Bulldust.BHP needs low-Mg nickel concentrates either from...

Bulldust.

BHP needs low-Mg nickel concentrates either from Kambalda or another high-grade komatiite nickel source to blend with its concentrates from Mt Keith and Leinster. If it can't secure this supply, its smelter will choke on slags and costs will blow out.

This WSA offtake is basically an admission that BHP's idea, post-WMC who had this all sorted, of a distributed network of client-miners feeding concentrates in the door to blend and smelt has fallen over recently. This has absolutely nothing to do with Ravensthorpe unlike the article says - Ravensthorpe was a failure of BHP's making in its entirety (the cons there were to go to Yabulu in Qld).

BHP is struggling for concentrates now that Silver Swan, Blair, several of Mincor's Kambalda operations and ConsMins Kambalda operations have gone on C&M. BHP can't throttle back production at Mt Keith or Leinster - the mills are just too big, and the smelter can't be shut down without some serious begging of Mincor and others (contracts work both ways) so either BHP takes a haircut or it strikes while the WSA iron is hot and flapping about in the breeze.

This is, without a doubt, proof that BHP has muffed its model at Kambalda. It made good choices avoiding LionOre at $8Bn (but the Russians aren't good nickel miners; they just have the most massive deposit in the world. Even an idiot can turn a profit from Noril'sk-Talnakh, but thats different in Australia). They also did a good turn in dipping out of Jubilee, which was a bloated underperformer. But that doesn't absolve them of problems in sourcing low-Mg concentrates for the NickelWest smelter.

The real winner here is WSA, which gets to finance the first open pit sulphide mine in Australia in donkeys ages. Bravura to them, but BHP is going to cop it in the long run because Kambalda isn't "long life, low cost" enough as a group - however it is an integral ingredient in making Mt Keith and leinster profitable.