So BHP has stopped it's $1.7B Neo Babel Mine (West Musgrave)?...

So BHP has stopped it's $1.7B Neo Babel Mine (West Musgrave)? Thanks

https://**promotion blocked**/resources/bhp-shuts-nickel-operations-as-oversupply-ends-turnaround-tale/

BHP shuts nickel operations as oversupply ends turnaround tale
The big kahuna of Aussie nickel, BHP Nickel West, finally confirms plans to suspend operationsSupply glut from Indonesia has resulted in US$300mn loss in FY24, with market deficit not expected until at least the late 2020sBHP to review decision in February 2027, in hope EV narrative brings pushes demand ahead of supply

BHP (ASX:BHP) ended months of speculation by announcing the closure of its Nickel West division in WA, a business which produces 80,000t of the battery and steelmaking metal and counts as one of the largest suppliers of the commodity outside Indonesia, China and Russia.

It will mean Australia’s nickel operations will be whittled down to just IGO (ASX:IGO) Nova operations and Glencore’s Murrin Murrin mine, reducing production in Australia from over 150,000t last year to around 60,000t.

Since the start of 2024 a collapse in LME nickel prices prompted by a wave of supply from Indonesian producers, many backed by Chinese steel and battery makers, has seen a host of Australian nickel mines shut down.

They include First Quantum and POSCO’s Ravensthorpe, Wyloo’s Kambalda operations, Panoramic’s Savannah and the Avebury mine in Tasmania, while IGO is running its Forrestania mines towards the end of their lives and paused construction of its next major nickel development Odysseus.

BHP’s is the big one though, with the world’s biggest miner shutting down its Kalgoorlie smelter, Mt Keith and Leinster mines and Kwinana refinery, as well as pausing construction of the $1.7 billion West Musgrave development acquired in a $9.6bn takeover of OZ Minerals that also netted its South Australian copper mines.

The division, which employed over 3000 people in WA, is set to post a US$300 million earnings loss for FY24, with a US$300m ($450m) impairment expected to be added to a US$3.5bn pre-tax impairment announced at the miner’s half-year results in February.

BHP claims to have reported negative cash flow at Nickel West every year since FY2020, when it began a US$3bn ($4.4bn) capital program to retool the business to supply the electric vehicle market.

But it will spend around US$300m a year following the transition to care and maintenance to maintain exploration, and keep its assets in good nick, with suspension to take place in October and be completed by December 2024.

BHP plans to review the restart of the business in February 2027.

That is around the time that tax breaks for downstream refining announced in the most recent federal budget are set to come in. The decision comes the same day The West Australian reported IGO and Andrew Forrest-backed Wyloo had pulled the pin on a nickel sulphate plant planned by the miners in Kwinina, near BHP’s own nickel refinery.

1600 people in ‘frontline’ roles will be offered roles elsewhere in BHP, which also announced a $20m fund for traditional owners and suppliers and support for 30 apprenticeships in the Goldfields.

Praying on market turnaround

Nickel West was poised for closure in 2014 when a sale process collapsed, but ran as a non-core business and kind of test lab under former asset president Eddy Haegel until May 2019, when the decision was made to reinstate it as a core asset.

Back then nickel was trading for less than US$12,000/t. While it’s fetching more today, the market has been dramatically altered by cost inflation and a flood of Indonesian producers at the bottom end of the cost curve.

Speaking to media on Thursday afternoon, BHP President Australia Geraldine Slattery said the company remains hopeful a deficit will emerge if demand from electrification can outpace the rise of supply from Indonesian producers from 2028 on and into the 2030s.

“I think what we would have to see is a market outlook where you had a sustained deficit that would support a confident investment return,” she said.

“As we’re seeing at the moment, there’s a level of flux in the market because of the supply glut and we see different operators curtailing.

“We do have optimism from the latter part of this decade through the ’30s, that that (deficit) will play out.

“A lot has to happen between now and then, and that’s why we put a line in the sand of February 2027 to make a call on that.”

She said BHP had been surprised at the growth in nickel supply in recent years, with a surplus expected to last for another three years.

“I think we’ve been clear that the basis of our decision today is relative to the market outlook through to the end of the decade,” she said.

BHP has not considered the divestment of Nickel West, or any individual parts of it at the current moment, Slattery said. BHP is keen to maintain the option to revive the integrated supply chain.

“We are optimistic on the market outlook from that point forward, based on the transport electrification (thematic),” Slattery said.

“Now, of course, there’s uncertainty with that, but we’ve got sufficient conviction to maintain investment in the option of bringing the Nickel West business back into operation.

“That’s why we’ve been very specific about the temporary suspension and the investment in exploration through to maintenance and integrity of the facilities.

“So there is uncertainty for sure, but we’re we’ve got conviction on the market beyond the late ’20s.”

Subdued response from Canberra

Nickel prices fell from over US$30,000/t at the end of 2022 to US$16,891/t today, with BHP CEO Mike Henry previously stating the company needed US$20,000/t pricing to break even.

That has come amid a rise in production from Indonesia, which has lifted its share of nickel output from nickel laterite sources from around 3% in 2015 to ~55% today.

But it’s also bridged a gap between class 1 and 2 nickel, the latter needed for battery production, using new generation high pressure acid leach and Chinese technology that can convert nickel pig iron to nickel matte for battery grade supply.

A number of nickel plants in Indonesia also enjoy long-term tax holidays, which enable many miners to operate lower on the cost curve.

Demand for nickel in EV batteries has also been dulled by shifting battery chemistries.

Cheaper but lower range lithium-iron-phosphate batteries, which don’t use nickel in their cathodes, are becoming a major force in China as consumers chase more affordable car models.

The sudden closure of WA nickel mines and collapse in lithium prices prompted crisis talks for both sectors of the industries with the WA and Commonwealth Governments.

That drew limited royalty relief from the State, lobbying for a so-called ‘green premium’ for Australian nickel from Federal Resources Minister Madeleine King and eventually the announcement of a production tax credit for downstream refining of critical minerals to kick in from 2027.

Slattery said BHP made no requests for support from politicians, whose chosen actions have been unable to withhold the nickel rout.

Minister King yesterday blamed the price drop from the end of 2022 for the decision by BHP, saying the Government welcomed it commitments to ‘support local supply chains and pay royalities to First Nations communities’.

“The Albanese Government worked with BHP and the broader nickel sector on policy responses that would support ongoing Australian nickel production,” she said.

“We added nickel to the critical minerals list in February, making nickel projects eligible for consideration under the $4 billion critical minerals facility. We also announced the critical minerals production tax incentive in the May Budget.

“However, it is clear that the scale of commercial difficulties Nickel West faces due to developments in global nickel markets has led to the temporary suspension announced by BHP today.”

Slattery said BHP was hopeful there would in the future be a premium realised for low emissions nickel production, not recognised by customers today, and that BHP did see a case where incremental investment beyond Indonesia would be needed to supply a growing EV market.

Bought as part of the $9.2bn takeover of Western Mining Corporation in 2005 – largely prized for the Olympic Dam copper-gold-uranium mine in South Australia – Nickel West was briefly the biggest earner in BHP’s house after prices hit a then record of over US$50,000/t in 2007.

The run was short-lived, with the metal’s volatility a hallmark since WMC founded the nickel business in Kambalda in 1966, building a concentrator, smelter and refinery in a handful of years to leverage a boom caused by arms sales for the Vietnam War.

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Jurisdiction spotlight: Who’s poised to ride the infrastructure coattails of BHP’s $1.7bn Nebo-Babel mine development?

As battery metal demand grows, big miners are increasingly looking to get more tonnes out of the ground – or pick up smaller players with potentially economic projects.

The idea is for these established producers to reduce costs through economies of scale, and buying ounces, often close to existing processing infrastructure, can be cheaper than finding and developing from the ground up.

M&A activity can also free up capital as shareholders in acquired targets reinvest down the value chain in the anticipation of repeating a speculative discovery to production cycle.

Betashares senior investment strategist Cameron Gleeson said back in July that big miners like BHP (ASX:BHP) and Rio Tinto (ASX:RIO) were “on the hunt for high quality assets to address their underexposure to copper and other energy transition metals.”

“While copper has been the first cab off the rank for both BHP and Rio Tinto, it’s our view they will perhaps start looking to build out exposure to other energy transition metals like nickel,” he said.

That could be why BHP has launched into one of the biggest investment splurges its once near-dead nickel division has seen in 50 years.

Last year the mining giant bolstered its ~80,000tpa capacity by purchasing OZ Minerals for a tidy $9.6bn.

The deal included its $1.7b West Musgrave project – which comprises the Succoth copper deposit and the 390Mt Nebo-Babel nickel-copper-PGE mine, which is expected to deliver annual production of 28,000t of nickel and 35,000t of copper over a 24-year operating life.

Ironically, BHP actually owned the mine years ago.

It was discovered by Western Mining geos working in the region in the late 90s and early 2000s, and has the right iron and magnesium ratios to be processed at BHP’s Nickel West smelter in Kalgoorlie.

BHP sold the project for just $250,000 to Cassini Resources back in 2014 before the junior was consumed by JV partner OZ in 2020.

An emerging mining hub in West Musgrave

WA’s remote West Musgrave region is a major metallogenic province near the intersection of the borders between Western Australia, South Australia and the Northern Territory.

And it’s now emerging as a new mining hub, since OZ had already approved development of the West Musgrave project before it got picked up by BHP.

Currently Nebo-Babel is six months into a two-year build, with the project expected to deliver its first concentrate in the second half of 2025 at a lowest quartile operating C1 cost of US$0.50/lb nickel.

Along with the mine itself, the plan is to develop processing facilities, a borefield, temporary and permanent waste landforms, a tailings storage facility, accommodation, airstrip and power infrastructure.

More than 80% of the project’s power will be provided by renewables.

Having a big miner build all this infrastructure in the region is a boon for juniors, who could piggyback on bigger projects to de-risk their own.

Not to mention, having an asset in this emerging hub means projects that looked like dusters a few years ago could be of interest as big miners like BHP spread a larger pool of resources thinner in the hopes of making a big nickel or copper discovery.

It’s put juniors and their assets even more on the radar of the majors than at any point in recent memory.

GCX Pic: GCX’s Dante Project location map displaying surrounding companies’ tenure and major deposits.

Who’re the juniors with a play in the region?

GCX Metals (ASX:GCX)

The company recently picked up the Dante nickel-copper-PGE project, just 15km from Nebo-Babel.

It’s not a greenfields play, either. Dante comes with a treasure trove of historical datasets, which includes drilling that returned a thick 310.5m intercept of disseminated copper sulphides in the same rock types that host Nebo-Babel.

GCX have already delineated big, advanced targets including ~23km of outcropping mineralised strike grading an average of 1.1g/t PGE3, 1.13% V2O5, and 23.2% TiO2, with grades up to 3.4g/t PGE3 along with the 7km-long Cronus prospect.

And according to MD Thomas Line, BHP are flying 10 flights up to the West Musgrave every single week and are bringing in a huge amount of infrastructure – de-risking that area from an infrastructure and logistics perspective.

NICO Resources (ASX:NC1)

The company holds the Wingellina nickel-cobalt project, part of its Central Musgrave project, which was discovered back in the 1950s.

But the conditions for its development have never really come to pass until the recent run in nickel prices that prompted Metals X (ASX:MLX) to spin the deposit into its own vehicle in 2021.

A PFS study indicated it could have an initial 42-year mine life as a 40,000tpa nickel and a 3,000tpa cobalt producer.

The project is around 120km from Nebo Babel and the company says its set to benefit from infrastructure in the region including recent approvals for the Jamieson Road to BHP’s project.

A DFS for Wingellina is due this year.

Redstone Resources (ASX:RDS)

RDS has its own West Musgrave project close to both the Nebo-Babel and Succoth deposits and NC1’s Wingellina nickel-cobalt project.

The company says the project is highly prospective for nickel-copper-cobalt-PGEs, especially considering it’s just 40km from Nebo-Babel.

The focus is currently on drilling to grow the Tollu copper vein deposit, with assays this year returning 11m at 1.2% copper from the Chatsworth prospect.

These assays, along with previous intersections at Chatsworth dating back to 2017 have yet to be included in the resource for the project – meaning there’s some solid room to grow.

Redstone expects the initial resource at Tollu of 3.8 million tonnes at 1% copper, containing 38,000 tonnes of copper, and 0.01% cobalt, which equates to 535 tonnes of contained cobalt, the mineralised area, and the volume of hydrothermal mineralisation, to increase with further drilling.

Caspin Resources (ASX:CPN)

Caspin was spun out after parent company Cassini was bought by Oz Minerals for the advanced West Musgrave nickel-copper project in 2020, then Oz was bought by BHP last year.

One of its biggest holders is Chalice Gold Mines (ASX:CHN) at 9.2%.

CPN has the Mount Squires project, prospective for nickel, copper, gold and REE in the West Musgrave region – adjacent to the western border of BHP’s West Musgrave project.

It includes a 40+km structural corridor with significant gold mineralisation and a 17km strike extension of the West Musgrave nickel and copper corridor.

Significant gold and copper mineralisation has already been identified close to surface with limited drilling – plus the company made an accidental rare earths discovery this year at the Duchess copper-gold-molybdenum target.

The company flagged 46m at 7,102ppm TREO with a higher-grade zone of 22m at 12,545ppm (or 1.25%) TREO, with more assays pending.

Power Minerals (ASXNN)

PNN is another company with a project in the Musgrave region – on the South Australian side of the border but it still counts.

The junior has delineated copper, nickel and PGE targets at the highly prospective Mt Caroline intrusion at its Musgrave project, which PNN says presents “an exciting target model for future exploration programs” and drilling to test below the surface cover sequence for mineralisation.

Negotiations for an exploration deed with the traditional owners of the APY lands at the project are currently underway. comprising two Exploration Licences and eight exploration licence applications held, or under farm-in, by wholly-owned Power subsidiary NiCul Minerals.

The priority target at the project is the Pink Slipper geophysical anomaly, which is part of a farm-in and joint venture agreement with Rio Tinto Exploration, covering four ELAs.