Shockwave through mining: BHP halts billion-dollar nickel operations in Western Australia!

BHP has announced a strategic decision to temporarily suspend its Nickel West operations and the West Musgrave project, collectively known as Western Australia Nickel, starting from October 2024. This decision comes in response to an oversupply in the global nickel market, which has driven down prices and made current operations unsustainable in the short term.

The suspension is set to begin after a transition period starting in July 2024, with operations fully halting by October and handover activities concluding by December 2024. During this period, BHP plans to suspend mining and processing operations at multiple facilities, including the Kwinana nickel refinery and Kalgoorlie nickel smelter, among others.

This decision follows a substantial investment by BHP in the nickel sector, with around US$3 billion (AU$4.4 billion) spent since FY2020 aimed at reorienting production towards the battery and electric vehicle market. Despite these efforts, Western Australia Nickel has faced continuous financial losses, culminating in an expected EBITDA loss of about US$300 million for the fiscal year ending June 30, 2024.

BHP has also recognized a non-cash impairment charge of approximately US$3.8 billion (AU$5.55 billion) against the carrying value of Western Australia Nickel due to these suspensions and the broader market conditions.

During the suspension, BHP is committed to investing approximately US$300 million (AU$450 million) annually to maintain the facilities and prepare for a potential restart, pending a favorable shift in market conditions. The company has outlined comprehensive care and maintenance programs to ensure the safety and integrity of the suspended operations.

Recognizing the impact on its workforce and the local community, BHP has pledged to offer alternative roles within the company to frontline employees or provide redundancy options. Additionally, a AU$20 million Community Fund will be established to support local communities affected by the suspension.

BHP has been actively engaging with both the Western Australian and Federal governments to address challenges in the nickel industry, including discussions on policy interventions like the Critical Minerals List and production tax incentives. However, despite these efforts, the prevailing economic conditions driven by global oversupply have necessitated this temporary suspension.

Looking ahead, BHP remains committed to the Western Australian economy, with planned investments exceeding AU$12 billion over the next five years. The company will also continue to support critical minerals research and the development of new technologies, such as the Electric Smelting Furnace pilot plant in collaboration with industry partners.

BHP’s decision to temporarily suspend its nickel operations in Western Australia reflects a strategic response to global market challenges. While the company navigates these turbulent times, its commitment to its employees, local communities, and the broader Western Australian economy remains steadfast, with significant investments planned to ensure long-term sustainability and readiness for market recovery.