Mining company BHP is planning to shut down its Nickel West operations in Western Australia, attributing the decision to a significant decline in nickel prices.

The move could impact thousands of jobs, according to media sources.

The mining giant is currently reviewing its development strategies for the region, prioritising cash preservation, which includes the option of placing Nickel West under care and maintenance.

In a statement the company said: “As disclosed in the January 2024 Operational Review, the nickel industry is facing challenges and there has been a sharp fall in nickel prices.

“Due to the deterioration in the short-term and medium-term outlook for nickel, BHP has lowered its nickel price assumptions.

“In addition, capital costs for Western Australia Nickel have increased due to inflation. BHP has undertaken a carrying value assessment of Western Australia Nickel having regard to these factors and will recognise an impairment as at 31 December 2023.”

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The company is set to incur a non-cash impairment charge of approximately $2.5bn (A$3.84bn) post-tax, which amounts to roughly $3.5bn pre-tax, against the carrying value of Nickel West.

This financial move reflects the impact of the anticipated closure on the company’s assets.

The Kambalda concentrator, part of Nickel West, is scheduled to enter care and maintenance in June this year.

This decision follows Wyloo Metals’ announcement of a halt to operations at its Cassini and Northern Operations mines by the end of May 2024.

Since these mines are the primary suppliers of ore for the Kambalda concentrator, their closure renders the milling circuit’s continued operation unfeasible for Nickel West.

In addition to the broader operational review, BHP is also re-evaluating the investment and timeline for the West Musgrave project.

This reassessment is part of the company’s strategic response to the current market conditions affecting the nickel sector.

BHP CEO Mike Henry said: “This is an uncertain time for the Western Australia nickel industry and we are taking action to address the current market conditions.

“We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave.”