BHP Group Limited
Exchange release
11 July 2024
Western Australia Nickel to temporarily suspend
operations
BHP announces that the Nickel West operations
and West Musgrave project (Western
Australia Nickel) will be temporarily suspended from October
2024. BHP intends to review the decision to temporarily suspend
Western Australia Nickel by February 2027.
The decision to temporarily suspend Western
Australia Nickel follows oversupply in the global nickel market.
Forward consensus nickel prices over the next half of the decade
have fallen sharply reflecting strong growth of alternative
low-cost nickel supply.
During the temporary suspension, BHP will
continue to support its workforce and local communities. BHP will
invest approximately US$300 million (AU$450 million) per annum
following completion of a transition period to support a potential
re-start of Western Australia Nickel.
The transition period will commence from July
2024. Operations will be suspended in October 2024 and handover
activities for temporary suspension will be completed by December
2024.
During the temporary suspension, BHP
will:
· suspend mining
and processing operations at the Kwinana nickel refinery,
Kalgoorlie nickel smelter and Mt Keith and Leinster operations and
the development of the West Musgrave project;
· implement a care
and maintenance program of work to ensure the ongoing safety and
integrity of its mines and related infrastructure;
· continue to
invest in exploration to extend the resource life of Western
Australia Nickel and preserve optionality; and
· offer Western
Australia Nickel frontline employees another role within BHP or the
choice of a redundancy and establish a AU$20 million Community Fund
to support local communities during the temporary
suspension.
Since FY2020 BHP has invested approximately US$3
billion (AU$4.4 billion) to sustain Western Australia Nickel as an
ongoing business and to reorient its production to the battery and
electric vehicle market. This includes establishing Australia's
first nickel sulphate plant to enhance downstream infrastructure,
building two new mines and investing in the development of two
solar farms and battery storage. Western Australia Nickel has
recorded negative cash flow every year during this
period.
Despite the significant capital investments,
lower global nickel prices have contributed to Western Australia
Nickel expecting to report an underlying EBITDA loss of
approximately US$300 million in the financial year to 30 June
2024.1
In February 2024, BHP announced plans to review
Western Australia Nickel and a non-cash impairment charge of
approximately US$3.5 billion (AU$5.1 billion) pre-tax against the
carrying value of Western Australia Nickel. As a result of the
decision to temporarily suspend operations, BHP expects to
recognise a further non-cash impairment charge of US$0.3 billion
(AU$0.45 billion) pre-tax as an exceptional item in the Group's
FY2024 Financial Statements.
Any redundancy payments and other contractual
costs triggered by the decision to place Western Australia Nickel
into temporary suspension would be recognised in the Group's HY2025
Financial Statements.
BHP's President Australia,
Geraldine Slattery said:
"We understand this is a challenging period for the Western
Australia Nickel team and surrounding communities. Every frontline
employee will be offered another role within BHP, and best
endeavours will also be made to identify redeployment opportunities
for other employees engaged in the day-to-day operations of Western
Australia Nickel.
We will also work closely with local
communities, Traditional Owners and suppliers to support a
responsible transition process, which will include the
establishment of a AU$20 million Community Fund.
Since BHP announced a review of Western
Australia Nickel in February, we have explored options to stem
losses in the short-term and identify a viable path forward for the
business.
Like others in the Australian nickel sector, we
have not been able to overcome the substantial economic challenges
driven by a global oversupply of nickel.
We have made the difficult but necessary
decision to temporarily suspend the Nickel West operation and West
Musgrave project.
We will continue to invest approximately AU$450
million (US$300 million) per annum in the Western Australia Nickel
facilities to enable a potential re-start. Western Australia
remains an important investment destination for BHP globally, with
investment in the State expected to be greater than AU$12 billion
over the next five years and we will continue to work with all of
our Western Australian partners to advance the economic prosperity
of the State."
1 The underlying EBITDA loss figure
is preliminary and subject to review and finalisation in BHP's full
year results for the period ending 30 June 2024.
Authorised for release by Stefanie Wilkinson,
Group General Counsel and Group Company Secretary
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