BHP to place Nickel West on care and maintenance until at least 2027 after downturn in industry

BHP is putting its Nickel West arm on care and maintenance until at least 2027 and is promising to offer new jobs to its 3000 workers at the WA asset.

The Big Australian has succumbed to an onslaught of Indonesian supply flooding the nickel market and announced it will place its WA Nickel business into a period of care and maintenance.

BHP on Thursday said WA Nickel would be temporarily suspended from October until at least February 2027, when it will then review the decision.

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

BHP Australia president Geraldine Slattery said the company will continue to invest approximately $450 million each in the 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-today 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 will also establish a $20 million community fund “to support local communities” during the suspension.

In February BHP announced it would write-off the entire value of its WA nickel portfolio and then some — equating to $5.4 billion — and first flagged it was considering switching off the network of mines, smelters, and refineries.

BHP expects WA Nickel to report an underlying earnings loss of approximately $US300m ($445m) for the 2024 financial year.

Nickel prices have dropped from above $US31,000 per tonne at the start of 2023 to below $US17,000 currently. This is on the back of technical innovations enabling Chinese-backed Indonesian miners to transform low-grade nickel ore into a higher-grade product more efficiently than in years prior.

BHP takes nickel sulphide ore at its Mt Keith, Cliffs and Leinster mines, which is then processed through two large concentrators and dryers at Mt Keith and Leinster. Nickel West’s concentrator plant in Kambalda also processes ore, but its ore is purchased from third parties.

These three streams of nickel concentrate converge at the Nickel West Kalgoorlie smelter.

The Kwinana refinery then further purifies the nickel matte into premium-grade nickel powder and briquettes. It then gets shipped off via Fremantle Port.

The Kalgoorlie smelter is a crucial cog in the Nickel West machine and was at the heart of some heated words by Federal Resources Minister Madeleine King.

There had been suggestions that the Federal Government might use taxpayer funds to help foot the bill for a much needed $1 billion refurbishment of the smelter that could help stave off a closure.

But in May Ms King seemed to close the door on providing the Big Australian a direct lifeline.

“On Nickel West we will work together as best we can ... these are ageing facilities, there are choices companies make to return capital to their shareholders, or 10 or 15 years ago maybe making upgrades to those facilities so that they last longer,” she said at the time.

“They (BHP) really chose not to upgrade the facilities and instead return capital to shareholders ... and they are perfectly entitled to that.

“But the price now is that the workers will probably face a different consequence.”

The intricate Nickel West supply chain means the care and maintenance fallout will spill over BHP’s walls onto a sprawling network of suppliers and contractors, and even to miners of other commodities.

The Amanda Lacaze-led Lynas Rare Earths will now lose a major source of sulphuric acid, which is required at its $780m Kalgoorlie cracking and leaching plant.

It has been confirmed the miner receives a significant stream of the corrosive chemical from BHP’s Kalgoorlie smelter.

More to come ...