BHP Sets Review Timeline for Nickel West Amid Market Challenges

Mining giant BHP has laid out a plan for a comprehensive review of its Nickel West operations, responding to the current subdued market for nickel. The reassessment, which has been in progress for some months, is part of the company's broader strategy to determine the future path for its nickel assets, including the West Musgrave project obtained through the acquisition of OZ Minerals.

The company’s quarterly report, released today, indicates that a detailed update on Nickel West will be provided in the full-year results announcement expected in August.

BHP’s ongoing review is prioritizing cash preservation strategies. This includes fine-tuning operations, revising maintenance schedules, re-evaluating capital expenditure, and cutting back on contractor expenses and equipment leasing. Part of the review is to evaluate the viability of placing Nickel West on care and maintenance, alongside considering the investment and development timing for the West Musgrave project.

Nickel West, BHP’s premier nickel venture in the state and a significant employer with over 3,000 staff, witnessed a 4% decline in production last quarter, generating 19,000 tonnes of nickel. The average price obtained for its nickel was $16,581 per tonne.

Australian nickel producers, including BHP, are contending with market disruptions caused by an influx of cost-effective production from Indonesian enterprises, particularly those with Chinese investment. This competition has been squeezing profit margins of local nickel operations.

In a related commentary, U.S. ambassador Caroline Kennedy, addressing a Perth battery minerals conference, criticized Chinese state-owned companies for their practices in Indonesia. BHP’s management anticipates that the resultant market conditions might persist for the foreseeable future.

However, BHP reports steady progress in other sectors, maintaining its projected targets for iron ore production despite a 6% output decrease in the last quarter due to environmental factors and ongoing development. BHP's iron ore division, recognized as the most cost-effective globally, has continued to perform well amid challenging weather conditions.

Investments are being channeled into enhancing railway and port facilities to support medium-term growth prospects, with ambitions to expand production capacity to over 305 million tonnes annually.

Additionally, BHP's South Flank project is expected to reach its full production capability of 80 million tonnes annually by the end of the year.

In response to these developments, BHP shares experienced a positive reaction, climbing 1.6% to $45.16 in this morning’s trading session.