BHP Group said on Thursday it was reassessing the value of its nickel operations after a price slump, in a move that could lead to writedowns amid an oversupply of the metal used in electric vehicle batteries.
The world’s biggest listed miner, which signed a deal to supply nickel to Tesla in 2021, is reevaluating the business after prices fell 40% in the last year as Indonesian supply jumped, causing restructures and writedowns at nickel mines across Australia.
BHP said it was looking at options to mitigate the impacts of the sharp fall in nickel prices and that it would offer more details at its half-year results on Feb. 20.
“The nickel industry is undergoing a number of structural changes and is at a cyclical low in realized pricing,” it said in quarterly production report. “Nickel West is not immune to these challenges….Given the market conditions, a carrying value assessment of the Group’s nickel assets is ongoing.”
BHP may write down the value of the West Musgrave nickel project it acquired with its purchase of OZ Minerals last year that experts valued at $1.2 billion, analysts said. The mine, currently under development, could also be delayed.
BHP could put its Nickel West unit that include its Kwinana plant that produces nickel sulphate under strategic review for a possible sale, although this was seen by analysts as less likely, or choose to delay planned investment.
Earnings tanked at BHP’s nickel business in the 2023 financial year, sliding 61% from a year earlier to just $164 million. The division accounts for less than 1% of its earnings but is a major part of its green energy marketing strategy.
BHP failed to sell the division about a decade ago due to an estimated $1 billion in closure costs at the time.
Elsewhere, BHP reported a small 2.2% drop in second-quarter iron ore production that was in line with analyst forecasts as it ties in its rail line to a central production hub in the Pilbara region.
Iron ore production from Western Australia on a 100% basis was 72.7 million metric tons (Mt) in the three months to Dec. 31, down from 74.3 Mt reported a year ago.
That compares with a Visible Alpha consensus estimate of 72.5 Mt, according to Morgan Stanley.
BHP said it was working with authorities after a worker at its BHP Mitsubishi Alliance (BMA) coal business was fatally injured in a vehicle incident on Jan. 15.
BHP logged a 4% drop in quarterly copper production to 457,000 metric tons due mostly to lower concentrator grades at its Escondida mine in Chile.
