and electric vehicle market, Western Australia Nickel has experienced negative cash flow annually due to lower global nickel prices.
Reflecting these challenges, BHP anticipates reporting an underlying earnings before interest, taxes, and depreciation loss of approximately $300 million for the fiscal year ending June 30, 2024. Additionally, BHP expects to recognize a non-cash impairment charge of $0.3 billion before tax in its 2024 financial results due to the suspension decision.
Looking ahead, BHP reaffirmed its commitment to Western Australia as a key investment destination, with plans to invest over A$12 billion in the state over the next five years.
Slattery underscored BHP’s dedication to collaborating with Western Australian partners to foster economic prosperity in the region amidst ongoing market challenges.
