On July 11, BHP announced it will temporarily suspend its Nickel West operations and the West Musgrave project in Western Australia amid the global nickel downturn.
But how we did we get here? Australian Mining investigates.
A refresher
The global nickel downturn was primarily caused by a supply surplus and an increase in nickel supplies from countries like Indonesia and China.
The oversupply in the global nickel market has forced Australian nickel miners such as IGO and Chalice Mining to weather storms from all angles. Another miner feeling the pinch is BHP.
The Big Australian announced in January it was weighing up options to “mitigate the impacts of the sharp fall in nickel prices”.
“The nickel industry is undergoing a number of structural changes and is at a cyclical low in realised pricing. Nickel West is not immune to these challenges,” the company said at the time.
“Operations are being actively optimised, and options are being evaluated to mitigate the impacts of the sharp fall in nickel prices. Given the market conditions, a carrying value assessment of the group’s nickel assets is ongoing.”
Days later, Wyloo – a major supplier to BHP’s nickel concentrator in Kambalda, WA – decided to temporarily shut down the Cassini, Long and Durkin nickel mines it obtained through its acquisition of Mincor Resources.
Wyloo notified BHP and the WA nickel mines were placed into care and maintenance from May 31.
Wyloo’s decision to cease mining in Kambalda meant that BHP couldn’t operate parts of its Kambalda concentrator, leading to BHP pausing part of its Kambalda processing operations, which took effect from June.
The major miner was also weighing 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 (CEO) Mike Henry said in February.
“We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave.”
These reviews resulted in BHP making about a quarter of its West Musgrave workforce redundant and decreasing the number of contractors who were working at its Kalgoorlie nickel smelter.
Nickel West
Further acting on its reviews, BHP decided last Thursday to temporarily suspend its Nickel West and West Musgrave operations, with 3000 jobs up in the air.
However, BHP said 1600 Western Australian Nickel frontline employees will be redeployed or offered redundancies during the transition period that commenced in July.
The transition period will see BHP suspend mining and processing operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter and Mount Keith and Leinster operations, as well as suspend development of the West Musgrave project.
The company will also implement a care and maintenance program of work to ensure the ongoing safety and integrity of its mines and related infrastructure.
Operations will be suspended in October and handover activities for the temporary suspension will be completed by December.
Response from miners
Lynas Rare Earths has a contract with BHP Nickel West for the supply of sulphuric acid to the Kalgoorlie rare earth facility from either BHP’s Kalgoorlie nickel smelter or imported sources.
The contract’s initial term was up until June 30 2027, about four months after BHP intends to review the Nickel West temporary suspension decision.
“BHP’s ability to supply acid from the Kalgoorlie nickel smelter will be affected by BHP’s announcement,” Lynas said.
“In line with the terms of the supply contract, BHP has affirmed its commitment to using reasonable efforts to supply imported acid to Lynas. Sulphuric acid is available for purchase on global markets.”
Sulphuric acid is the largest volume industrial chemical in the world. Its primary use is in the production of phosphate fertilisers but it’s also used in the purification of petroleum, the pickling of metal, copper smelting, nickel smelting, electroplating and metal work.
Large quantities of the acid are made from either roasting pyrite concentrates or smelting base-metal ores and concentrates, and small amounts are made from sulphate minerals as a co-product of cement manufacture.
BHP’s Nickel West decision may also have an impact on Glencore, as BHP supplies sulphuric acid to Glencore so it can operate its Murrin Murrin nickel operations in WA.
“We will continue to closely monitor the situation and our Murrin Murrin operations in the context of the current market environment,” a Glencore spokesman told The Australian Financial Review.
“Murrin Murrin has an extensive ore body which could support a very long mine life. However, it is very dependent on not only market conditions but also input costs associated with energy, labour, logistical synergies and critical rail and port infrastructure access.”
BHP intends to review the decision to temporarily suspend its Western Australia Nickel business by February 2027.
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