After declaring an impairment against its nickel operations in its half-year results, BHP has made about a quarter of its West Musgrave workforce redundant.
The major miner obtained the West Musgrave project – located about 1300km north-east of Perth in Western Australia – from OZ Minerals, which it acquired last year for $9.63 billion.
While BHP reportedly remains committed to developing West Musgrave, a company spokesperson told The Australian Financial Review that some contractors working on West Musgrave have been “demobilised”.
“We continue to assess phasing and capital spend for the ongoing development of the West Musgrave project and have reduced the scope of work with some contractors, who have demobilised from site as a result,” the spokesperson said.
The redundancies follows BHP announcing plans to pause part of its Kambalda processing operations in Western Australia. The decision was made in light of Wyloo placing the Cassini, Long and Durkin nickel mines under care and maintenance.
Wyloo was a major supplier to BHP’s nickel concentrator in Kambalda, following its $760 million acquisition of Mincor Resources last year.
The closures were actioned amid the global nickel downturn, which was primarily caused by a supply surplus and an increase in nickel supplies from countries like Indonesia and China.
A wide range of relief options for the nickel industry have been evaluated, with Federal Resources Minister Madeleine King and WA Mines Minister David Michael pledging to accelerate discussions on incentivising investment while urgently progressing discussions with State and Territory Governments on common user infrastructure for critical minerals.
Ideally, the common user infrastructure will include strategic materials to complement the Strategic Infrastructure Hubs Scoping Study.
Both ministers will also engage in further discussions with the Chamber of Minerals and Energy WA about the future of the nickel industry and the role of royalties.
While the Federal Government and Australian mining executives have called for a ‘green price premium’ to be introduced for nickel, the London Metal Exchange (LME) rejected the idea two weeks ago.
“The LME believes the market for ‘green’ nickel is not yet large enough to support vibrant trading in a dedicated green futures contract,” LME said.
“Market participants have expressed concern that there remains significant market debate as to how to define ‘green’, and further, that an LME contract representing a narrower sub-segment of the market would not attract sufficient stocks and trading volumes to be viable.
“Limited support exists for such initiatives, with a majority of market participants taking the view that dedicated contracts would detrimentally fragment liquidity and potentially undermine the utility of LME nickel as the primary risk management tool used by all segments of the market.”
The pricing structure would have differentiated between the Australian-produced nickel that follows strong environmental, social and governance (ESG) standards and nickel produced in countries that don’t have the same standards.
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