Price slump puts 60% of Australian nickel market at risk: BHP

Australian mining giant BHP said Monday that up to 60% of the Australian nickel industry is struggling to make ends meet at the current market prices, Kallanish reports.

Speaking in a shareholder Q&A session, chief financial officer David Lamont said: “30% of the Australian nickel market today has gone offline and another 30% is also under pressure alongside the cash scenario.”

According to chief executive Mike Henry, the company’s nickel production costs currently sit at about $20,000/tonne, but market prices dropped to $16,000-17,000/t. “So just from an operating cost or operating margin basis, we’re in the red. That means that the business is losing cash, and at the same time, there’s a need for ongoing investment in the business just to keep it safe and running effectively,” he says. “So looking at all of that, we’ve said okay, well clearly this isn’t sustainable”

As part of that measure, Lamont confirmed changes to the West Musgrave nickel-copper project it is building in Western Australia and a “sense of urgency” to complete the review on whether to put Nickel West under care and maintenance. The firm had previously said it was reviewing the mine’s development timeline, and has now confirmed it has cut around a quarter of the contractor workforce at the West Musgrave site. First production was expected in H2 2025.

To put Nickel West offline until conditions improve is a “technically challenging task” and a “pretty weighty decision,” Henry explains. That’s because, in addition to the mine, the operation also involves smelters and the refinery, as well as 3,000 employees. $BHP Group Ltd(BHP.US)$