BHP may write down the value of its WA nickel business after the price of the steel-making ingredient plunged 24 per cent in 12 months.
Chief executive Mike Henry said the miner was “evaluating options to mitigate the impacts of the sharp fall in nickel prices” as he discussed its half-year operational performance on Thursday.
In the three months to December, the price of nickel fell 17 per cent to $US16,812 a tonne, leading BHP to start cost cuts and reassess the carrying value of the business, which employs 2500 workers at three mines and includes two ore concentrators in WA’s Goldfields and a refinery south of Perth.
The size of the writedown, if any, will be revealed at the company’s half-yearly financial results next month.
The mining heavyweight’s shares traded 1.3 per cent lower at $45.96 shortly after midday.
BHP’s announcement comes three days after Canadian miner First Quantum Minerals said it would stop mining at its Ravensthorpe nickel mine in WA’s south and switch to processing stockpiles, resulting in a 30 per cent cut to its 420-strong workforce. Last week, smaller prospector Panoramic Resources’ Savannah nickel project in WA’s Kimberley was suspended by its administrators with 140 jobs lost.
Lithium prices are also low, leading US-based Albemarle to announce global cost-cutting measures overnight, including abandoning plans to add a fourth train to its Kemerton lithium hydroxide plant in WA’s south-west.
The reactions to low nickel and lithium prices, coupled with Alcoa’s announcement last week that it would shut its Kwinana alumina refinery at the cost of about 1000 jobs, are likely to take some pressure off the tight WA labour market that has pushed the cost of mining projects up significantly.
BHP’s cash cow iron ore operation in WA’s Pilbara region had a 3 per cent dip in output in the December quarter compared to a year ago, but this was more than offset by a 21 per cent uptick in the average realised price, the company said.
The fall in production was attributed to the rollout of new railway signalling equipment and the ongoing ramp-up of two new mines, South Flank and Area C.
Copper output from BHP’s mines in Chile and South Australia for the six months to December rose 3 per cent compared to a year ago, but production of metallurgical coal from Queensland slumped 18 per cent due to significant maintenance work.
Henry said it was a solid six months of operations during which BHP also incorporated Oz Minerals’ assets into its SA copper business and committed to a $US4.9 billion ($7.5 billion) expansion of its Canadian potash project.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Source: Thanks smh.com