BHP lifeline as WA nickel shutdown culls mining jobs

BHP has offered new jobs to about 800 workers affected by the shutdown of its nickel operations but hundreds have chosen redundancy amid a major commodity downturn.

BHP Nickel West Kalgoorlie Smelter

BHP has offered new jobs to about 800 workers affected by the shutdown of its nickel operations with hundreds more staff to leave the mining giant at a time of rising tensions with the Albanese government over industrial relations policies.

Hundreds of workers have chosen redundancy ahead of alternative employment within BHP as the company’s nickel mining and processing in Western Australia grinds to a halt.

The BHP nickel smelter at Kalgoorlie will stop operation this week after 51 years. It employed 200 workers and about 100 contractors. Mines at Leinster and Mr Keith have closed and the company’s nickel refinery at Kwinana is in shutdown mode.

The Australian nickel industry has collapsed in the past 12 months in the face of a glut in global supply from Chinese-backed nickel laterite producers in Indonesia, with BHP expecting prices to remain depressed until at least the end of the decade.

BHP said it was honouring a commitment to “guarantee” the jobs of 1600 frontline nickel workers made in July when it flagged suspending the nickel operations that overall employed about 3500 people, including contractors.

BHP will retain about 400 workers in nickel to maintain the assets with most working out of Leinster.

It will spend $450m a year on maintaining the assets and meeting commitments to traditional owners and affected communities in Leinster, Leonora, Laverton, Wiluna and Kalgoorlie pending a review scheduled for February 2027. Any restart after that time will hinge on market conditions.

The mining giant expects to make its last nickel product sales through October.

BHP Nickel West asset president Jessica Farrell said about 40 workers a day were being offered alternative employment as the operations wound up and moved into “maintenance and preservation”.

Ms Farrell said of the 800 workers offered new jobs so far many had opted to join the company’s iron ore division in WA, where unions are attempting to re-establish themselves under the government’s changes to industrial relations laws. She said about 35 per cent of workers were choosing redundancy. Others are moving to BHP’s copper operations in South Australia.

BHP has started moving its nickel mining fleet and some infrastructure out of the Goldfields in WA to the iron ore and copper operations.

Federal resources minister Madeleine King accused BHP of under investing in nickel and then lashed out at its opposition to industrial relations changes as the nickel industry imploded. WA’s Labor premier Roger Cook labelled the BHP call to suspend operations disappointing and referenced the state agreements that underpin the company’s iron ore and nickel operations.

BHP reported a full-year loss of about $450m on the nickel operations in July and in February wrote down the value of the business by $5.4bn pre-tax. Those financial hits came after BHP invested $4.4bn from 2020 to grow mines and sustain operations based on anticipated demand from battery and electric vehicle makers.

Ms Farrell said BHP would continue to monitor pricing and demand and supply, but market signals “very much support the decision we took” in the face of the heavy losses.

“This was the best decision. It was a difficult but necessary decision that we had to take,” she said.

BHP reported a full-year loss of about $450m on the nickel operations in July and in February wrote down the value of the business by $5.4bn pre-tax.

Global nickel prices are sitting at around $US17,500 a tonne are averaging more than $US25,000 a tonne in the 18 months to mid-2023.

Macquarie is forecasting a small surplus of supply in 2024-25 and noted that Indonesian limits on new mining permits and falling grades my limit supply growth.

Ms Farrell said there was third-party interest in the BHP nickel assets, which included the stalled West Musgrave project acquired as part of the takeover of OZ Minerals takeover.

“I get calls every day around are you selling this, are you selling that. Our focus is very much on this transition (to maintenance). We’re making our decisions on the basis that this is a move into temporary suspension. We’re preserving the assets and we’re retaining the options for us at the moment,” she said.

Ms Farrell said some of the workforce opting for redundancies was leaving BHP to take up new jobs with other miners, including in the buoyant gold sector.

BHP will retain about 400 workers in nickel to maintain the assets with most working out of Leinster, a town the company must keep open and key services in place under the terms of a state agreement known as the Nickel (Agnew) Agreement Act from 1974.

Ms Farrell said BHP would continue exploration work around Leinster and meet all of its social licence to operate commitments. It is in talks with community leaders in the Goldfields about projects as part of a $20 million community fund.

BHP owns the houses and almost everything else in Leinster, which was home to 800 residents and had 130 children enrolled in its school at the start of 2024.

Local businessman and shire president Peter Craig said it would take a few months to gauge the impact on the BHP shutdown on Leinster.

Mr Craig expects about 300 of the 400 workers BHP retains in nickel to be based in Leinster, but said about half of them could be employed on a fly-in, fly-out basis.

“No one will know exactly where Leinster is going until December-January but in the meantime they (BHP) are doing everything they can to support the town,” he said. “A lot of good community people are staying. It is going to be quiet, no doubt about it, but we are hoping the school stays open.”

Mr Craig said gold and lithium mines in the region and any influx of amateur prospectors inspired by high gold prices could cushion some of the blow to Leinster.

“Every man and his dog is out here with a metal detector. They are everywhere at the moment,” he said of the remote Leinster region about 1000 kilometres north east of Perth.

There are a handful of gold mines within a 100 kilometres radius of the town, including Agnew, Bellevue and Northern Star’s Thunderbox and Bronzewing operations. Liontown’s new Kathleen Valley lithium mine is 60km north of Leinster.

Originally published as BHP lifeline as WA nickel shutdown culls mining jobs