BHP, Closure, Financial reports, News, Nickel

BHP nickel assets to incur impairment

BHP is set to declare an impairment against its nickel operations in its half-year results.

Following Wyloo’s decision to place the Cassini, Long and Durkin nickel mines under care and maintenance, BHP announced in late January that it would transition its Kambalda concentrator into care and maintenance in June 2024.

It will also consider putting its Nickel West operations into care and maintenance.

As a result, its Nickel West operations and West Musgrave project in WA will incur an impairment to their carrying value.

“This is an uncertain time for the Western Australia nickel industry and we are taking action to address the current market conditions,” BHP chief executive officer Mike Henry said.

“We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave.”

WA Premier Roger Cook told the ABC he and Federal Resources Minister Madeline King are evaluating relief options.

“Obviously we have some levers around royalty relief and rebates and we are looking at all options in terms of how we can support the industry,” he said.

Cook also spoke to The Australian Financial Review (AFR) about the industry.

“This is not a cyclical issue, this is a significant structural disruption to the industry, so it not only needs the State Government, (but) Governments at all levels to do the heavy lifting to make sure that we can assist the industry deal with these global trends,” he said.

BHP will recognise a non-cash impairment charge of about $US3.5 billion before tax against the carrying value of its WA nickel business.

The impairment reduces the carrying value of WA nickel’s net operating assets to negative $US0.3 billion. This includes closure and rehabilitation provisions of about $US0.9 billion.

BHP is expected to record an underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) of about negative $US0.2 billion for its WA nickel business in its first half of the 2023–24 financial year (H1 FY24) results.

The major miner previously flagged how the nickel downturn was affecting its nickel operations in its operational review for the half year ending December 31 2023.

“The nickel industry is undergoing a number of structural changes and is at a cyclical low in realised pricing,” the company said. “Nickel West is not immune to these challenges.”

BHP cited the increase of nickel supply from Indonesia through the London Metals Exchange as the reason for the weakening nickel prices.

“During 2023, London Metals Exchange benchmark nickel prices fell considerably as both the supply of nickel from Indonesia significantly increased and the London Metals Exchange began accepting Indonesian-origin nickel products as part of its efforts to respond to evolving industry dynamics,” the company said.

“These unfavourable operating conditions are expected to endure for a considerable time. Due to the deterioration in the short-term and medium-term outlook for nickel, BHP has lowered its nickel price assumptions.”

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