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OLIVIA THOMSON<\/a><\/p>\n\n\n\n![\"The](\"https:\/\/www.australianmining.com.au\/wp-content\/uploads\/2022\/12\/210705_nickelwestmtkeith3_highres-copy-1024x550.jpg\")
<\/figure>\n\n\n\nThe Mount Keith operation is part of BHP’s Nickel West business. Image: BHP.<\/p>\n\n\n\n
BHP has decided to temporarily suspend its Nickel West operations and the West Musgrave project in Western Australia amid the global nickel downturn.<\/p>\n\n\n\n
What does the suspension mean for the Australian nickel industry? Australian Mining <\/em>investigates.<\/p>\n\n\n\n Operations will be suspended in October and handover activities for the temporary suspension will be completed by December.<\/strong><\/p>\n\n\n\n The transition period has commenced and will see BHP suspend mining and processing operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter and Mount Keith and Leinster operations, as well as suspend development of the West Musgrave project.<\/p>\n\n\n\n The company will also implement a care and maintenance program of work to ensure the ongoing safety and integrity of its mines and related infrastructure. BHP will also continue investing in exploration to extend the resource life of Western Australia Nickel to preserve optionality.<\/p>\n\n\n\n \u201cWe understand this is a challenging period for the Western Australia Nickel team and surrounding communities,\u201d BHP president Australia Geraldine Slattery said<\/a>.<\/p>\n\n\n\n \u201cSince 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.<\/p>\n\n\n\n \u201cLike others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel. We have made the difficult but necessary decision to temporarily suspend the Nickel West operation and West Musgrave project.\u201d<\/p>\n\n\n\n As a result, 1600 Western Australian Nickel frontline employees will be redeployed or offered redundancies.<\/p>\n\n\n\n BHP has pledged to support its workforce and local communities during the suspension. The company will establish a $20 million community fund to support local communities and will invest around $450 million per annum once the transition period to support a potential restart of Western Australia Nickel is completed.<\/p>\n\n\n\n \u201cWestern Australia remains an important investment destination for BHP globally, with investment in the state expected to be greater than $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,\u201d Slattery said.<\/p>\n\n\n\n BHP intends to review the decision to temporarily suspend its Western Australia Nickel business by February 2027.<\/p>\n\n\n\n The Nichel West operations suspension follows BHP pausing part of its Kambalda processing operations, which took effect from June. At the time, the major miner was also weighing putting its Nickel West operations into care and maintenance.<\/p>\n\n\n\n The review resulted in BHP making about a quarter of its West Musgrave workforce redundant and decreasing the number of contractors who were working at its Kalgoorlie nickel smelter.<\/p>\n\n\n\n Government response<\/strong><\/p>\n\n\n\n In January, Federal Resources Minister Madeleine King and WA Mines Minister David Michael met<\/a> with nickel producers to discuss ways they could support the industry during the downturn.<\/p>\n\n\n\n Following the roundtable, King and Michael said they would work together to accelerate discussions on incentivising investment while urgently progressing discussions with State and Territory Governments on common user infrastructure for critical minerals.<\/p>\n\n\n\n A month later, King placed<\/a> nickel on the critical minerals list, which outlines minerals that are essential to low-emission technology, the economy and national security, and whose supply chains are vulnerable to disruption.<\/p>\n\n\n\n Now, King has described BHP\u2019s decision as a reflection on \u201cthe extreme volatility in global nickel markets\u201d.<\/p>\n\n\n\n \u201cOur immediate concern is for the workers and communities impacted,\u201d King said<\/a>.<\/p>\n\n\n\n \u201cWe welcome the commitments made by BHP to redeploy workers who wish to continue to work for the company and we welcome BHP\u2019s undertaking to continue to invest in Nickel West throughout the temporary suspension to enable a re-start when global nickel markets stabilise and improve.<\/p>\n\n\n\n \u201cWe also welcome BHP\u2019s commitments to continue to support local supply chains and pay royalties to First Nations communities through the temporary suspension and work with the WA Government to continue to support skills and resource investment in future projects.\u201d<\/p>\n\n\n\n WA Premier Roger Cook echoed similar sentiments.<\/p>\n\n\n\n \u201cThis is a disappointing decision and our thoughts are with the thousands of workers and their families affected by the suspension,\u201d Cook said<\/a>.<\/p>\n\n\n\n \u201cMy government will do whatever it takes to support those workers and our regional communities through this difficult time.\u201d<\/p>\n\n\n\n The WA Government previously announced<\/a> a 50 per cent royalty relief program to kick in if the average price of nickel concentrate dips below $US20,000 per tonne. The rebate is repayable by companies in equal quarterly instalments over the following 24 months.<\/p>\n\n\n\n BHP will now allocate funding towards the WA Government\u2019s proposed<\/a> $200 million critical minerals advanced processing common user facility, which will be co-funded by the Commonwealth.<\/p>\n\n\n\n The company will also pursue an electricity smelting furnace in Kwinana with its project partners, making its refinery resources and expertise available for critical minerals research in partnership with Curtin University, and will donate $5 million to support apprenticeships under the WA Government\u2019s group training organisation wage subsidy program.<\/p>\n\n\n\n Industry response<\/strong><\/p>\n\n\n\n Following the nickel roundtable in late January, King and Michael committed to engaging in further discussions with the Chamber of Minerals and Energy WA about the future of the nickel industry and the role of royalties.<\/p>\n\n\n\n CME CEO Rebecca Tomkinson described BHP\u2019s nickel suspension as \u201cresponsible\u201d.<\/p>\n\n\n\n \u201cThis is a challenging time for our critical minerals sector and we\u2019re committed to working closely with State and Federal Governments to ensure our policy settings remain competitive, enabling the industry\u2019s viability across all time horizons \u2013 short, medium and longer-term,\u201d Tomkinson said<\/a>.<\/p>\n\n\n\n \u201cBHP is a significant employer in WA with strong ties to the local communities of Leinster, Leonora, Kalgoorlie and Kambalda. I know this decision comes after months of operational review and careful consideration of options. It has not been made lightly.<\/p>\n\n\n\n \u201cWe are fortunate right now that the WA minerals sector remains vibrant, so workers impacted by this decision are in a good position to secure work elsewhere in resources.\u201d<\/p>\n\n\n\n Tomkinson said the industry cannot become complacent during difficult times.<\/p>\n\n\n\n \u201cWe must continue to keep WA mining strong by having a robust and efficient legislative framework in place that fosters future development,\u201d she said.<\/p>\n\n\n\n Possible solutions<\/strong><\/p>\n\n\n\n BHP has welcomed<\/a> the proposed production tax credit (PTC) for critical minerals, which will allow eligible entities to claim 10 per cent of expenditure for processing and refining any of Australia\u2019s 31 critical minerals.<\/p>\n\n\n\n The PTC was inspired by a similar US Government scheme introduced through the Inflation Reduction Act<\/a><\/em>, which considered to be the largest climate investment in US history.<\/p>\n\n\n\n The Association of Mining and Exploration Companies (AMEC) engaged Mandala Partners in 2023 to economically model the introduction of an IRA-style PTC into Australia.<\/p>\n\n\n\n In February, AMEC led<\/a> a delegation of mining and energy companies that included IGO, Wyloo, Australian Vanadium, QEM, Pilbara Minerals, and Tesla to progress discussions surrounding PTC with the Federal Government. Consultation on a potential PTC commenced<\/a> in June.<\/p>\n\n\n\n Alongside a PTC, Wyloo CEO Luca Giacovazzi has advocated<\/a> for a \u2018green nickel price premium\u2019, which would differentiate between the Australian-produced nickel that follows strong environmental, social and governance (ESG) standards and the low-quality nickel produced in countries such as Indonesia.<\/p>\n\n\n\n Nickel pricing reform also has the support<\/a> of Minister King and Andrew Forrest.<\/p>\n\n\n\n In January, Henry predicted<\/a> that the nickel downturn would extend to the end of the decade, adding that nickel is BHP\u2019s smallest business.<\/p>\n\n\n\n \u201cYes, it\u2019s been one of the three areas of production growth that we\u2019ve called out for BHP \u2026 but having said that, it\u2019s always been the smallest \u2026 business within the BHP portfolio, and in terms of the growth outlook for the company,\u201d Henry said.<\/p>\n\n\n\n \u201cBut there\u2019s 17 million Australians who depend upon BHP, either directly as shareholders, or indirectly through superannuation funds, for a successful and high-performing BHP.<\/p>\n\n\n\n \u201cThat creates a real sense of accountability on our part, to ensure that we\u2019re taking the right decision, taking into account a range of considerations, both shareholder and other stakeholders, and we\u2019re in that process as we speak.\u201d<\/p>\n\n\n\n