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BHP cuts contractors at Australian nickel project amid price slump

BHP CEO Mike Henry

BHP CEO Mike Henry

18th March 2024

By: Reuters

  

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MELBOURNE - BHP Group said on Monday some contractors at its West Musgrave nickel and copper project in Western Australia had left its operations as the global miner assesses whether it will put its nickel division on ice due to a severe price slump.

The move comes after BHP said it was reviewing the mine's development timeline at its half-year results last month and as senior executives on Monday issued fresh warnings about the difficulties in the nickel sector.

The company said it had cut around a quarter of the contractor workforce at the site, or about 100 people.

"We continue to assess phasing and capital spend for the ongoing development of the West Musgrave project and have reduced the scope of work with some contractors," a BHP spokesperson said.

Prior owner Oz Minerals, which was bought by BHP last year, estimated in December 2022 that it would cost A$1.7-billion to develop West Musgrave, with first production expected in the second half of 2025.

BHP's nickel mining and processing business in Australia whose products include nickel sulphate for the electric vehicle industry was put under review last month amid a supply surge from Indonesia that hit prices. It employs around 3,000 people.

BHP's outgoing Chief Financial Officer David Lamont said separately on a call to shareholders on Monday the decision to review the division was necessary given operational losses.

"To put that into context, 30% of the Australian nickel market has gone off line and another 30% is under pressure," Lamont said.

BHP is grappling with the complexities of winding down its refining and smelting business in particular. CEO Mike Henry said on the same call that BHP was "committed to landing on a decision as soon as practically possible."

The company flagged a $2.5-billion non-cash impairment charge in relation to the division at its half-year results.

Henry has been highly critical of Australia's industrial relations laws, particularly around its incoming "same job same pay" legislation designed to ensure contractors are not paid less than employees, but he said BHP has seen "pockets" of positive government policy action being taken to shore up the sector.

Henry noted "constructive engagements" in the states of Western Australia and South Australia to attract more capital to the mining industry. Western Australia has offered royalty relief to nickel miners. Federally there have also been improvements around skilled migration, he added.

Edited by Reuters

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