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BHP Group Limited (NYSE:BHP) will temporarily suspend its Nickel West operations and West Musgrave project in Western Australia starting October 2024.
The Australian miner plans to review this suspension by February 2027.
The company stated that the transition period will begin in July 2024. Operations will be suspended in October 2024, with handover activities for the temporary suspension completed by December 2024.
The decision to temporarily suspend Western Australia Nickel is due to an oversupply in the global nickel market.
During the suspension, BHP will support its workforce and local communities, investing about $300 million annually post-transition to restart Western Australia Nickel potentially.
Also Read: BHP Cuts Employee Incentives, Misses Performance Goals
The company says that forward consensus nickel prices for the next five years have sharply declined, reflecting strong growth in alternative low-cost nickel supply.
Declining global nickel prices have resulted in Western Australia Nickel projecting an underlying EBITDA loss of around $300 million for the financial year ending June 2024.
Due to the decision to temporarily suspend operations, BHP expects to recognize an additional non-cash impairment charge of $0.3 billion pre-tax as an exceptional item in the FY24 financial statements.
In February 2024, BHP announced a review of Western Australia Nickel and a non-cash impairment charge of roughly $3.5 billion pre-tax against its carrying value.
BHP’s President Australia, Geraldine Slattery said, “Since BHP announced a review of Western Australia Nickel in February, we have explored options to stem losses in the short-term and identify a viable path forward for the business. Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel.”
Read: BHP Requests Extension Beyond 4 PM GMT Deadline to Finalize Anglo American Deal
“Western Australia remains an important investment destination for BHP globally, with investment in the State expected to be greater than AU$12 billion over the next five years and we will continue to work with all of our Western Australian partners to advance the economic prosperity of the State.”
Investors can gain exposure to the stock via Exchange Traded Concepts Trust Optica Rare Earths & Critical Materials ETF (NYSE:CRIT) and VanEck Natural Resources ETF (NYSE:HAP).
Price Action: BHP shares closed higher by 0.33% at $58.55 on Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors
Photo via Shutterstock
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