BHP Nickel West: Alliance Aviation, Lynas, Qube and GR Engineering among those impacted by suspension fallout

Fly-in, fly-out aircraft operator Alliance Aviation is bracing for a multimillion-dollar hit to its bottom line after BHP revealed it would mothball its vast WA Nickel portfolio and wait on a market turnaround for the key battery commodity.

Alliance currently flies 24 return trips a week between Perth and the Big Australian’s Nickel West sites at Mt Keith and Leinster in the northern Goldfields.

Moving the mine workers requires the full-time use of two Fokker 100 aircraft that accounted for 3 per cent of total company flight hours last financial year. That was due to fall to 2.15 per cent this financial year as the carrier grew other routes.

Alliance on Friday told investors that BHP’s decision to place its nickel assets on care and maintenance by December could cost it up to $9 million in lost earnings over the next two financial years as services start to wind down from October.

“However, given the nature of the company’s operation, the surplus capacity will be reallocated to existing and new customers in Western Australia and Queensland, so at this time, this situation will have a minimal net impact on the company’s earnings going forward,” the company said.

“In the meantime, Alliance will work with BHP Nickel West in a flexible and supportive manner as would be expected from the long-term relationship both companies have enjoyed since 2006.”

The airline is not the only business to be hit by the fallout of BHP’s decision on Thursday to cease production from Nickel West until at least early 2027 — a move that will impact up to 3000 workers.

The miner earlier this year effectively wiped the value of the portfolio to zero as it was hit by an onslaught of Indonesian supply that has flooded the nickel market and left prices stuck in the muck.

Lynas Rare Earths relies on significant volumes of sulphuric acid from Nickel West’s Kalgoorlie smelter to run its nearby $780m cracking and leaching plant, which only started full operations in December.

Lynas has previously said the operation supports over 100 full-time workers.

The Amanda Lacaze-led company on Friday told investors it had a contract with BHP that runs until mid-2027 to supply the caustic chemical from “either the Kalgoorlie nickel smelter or imported sources”.

“In line with the terms of the supply contract, BHP has affirmed its commitment to using reasonable efforts to supply imported acid to Lynas,” it said.

“Sulphuric acid is available for purchase on global markets. Lynas and BHP have been working together on contingencies for continued acid supply to Kalgoorlie and these plans will now be finalised for implementation.”

Logistics giant Qube Holdings handles a big chunk of the freight that travels across the Nickel West network.

A Qube spokesman said the company had a deal in place with BHP to minimise its own pain from the operational pause.

“We don’t expect the impacts of this decision to be material for Qube and we have contractual protections in place,” he said.

“As a large, diversified freight and logistics provider, with operations in more than 200 locations, we expect to mitigate potential impacts.”

BHP’s WA Nickel business mainly encompasses the Nickel West portfolio as well as the under-construction West Musgrave project acquired following the OZ Minerals takeover last year.

GR Engineering’s shares shed nearly 5 per cent in early trade on Friday after the West Musgrave contractor said it expects an $80m revenue hit during the current financial year.

Tools are to be downed at West Musgrave in December and will come 20 months after GR inked contracts for design and construction work at the project.

GR did not disclose how many internal jobs would be affected by the pause.

BHP Australia president Geraldine Slattery said on Thursday the miner would continue to invest about $450m a year across the WA Nickel facilities to enable a potential re-start.

“Every frontline employee will be offered another role within BHP, and best endeavours will also be made to identify redeployment opportunities for other employees engaged in the day-to-day operations of Western Australia Nickel,” she said.

“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.”

BHP said it would also establish a $20m community fund “to support local communities” during the suspension.