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Resources multinational retrenches workers after half of global production made a loss

BHP Nickel West
BHP Nickel West

A mining giant made further cuts to its workforce after discovering one in two mineral operations were unprofitable.

BHP recently confirmed it recently axed several construction roles at its $1 billion Kalgoorlie smelter project.

Up to 2000 workers were required to rebuild the nickel operation and develop a 1000-bed accommodation camp to house them. However, nickel spot prices were just US$16,460 (A$24,812) a tonne between January and December 2023, representing near 42 per cent decline during the period according to the YCharts website.

This prompted the proponent to make the difficult decision to reduce operational expenses. Work was reportedly suspended on a new precipitation system at the beginning of March 2024. The responsible contractors were stood down with immediate effect.

“From an operating margin basis we are in the red. That means the business is losing cash, and at the same time there is a need for ongoing investment in the business just to keep it safe and running properly,” CEO Mike Henry told an investor briefing according to Fairfax Media.

“On top of that we have the need for a major [Kalgoorlie] smelter rebuild coming towards us, which is many hundreds of millions of dollars in capital expenditure. Clearly this is not sustainable … so we have to figure out how we make this business more sustainable. Part of that is about bringing costs down.”

Although the smelter is expected to stay open, refurbishment is unlikely to proceed unless the state or federal governments offer financial assistance.

The accommodation camp’s development application was withdrawn shortly before the City of Kalgoorlie-Boulder was due to meet to discuss whether to approve the project on February 26.

“The nickel industry is undergoing a number of structural changes, primarily from the excessive rapid growth of Indonesian supply. As a result the nickel price has fallen around 50 per cent over the past year and as much as half of global production now is estimated to be loss-making,” Henry previously said.

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