Anglo’s over so what now for BHP of Nickel West?

BHP’s Mount Keith Nickel West facility in Western Australia.

The excitement of BHP’s doomed tilt at Anglo American may be over, but Mike Henry and his team still have plenty of work to be getting on with – the first order of business being delivering some certainty to the company’s 3000 West Australian nickel workers.

The looming decision on whether Nickel West will be closed has largely been lost in the noise around the Anglo pursuit, but there are still some valuable takeaways for Nickel West in the way Henry and his team ­approached the takeover bid.

The first is that this iteration of BHP’s leadership always has a number in mind.

BHP has been crunching the numbers on the future of Nickel West since announcing in February that mothballing the operations was an option under consideration.

Henry had hard lines he would not cross on Anglo, on both structure and valuation. There will be a set of figures at the core of BHP’s decision making – some combination of raw production costs, return on capital and whether WA nickel can really compete with Indonesian production in the long term.

All will be balanced against both other investment options and, on the other side of the equation, the considerable social cost in WA of shuttering Nickel West.

BHP has played a good hand so far in reducing the latter risk. Flagging Nickel West’s closure so far out has done the company few favours with its own workforce – nobody needs six months of stress about the future of their job hanging over them.

But the early warning has also put a sense of inevitability around the decision.

Outside of its own employees and people in the financial and mining communities that actually track the nickel price, few would be surprised if BHP closed down its nickel division.

But as one senior former colleague of Henry’s said privately this week, the long decision-making time frame won’t be for that reason – it is the way the BHP boss operates.

Some CEOs might make a gut call to get the decision done more quickly.

Based on the nickel price outlook, BHP’s marginal WA assets, and the amount of modernisation money needed, that would probably only go one way.

But Henry is so data driven, they say, that he will want to make sure every number is crunched and every option is examined before a final call is made.

Nickel West is probably on track for an improved final quarter of the financial year.

Nickel is up about 25 per cent on its levels at the start of the year. And federal government budget decisions around production credits for downstream processing of minerals offer ­potential new models for Nickel West and the rest of the Australian nickel and critical minerals sector.

BHP hasn’t set a definitive deadline for a decision on the asset, other than saying that it will come before the delivery of its full-year financial accounts in August.

In reality, the decision is likely to come ahead of that point. BHP has form for giving shareholders plenty of notice of major decisions that will affect its annual results.

And while the value of Nickel West has already been written down to nothing, BHP will have to be planning for the closure and clean-up costs as part of its budget process for the next financial year. That makes a July announcement a distinct possibility, if not before.

Industry sources say the recent nickel price rally is unlikely to be enough to save Nickel West. But if that’s the case, Henry will want to be able to say that BHP examined every option available to keep the historic business alive.