BHP still months away from call on fate of WA nickel and 3300 jobs

BHP says a decision on the fate of its WA nickel assets is still a few months away as it continues to assess their longer-term viability amid a market beaten down by a flood of the steel and battery ingredient from Indonesia.

The Big Australian has already cut contractors at its Kalgoorlie nickel smelter and stood down around a quarter of the workforce constructing the West Musgrave nickel and copper project it acquired following the takeover of OZ Minerals last year.

Those moves came a month after the miner copped a non-cash, pre-tax impairment of about $US3.5 billion ($5.4b) against the carrying value of Western Australia Nickel, which encompasses its existing nickel portfolio and West Musgrave.

BHP’s Nickel West employs around 3300 people — the vast majority in WA.

It told investors in a quarterly production update released on Thursday that it “expects” a decision on whether to mothball the operations when it publishes its full-year results in August.

“We continue to review our plans for Western Australia Nickel with a focus on preserving cash,” BHP said.

“This includes optimising operations and maintenance schedules, reviewing capital plans, and reducing contractor spend and equipment hire.

“Our review also includes assessing the potential to place Nickel West into a period of care and maintenance and the phasing and capital spend for the development of the West Musgrave project.”

In February, BHP chief executive Mike Henry flagged a decision would be made on the future of WA nickel in “the months ahead”.

US Ambassador to Australia Caroline Kennedy on Wednesday took a veiled swipe at the state-owned Chinese mining companies in Indonesia that were squeezing WA nickel producers out of the market.

Most WA nickel producers have either scaled back production or shut mines entirely.

While the nickel price received a bump last week from the introduction of new UK and US sanctions targeting Russian production, it remains depressed as Indonesia continues to ramp up output and flood the market with cheap supply.

BHP said its nickel production in the three months to the end of March fell 4 per cent compared to the previous quarter to 18,800 tonnes. It is forecasting full-year production at the lower end of its 77,000 to 87,000t guidance range.

Elsewhere, the miner said iron ore production from its vast Pilbara network slipped 6 per cent compared to the previous quarter to 68.1 million tonnes — but up 3 per cent comparted to a year earlier — due to heavy rain, tie-in activity for its rail technology program, the impacts of the ongoing ramp-up of the Central Pilbara hub and a bushfire near its Yandi project.

It said its $US3.6b South Flank development remains on track to ramp up to full annual production of 80mt by the end of the financial year. It achieved an average realised price of $US106.30/t.

Production guidance remains unchanged at between 282mt and 294mt.