REG - BHP Group Limited - WA Nickel to temporarily suspend operations

BHPAnnouncement

11/07/2024 07:45

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RNS Number : 0210W  BHP Group Limited  11 July 2024

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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