Australia-based mining giant BHP announced on Thursday that it will temporarily halt operations at its Nickel West and West Musgrave projects in Western Australia from October 2023, with a review of this decision scheduled by February 2027.
“The decision to temporarily suspend Western Australia Nickel follows oversupply in the global nickel market. Forward consensus nickel prices over the next half of the decade have fallen sharply reflecting strong growth of alternative low-cost nickel supply,” the company stated.
During the suspension, BHP plans to support its workforce and local communities, investing approximately USD 300 million (about $443 million) annually post-transition to restart operations potentially.
The transition period will commence in July, with operations ceasing in October and the suspension process expected to be completed by December. This will affect the Kwinana nickel refinery, Kalgoorlie nickel smelter, Mt Keith, Leinster operations, and the West Musgrave project, acquired last year as part of the $9.6 billion ($6.5 billion) OZ Minerals takeover.
Since 2022, around $4.4 billion AUD ($2.9 billion USD) has been invested in Western Australia Nickel, focusing on battery and electric vehicle markets. Despite these efforts, the venture has faced negative cash flow each year.
Lower global nickel prices have led to Western Australia Nickel projecting an underlying EBITDA loss of approximately $300 million USD for the fiscal year ending June 30, 2024.
“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,” stated Geraldine Slattery, president of BHP’s Australia operations. “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.”
The suspension decision has been disappointing for the Western Australian government, with concerns over the impact on thousands of workers and communities in the Goldfields region. BHP has committed to offering affected employees alternative roles within the group or redundancy packages, and establishing a $20 million AUD ($13.5 million USD) fund to support local communities.
“This announcement again shows the volatility of global commodity markets and reinforces the importance of my government’s work to diversify our economy and build more resilience into our resources sector,” said Western Australian Premier Roger Cook.
The Australian Financial Review remarked that BHP’s decision leaves the Australian nickel industry in a precarious position, following closures of other major mines, including those owned by Andrew Forrest’s Wyloo Metals. The publication noted that global nickel prices, which averaged over $25,000 USD per tonne from early 2022, have now dropped to about $16,725 USD per tonne. Analysts and BHP predict the market will remain oversupplied until the end of the decade due to increased supply from Indonesia.
