The fallout from BHP mothballing its Nickel West operations has had a ripple effect through engineering and haulage contractors, fellow miners, airlines and power suppliers.
The fallout from BHP's mothballing of its Nickel West operations has had a ripple effect through engineering and haulage contractors, fellow miners, airlines and power suppliers.
The big miner moved to suspend its Nickel West operations from October due to depressed prices for the battery metal as a result of flooded global markets, according to the miner.
Affected sites include the Kwinana Nickel Refinery, Kalgoorlie smelter, Mount Keith and Leinster mining operations, and the West Musgrave development. About 3,000 employees are affected, with all to be redeployed or offered redundancies.
Local contractor GR Engineering was among those impacted. It was contracted for design and construction works - valued at $312 million over two years- at the West Musgrave development.
GR Engineering told the market it was forecasting an $80 million revenue hit as a result of BHP's suspension of nickel operations for the year ending June 30 2025.
“GR Engineering will continue to support BHP during the transition and handover process,” it said in a statement.
ASX-listed Alliance Aviation Services was also caught in the fallout, with the resources industry aviation services provider operating 24 round-trips for BHP Nickel West each week.
Alliance runs the trips between Perth-Mt Keith and Perth-Leinster for the nickel division, with those services occupying two Fokker 100 aircraft, effectively full time, operating 3,140 flight hours per annum collectively.
It said during financial year 2024, those 3,140 flights hours represented 3 per cent of the company’s total flight hours.
Alliance told the market it estimated a full-year impact of about $3 million to $4 million in FY25 and about $5 million in FY26 at EBITDA level.
It said it anticipated that the number of flights would reduce to a level sufficient for care-and-maintenance staff to be rotated at Nickel West's operations.
But Alliance said its surplus capacity would be reallocated to existing and new customers in Western Australia and Queensland.
Lynas Rare Earths also told the market of its impact, as the company buys its acid supply for its Kalgoorlie rare earths facility from BHP Nickel West.
The miner has a contract with the nickel division for the supply of sulphuric acid from either BHP’s Kalgoorlie nickel smelter or imported sources until June 2027.
“BHP’s ability to supply acid from the Kalgoorlie nickel smelter will be affected by BHP’s announcement,” Lynas told the ASX.
But it said BHP has affirmed its commitment to using “reasonable efforts” to supply imported acid to Lynas, in line with the terms of its supply contract.
“Lynas and BHP have been working together on contingencies for continued acid supply to Kalgoorlie and these plans will now be finalised for implementation,” it said.
Fellow nickel miner Glencore owns the Murrin Murrin nickel and cobalt mine and processing facility in the north-eastern Goldfields, and employees 1,470 people. Glencore sources “small volumes” of product from BHP’s operations that supplements its own acid production.
A company spokesperson said it would continue to closely monitor the situation and its Murrin Murrin operations in the context of the current market environment.
“Murrin Murrin has an extensive ore body which could support a very long mine life, however, it is very dependent on not only market conditions but also input costs associated with energy, labour, logistical synergies and critical rail and port infrastructure access,” the spokesperson said.
“MMO produces acid from sulphur imported via the Fremantle Ports (Kwinana Bulk Cargo Terminal) for our operations.
“We currently source small volumes from BHPs operations that supplement our own acid production.”
Logistics and infrastructure company Qube is contracted for freight logistics for some of BHP Nickel West’s network. But the company said it didn't expect to be materially affected.
"We note BHPs announcement late yesterday and we'll work through the implications of it with our customer," a Qube spokesperson said.
"We don't expect the impacts of this decision to be material for Qube and we have contractual protections in place. As a large, diversified freight and logistics provider, with operations in more than 200 locations, we expect to mitigate potential impacts."
Other contractors were engaged by BHP’s nickel division, but it appears majority of their contract terms were due to end this year.
Contractor Monadelphous had a one-year extension to its mechanical and electrical maintenance, shutdown and project services contract across the Nickel West operations, for a term until October 2024.
Tulli Resources had a $16 million contract with Nickel West to provide heavy mobile equipment hire and maintenance services at the Camelot Pit project.
That contract term was also until October 2024 and represented the biggest contract the BHP had awarded to an Indigenous business.
CIMIC Group subsidiary CPB Contractors had $150 million worth of work at Nickel West's Mt Keith mine, which was due to be completed in 2024.
Perenti was also contracted by Nickel West for drilling at its Leinster operation through its Ausdrill subsidiary. The term of the contract is unclear, but its understood the impact is minimal for Perenti.
“We are working with BHP to support their decision at NickelWest," a Perenti spokesperson said.
"As stated, they intend to continue exploration activities in the near term. Regardless, this will not have a material impact to overall group revenue in either FY24 or FY25. ”
Power sector impact
In the power sector, the shutdown will affect three major renewable energy suppliers.
Canada's TransAlta Corporation has a 16-year offtake agreement with BHP to supply power to the Mt Keith and Leinster mines.
The power comes from TransAlta’s 27-megawatt solar farm at Mt Keith and a 10.7MW solar farm at Leinster, along with a 10MW battery.
Until recently, TransAlta had also been preparing for increased power supplies to Nickel West.
In February this year, it compelted the Mount Keith 132-kilovolt expansion project to facilitate the connection of additional generating capacity to the transmission network servicing BHP.
In the same month, it emerged that TransAlta was seeking EPA approvals for a 150MW gas-fuelled power station to support processing at Mount Keith.
TransAlta Australia vice-president Robert Millard said that, as the long-term electricity partner for BHP Nickel West, it was working closely with BHP to better understand its energy requirements.
"While power demand from BHP Nickel West may decrease during this period, TransAlta remains committed to meeting all ongoing demand, including through operating and maintaining the solar facilities and battery energy storage system at our Mt Keith and Leinster facilities," Mr Millard said.
"We will continue to support our employees and our customer during this temporary suspension and remain committed to assisting our customer with any potential restart of its nickel operations.”
A second power provider affected by the shutdown is Risen Energy. It's 100MW Merredin solar farm was contracted in 2021 to supply power to BHP’s Kwinana nickel refinery.
A third is the Flat Rocks wind farm, jointly owned by Italy’s Enel Green Power and Japan’s Inpex. It was contracted in 2022 to supply the Kalgoorlie smelter and Kambalda concentrator.
The 76MW wind farm near Kojonup started commissioning this year after a two-year construction period.
Business News is seeking comment from each of these projects.
