AS nickel prices rise in response to Indonesia’s export ban, BHP Billiton is considering the sale of its WA nickel business.
The Indonesian ban came into play in January, in an attempt by the country’s government to induce more value-adding to its mineral exports through the development of onshore processing operations.
These restrictions – from the world’s largest nickel exporter and the main supplier of low-grade nickel laterite to China’s nickel pig iron industry – have already caused a surge in commodity prices, which BHP is now reportedly trying to cash in on.
BHP’s Nickel West operation, worth $1 billion, comprises the Mt Keith open cut mine and concentrator; two underground mines and a concentrator at Leinster; a nickel concentrator and smelter, producing nickel concentrate and nickel matte, in Kalgoorlie; and a Kwinana operation that produces LME grade nickel briquettes and nickel powder, as well as a range of saleable co-products.
The possible divestment of Nickel West is part of the ‘four pillar’ strategy introduced by BHP chief executive Andrew Mackenzie, focussed on iron ore, coal, copper and petroleum.
The price of nickel rose to a 12-month high of US$7.14 per pound early in 2014, with the LME three-month nickel price currently standing at about $15,950 per metric ton and the spot price standing at $15,860/metric ton.
During a phone conference, Glencore Xstrata chief executive Ivan Glasenberg said the company would look at BHP’s nickel assets as part of its opportunistic approach to mergers and acquisitions. He reiterated, however, that Glencore would only purchase assets that met its criteria for returns on investment.
“Nickel West is out in the market and you know us, we kick tyres and look at anything which is available,” he said.
Should BHP proceed with the sale of its nickel operations, the proceeds could be used to cut the company’s debt to US$25 billion by the end of the 2014 financial year. The nickel business suffered impairment charges of US$865 million after tax for the fiscal year ending 30 June 2013. Its operations produced 103,000t of saleable nickel during the period, down from 109,000t for the same period in 2012.