Australian resources firm BHP will report an impairment of $2.5bn on its Western Australia nickel business, with it deciding to halt its Kambalda concentrator and not ruling placing the entire Nickel West integrated operation into care and maintenance.

 

BHP's Kambalda concentrator will be placed into care and maintenance in June this year, as it will be no longer viable for Nickel West to continue operating the milling circuit after Wyloo Metals stops production at the Cassini and Northern Operations mines on 31 May, BHP said on 15 February.

 

It has lowered its nickel price assumptions for both the short and medium term because of unfavourable operating conditions in the global nickel industry, which are expected "to endure for a considerable time", it warned. Capital costs for its Western Australia Nickel operation, comprising Nickel West and the West Musgrave project, have increased because of inflation.

 

The company will recognise a non-cash impairment charge of approximately $2.5bn after tax, around $3.5bn pre-tax, against the value of Western Australia Nickel as of 31 December 2023 when it releases its July-December 2023 results on 20 February. It will also record negative earnings before interest, taxes, depreciation and amortisation (ebitda) of around $200mn at that business, it said on 15 February.

 

"BHP is also reviewing the development plans for Western Australia Nickel with a focus on preserving cash, which includes the potential to place Nickel West into a period of care and maintenance," it said. Apart from the Kambalda concentrator, Nickel West comprises the Kwinana refinery, the Kalgoorlie smelter and the Mount Keith, Cliffs and Leinster mines.

 

Nickel West's nickel production rose by 4pc from a year earlier in the first half of BHP's 2023-24 fiscal year to 39,800t, while the firm's average realised nickel price plunged by 24pc over the same period to $18,602/t.

 

The company had already revealed it was reassessing its nickel operations in mid-January because of the significant price drop for the metal in recent months on the back of surging Asian supplies and a global demand slowdown. That was followed shortly by Wyloo Metals' announcement about its Kambalda mining operations, which supply most of the nickel ore to BHP's nearby concentrator.

 

The Australian nickel crisis has since deepened even further, with the Avebury nickel mine in Tasmania joining a growing list of mines being mothballed. Australia's federal and Western Australia state governments are considering incentives, including production tax credits and royalty reliefs for the nickel and lithium industry following urgent meetings with industry representatives.

 

"Commodities traditionally go through natural and cyclical boom and bust cycles," federal resources minister Madeleine King said in late January. "But the potential prolonged impact this could have on Australia's energy transition, local workforce and development of Australia's minerals sector is a matter of great concern." argusmedia