BHP purchase bolsters nickel operation

BHP is about to push the button on its third new West Australian nickel mine in a year

BHP’s Nickel West operation has been revived under boss Eddy Haegel

BHP is about to push the button on its third new WA nickel mine in a year as it prepares to begin production from a new underground operation at Leinster and adds Norilsk Nickel’s giant Honeymoon Well project to its inventory.

The latest move by BHP to boost its once-unloved Nickel West operations underscores the arm’s revival under nickel boss Eddy Haegel and confirms BHP’s commitment to the commodity under new boss Mike Henry.

BHP is understood to have paid just under $US30m ($44m) for Honeymoon Well. The depo­sit, which contains about 1.2 million tonnes of nickel across its tenement base, adds at least another 10 years to the potential life of BHP’s West Australian nickel operations and will cement the company’s place as the country’s dominant nickel producer for decades to come.

The acquisition comes as BHP looks to restart underground mining at Leinster in August after closing its Perseverance mine in 2013 on safety grounds.

 

It is BHP’s first development of a block-cave operation, a technique that involves undermining a large underground deposit and allowing it to collapse inward to allow cheaper extraction of ore.

The method is primarily used in large copper and gold deposits, such as Newcrest Mining’s Cadia operations in NSW, and BHP sees the development of expertise in the technique in Nickel West — albeit at a smaller scale — as a key part of its future as it looks to the development of large-scale copper and gold operations in Australia and South America.

The development of the mine — beneath the Perseverance operations closed in 2013 on safety grounds — will give Nickel West its third new mine in the past year, after its Yakabindie open pit beg­an production in late 2019 and the high-grade Venus underground operation launched this year.

It comes as the nickel price is again climbing back to close to $US13,000 a tonne after the commodity tumbled more than 20 per cent during the coronavirus crisis, from $US14,285 a tonne in January to lows of close to $US11000 in March.

BHP was seeking to sell Nickel West in 2014 and still regarded the asset as “non-core” until only a year ago, when the then chief executive Andrew Mackenzie brought the division back into the fold, saying it had the potential to return to its one-time status as a tier-one flagship asset for the mining major, as a key supplier of nickel sulfate to the battery market amid expectations a boom in electric vehicles would lead to a surge in demand for the commodity over the next decade.

Industry sources say BHP’s move on Honeymoon Well could also raise interest in the WA nickel sector, as explorers such as St George Mining drill high-grade prospects and former miners Mincor Resources and Panoram­ic Resources look to return mothballed mines back to production.

BHP’s acquisition of Honeymoon Well also draws a line underneath Norilsk’s ignominious foray into Australian nickel mining, after its top of the cycle entry into the sector in 2007 turned into a corporate disaster for the Russian nickel major.

Norilsk came to WA in early 2007, buying OM Group, which owned the Cawse nickel project in the Goldfields, for $US408m. Just months later it pipped Xstrata in a heated bidding war for Canada’s LionOre Mining, paying $US5.8bn for the company’s suite of high-grade operations as the price of nickel peaked at highs of more than $US54,000 a tonne.