BHP Billiton will book heavy writedowns on the sale of its Yabulu nickel refinery in Queensland to iron ore billionaire Clive Palmer, who is eying the mining giant’s other nickel assets including the mothballed Ravensthorpe mine.
The refinery near Townsville is being sold to private companies owned by Professor Palmer, a key figure in the nation’s resources industry for more than 25 years.
The sale price was not disclosed but Professor Palmer said the refinery had been acquired for less than the $2 billion replacement cost.
Despite beating off stiff competition from overseas and Australian bidders, Professor Palmer said BHP Billiton had proved “tough negotiators”.
But the deal terms will, at completion, provide sufficient capital and access to funds to enable the business to continue as a going concern under its new owner, BHP Billiton said in a statement today.
BHP Billiton will writedown a total of $US675 million ($847.8 million) on the sale, which will be reported as exceptional items in its 2008/09 results.
It will writedown the carrying value of Yabulu by about $US500 million ($628.18 million) and lose a further $US175 million ($A219.86 million) in unrecoverable tax benefits.
Transfer of ownership of Yabulu is expected to be finalised by the end of July and all 940 staff will be retained.
Professor Palmer said staff numbers may rise under his expansion plans for Yabulu, which could involve purchasing BHP Billiton’s Ravensthorpe that closed in January and the partly closed Leinster nickel mines in Western Australia to provide an enlarged refinery with additional feedstock.
The ore for Yabulu is currently sourced from third party mines in New Caledonia, Indonesia and Philippines.
The refinery has produced up to 32,000 tonnes of nickel and 2,700 tonnes of cobalt a year, and was upgraded by BHP Billiton at a cost of more than $1 billion over the past two years to take another 40,000 tonnes of feedstock from Ravensthorpe.
“That plant was doing that up until Ravensthorpe closed down so there is the potential to open up the back end of the plant again to take an additional feedstock source,” Professor Palmer said.
There is much speculation that BHP Billiton will sell Ravensthorpe, which closed in January about a year after it opened, resulting in 1800 job losses.
The future of the mining giant’s Perseverance mine at Leinster is also in doubt after the WA state government recently threatened to fully close the operation following two rock fall incidents this month.
“It could be (of interest),” Professor Palmer said.
“We’ve been negotiating Yabulu since December and haven’t had the ability to look at all the Ravensthorpe data and plant to do a proper due diligence to know whether there is an angle or way that that could be revitalised.
“Maybe BHP want to put it on the market in the future and provide more information.
“We’re also in the process of acquiring more nickel deposits to feed this plant.”
Professor Palmer said Yabulu was “a good strategic fit into our nickel asset portfolio”.
He said it was “still profitable” despite low nickel prices and predicted a rise in the nickel price from about $US7.40 per pound currently to $US9.50/lb in the next 18 months.
This compares to an average price of about $US14.60/lb in 2007/08, reflecting a plunge in the production of stainless steel, which is the commodity’s main use.
The Yabulu refinery exports about $600 million worth of nickel and cobalt a year to Japan, Korea and Europe, and has operated for more than 35 years.
BHP Billiton head of stainless steel materials Jimmy Wilson said the deal was supported by the Queensland government, which had affirmed that there would be no change in licensing or other arrangements.
Qld Premier Anna Bligh said in a statement that the continued operation of Yabulu was “good news for the Townsville region and good news for the state’s economy”.
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