BHP’s Decision on Western Australian Nickel Operations Expected by August
BHP, one of the world’s largest mining companies, is expected to announce its decision on the future of its Western Australian nickel operations by August. This comes after the company placed the assets under review in February due to a sharp fall in nickel prices. BHP’s CEO, Mike Henry, stated that efforts are being made to optimize operations and preserve value in Western Australia.
The decline in nickel prices is primarily attributed to an influx of lower-cost supply from Indonesia. This not only affects nickel production in Australia but also worldwide, as approximately half of global production is estimated to be profit-losing. In light of this, BHP is conducting a comprehensive review that includes evaluating capital plans, optimizing operations and maintenance schedules, and reducing contractor spending and equipment hire.
During the fiscal third quarter, BHP’s Western Australian nickel production fell by 4 percent compared to the previous year. However, the fiscal year-to-date production saw a modest increase of 1 percent. For the full fiscal year, BHP forecasts its nickel output to be in the lower range of 77 kt to 87 kt.
The ongoing review also explores various options, such as evaluating the development of the West Musgrave project. Additionally, BHP is considering reducing discretionary expenditures and potentially imposing a period of care and maintenance at Nickel West to mitigate the impacts of plummeting nickel prices. Unfortunately, this could potentially affect 3,300 jobs.
Despite the challenges faced in the nickel sector, BHP remains confident in meeting production expectations for other commodities. Copper output has been particularly strong, with a 15 percent increase during the quarter and a 10 percent increase year-to-date. This growth is driven by BHP’s operational performance at Copper South Australia, the Spence site in Chile, and Escondida.
BHP is actively conducting exploration drills across Copper South Australia in order to enhance its resource knowledge and support its growth studies. The company maintains its forecast for full-year copper production at 1,720 kt to 1,910 kt.
In terms of iron ore production, BHP saw a 3 percent increase during the quarter, reaching 61.5 Mt. However, year-to-date production decreased by 1 percent to 190.5 Mt. Despite this slight dip, BHP’s full-year production forecasts remain unchanged at 254 Mt to 264.5 Mt. Mr. Henry emphasized that Western Australia iron ore remains the lowest-cost producer globally, and the company continues to invest in improvements to rail and port operations to support future growth.
On the other hand, BHP lowered its annual metallurgical coal forecast to between 21.5 Mt and 22.5 Mt due to a decline in output during the quarter. Metallurgical coal production decreased by 13 percent to 6.0 Mt, and year-to-date production fell by 16 percent to 17.4 Mt. However, BHP expects its annual energy coal output to be at the upper end of the forecasted range of 13 Mt to 15 Mt. Third-quarter production increased by 5 percent to 4.1 Mt, and year-to-date production soared by 23 percent to 11.6 Mt.
Mr. Henry acknowledged that significant wet weather, including the impact of two tropical cyclones, and operational challenges have affected production and unit costs at BHP’s BMA metallurgical coal operations in Queensland. As a result, the company has revised its guidance for the year. However, BHP successfully completed the sale of the Blackwater and Daunia mines, generating up to US$4.1 billion.
In other mining endeavors, BHP’s Jansen potash project in Canada is progressing well. The stage one of the project is now 44 percent complete, remaining ahead of its original schedule.
BHP’s decision on the future of its Western Australian nickel operations will undoubtedly have significant implications for the mining industry. As the company navigates through challenging market conditions, it remains committed to optimizing its operations, preserving value, and meeting production expectations for other key commodities.
