One of the world’s largest resources companies estimates that as many as one in two mineral operations are unprofitable.
BHP recently revealed a major drop in commodity prices will significantly impact on its nickel mines.
“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,” CEO Mike Henry said at the latest half year results.
Nickel spot prices were 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.
The proponent is reviewing whether to place its entire Nickel West division into care and maintenance until prices recover. It has already approved suspending activities at its Kambalda concentrator and transitioning to care and maintenance from June 2024. Up to 3000 existing workers could be impacted if all Nickel West operations follow suit.
“We have recognised a non-cash impairment of US$2.5 billion (A$3.8B) at our Western Australia Nickel business. We have responded by optimising operations, reducing discretionary expenditure and reviewing capital plans to mitigate the impacts of the current low prices. This includes optimising the West Musgrave project schedule,” Henry said.
“We are also looking at potentially entering a period of care and maintenance – noting that this is not without its own challenges.”
The company reported a US$927 million (A$1.4B) net profit for the six months to 31 December 2023, down 86 per cent compared to the previous corresponding period.
Click here to read the full results.
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