BHP targets cost cuts amid nickel squeeze
BHP will look to cut costs at its West Australian nickel business as an ongoing crisis threatens the future of a raft of major mines in the state.
BHP will look to cut costs at its West Australian nickel business as an ongoing crisis threatens the future of a raft of major mines in the state.
Major miners met with WA Premier Roger Cook on Friday, the latest flashpoint in a rocky start to the year for the state’s nickel industry amid the prospect of an extended downturn for the commodity and the broader critical minerals sector.
Sources said BHP Nickel West boss Jess Farrell has met with vendors and suppliers to ask for potential cost cuts to take effect over the short term.
BHP said in January it would mothball its Kambalda nickel concentrator in the West Australian Goldfields region after Liontown, Chalice, South32 and Wyloo all announced pullbacks in response to tumbling prices for battery and clean energy metals.
That added to the wave of mine closures and project deferrals that have plagued the sector over the past two months.
Wyloo’s mine is the primary supplier of nickel ore for BHP’s Kambalda concentrator and the decision to put it into care and maintenance directly impacts some of Nickel West’s feedstock.
“We are working hard to remain globally competitive in a very tough operating environment. Costs have risen sharply and continue to go up while prices have fallen as new supply comes into the market,” Ms Farrell said in a statement.
“Nickel West is a complex business combining underground mining operations, third party supply, on-site smelting, downstream refining and a multi-stage supply chain in a fast-evolving global market.
“We know this is creating a lot of uncertainty for the many people who work in Australia’s nickel industry, and we continue to communicate with our people and across the sector as we take action to address these challenges.”
The nickel sector’s woes are the result of the explosion of production in Indonesia, where the government’s long-held demands – for companies that want access to the country’s abundant laterite nickel deposits to build downstream refineries – are paying off.
Indonesia is now producing about 1.5 million tonnes of nickel a year, more than half of global supply. Its supply is dependent on cheap coal-fired power, and the country’s mining sector has been criticised for holding far lower environmental standards than those in Australia or other major mining jurisdictions.
WA industry lobby group AMEC said the nickel industry needed tailored relief.
“There is no one government measure that will provide an immediate fix. That’s why it’s important that government engages directly with companies to develop tailored relief,” AMEC chief executive Warren Pearce said.
“There is a role for the state to provide tailored assistance when mines enter care and maintenance - to help companies keep more of their workers employed, to continue advancing future projects and make sure our industry is well positioned to take advantage when market conditions improve,” he added.
“More broadly than nickel, there remains a real need for state and federal governments to provide incentives that level the playing field with our global competitors. And the WA battery and critical minerals strategy offers an opportunity to develop a downstream industry, right here in our backyard.”
Nickel was trading at $US16,000 a tonne on the London Metals Exchange this week, down almost $US1000 a tonne over the last month, and almost half the price from a year ago.
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