Thousands of Australian jobs are at risk after mining giant BHP announced a massive $10.3 billion in writedowns following a global collapse in nickel prices and legal action in Brazil that forced it to set more money aside for the Samarco dam disaster.
The country’s largest miner announced on Thursday a $US3.5 billion ($5.4 billion) pre-tax impairment against its West Australian nickel operations ahead of its half-year financial results, which are due out next week.
Global nickel prices have slumped.Credit: AP
BHP’s Western Australia Nickel employs about 2500 people, and any downsizing of its mining operations, smelter in Kalgoorlie and refinery in Kwinana will reverberate across the industry.
WA Premier Roger Cook said BHP’s move reflected a structural disruption to the nickel industry. Long considered the rising star of Australia’s battery-driven mining green energy boom – alongside lithium and rare earths – nickel has been swamped by a tsunami of supply from Indonesia last year, which slashed prices and shuttered Australia’s sector seemingly overnight.
“We should all be worried about the future for our nickel industry off the back of BHP’s announcements today,” Cook told reporters in Perth on Thursday, adding that all levels of government needed to do “heavy lifting” now to help the industry cope.
“I’ve been speaking with [Federal Resources] Minister Madeleine King almost daily over the past week and meeting with industry representatives as recently as last night to talk about what the state government can do to support our miners,” he said, flagging the possibility of royalty cuts and rebates.
‘We should all be worried about the future for our nickel industry off the back of BHP’s announcements today.’
WA Premier Roger Cook
BHP chief executive Mike Henry said the mining giant was reducing operating costs at its nickel division and reviewing its Nickel West and West Musgrave operations.
“This is an uncertain time for the Western Australia nickel industry, and we are taking action to address the current market conditions,” Henry said.
At the same time, developments in a legal case in Brazil over the fallout from the disastrous 2015 Fundao tailings dam collapse, which killed 19 people and spewed millions of tonnes of toxic waste into the country’s waterways, prompted the company to set aside a further $US3.2 billion, taking its total provision for the catastrophe to $US6.5 billion.
The fallout from the dam collapse in Brazil, a joint venture between BHP and Brazilian miner Vale, has mired BHP in two major legal proceedings.
Homes lay in ruins in Bento Rodrigues, Minas Gerais, Brazil, after the Samarco dam burst on November 5, 2015. Credit: AP
In January, a Brazil federal court decision found BHP and Vale jointly liable for collective moral damages of $US9.75 billion, which prompted the mining giant to boost its provisions on Thursday. Vale and BHP filed a motion against the Brazil court’s decision early this month, and BHP said it intends to appeal, a process that can take between two and five years.
Another case in the High Court in London claims BHP is financially liable for the damage caused by the dam bursting, seeking $US44 billion.
BHP is the world’s third-largest mining company and the single largest investment for many of Australia’s biggest super funds. Its shares closed 1.7 per cent lower at $45.17.
Predicting the unfavourable conditions in the nickel industry to “endure for a considerable time”, the company cut the value of its nickel business to negative $US300 million, a figure that includes money for the closure and rehabilitation of its assets.
BHP will place Nickel West’s Kambalda concentrator into care and maintenance in June after Andrew Forrest’s Wyloo Metals shuttered operations at its nearby nickel mines, which feed the bulk of the ore coming into the concentrator.
The miner also said it was considering putting Nickel West into a period of care and maintenance and will review its West Musgrave project, which it inherited as part of the OZ Minerals takeover. West Musgrave is only about 21 per cent complete.
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