BHP closes nickel mine as prices rise

At a time when investors are getting more bullish about nickel prices BHP Billiton (NYSE: BHP; LON: BLT; ASX: BHP) has decided to close one of its key nickel mines in Australia.

The decision comes roughly a month and a half after production at the Perseverance underground mine was stopped due to a 3.7 magnitude earthquake that resulted in nine workers being trapped underground.

And while the workers eventually made it back to surface safely BHP put the operation on ice while its own technical and operational teams, as well as independent experts, worked hard at assessing the risks on the sub-level cave operations. The conclusion reached is that there is no way to guarantee a safe resuming of operations and so it will be closed indefinitely.

Perseverance is part of BHP’s Nickel West division in Australia — a fully integrate mine to market business. The mine is one of two underground nickel mines at Leinster, which is situated outside a town of the same name roughly 900-km northeast of Perth.

Nickel West will, however, continue to operate its processing facilities at Leinster, along with its other operations in Western Australia, and will maintain the underground infrastructure at Perseverance.

To partially offset the loss of production at Perseverance mining will resume at Rocky’s Reward open cut mine, which is near the town of Leinster.

The closure of Perseverance means that up to 200 people will likely lose their jobs, although the company says it will look to redeploy as many workers as it can before announcing the final number. Nickel West has a total workforce of around 500 but has been weathering tough news even before the closure. The division recently announced a US$1.7 billion writedown on assets due to weaker nickel prices.

The irony is that now that the outlook for nickel is improving, largely on the back of decreased production from Indonesia, BHP will lose some of its own supply. Late in November the price for nickel was trading for US$6.00 per lb. but has been on a steady climb since then and was trading for US$6.35 per lb. on Dec. 17.

In New York on Dec. 17 the company’s shares were off 47¢ to US$63.73 on 1.97 million shares traded.


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