Mining giant BHP has announced the temporary suspension of its Western Australia Nickel operations including the Nickel West operations and the West Musgrave project from October 2024.

The company noted that the move was in response to oversupply in the global nickel market and a sharp decline in forward consensus nickel prices.

A review of the suspension is scheduled for February 2027.

During the suspension, BHP will invest around $300m (A$442.62) annually after a transition period to maintain the option to restart operations.

The transition will begin in July 2024, with the suspension taking effect in October and completion of handover activities by December of the same year.

As a result of this decision, the Kwinana nickel refinery, Kalgoorlie nickel smelter, and Mt Keith and Leinster operations will cease, along with the development of the West Musgrave project.

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BHP will implement a care and maintenance programme to ensure the safety and integrity of the mines and infrastructure.

The company also plans to continue investing in exploration to extend the resource life of Western Australia Nickel and maintain future options.

BHP has committed to supporting its workforce, offering employees alternative roles within the company or redundancy options, and has established a A$20m Community Fund to assist local communities during the suspension period.

Since the financial year 2020, BHP has invested roughly $3bn in Western Australia Nickel, aiming to reorient its production towards the battery and electric vehicle market.

The investment included the establishment of Australia’s first nickel sulphate plant and the development of new mines and renewable energy sources.

However, despite these efforts, Western Australia Nickel has experienced negative cash flow annually and is expected to report an underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) loss of around $300m for the financial year ending 30 June 2024.

In February 2024, BHP announced a review of Western Australia Nickel and a non-cash impairment charge of approximately $3.5bn pre-tax against its value.

Following the suspension decision, an additional non-cash impairment charge of $300m pre-tax is expected to be recognised in the FY2024 financial statements.

Redundancy payments and other costs associated with the suspension will be accounted for in the half-year 2025 financial statements.

BHP Australia president Geraldine Slattery said: “We understand this is a challenging period for the Western Australia Nickel team and surrounding communities.

“Every frontline employee will be offered another role within BHP, and best endeavours will also be made to identify redeployment opportunities for other employees engaged in the day-to-day operations of Western Australia Nickel.

“We will also work closely with local communities, traditional owners and suppliers to support a responsible transition process, which will include the establishment of a A$20 million community fund.”

Minister for Resources and Minister for Northern Australia Madeleine King noted that BHP’s decision to temporarily suspend its nickel operations in Western Australia will significantly affect the workers and communities in Kwinana, Kambalda and Kalgoorlie.