BHP considering Western Australia Nickel sale, Queensland coal suspensions

BHP Group Ltd. is considering selling its Western Australia Nickel (WAN) and shutting in some metallurgical coal mines in Queensland, according to its fiscal 2025 financial results released Aug. 19.

In 2022, BHP undertook its most aggressive exploration campaign in Western Australia since acquiring the WMC Resources assets in 2005 to boost the world's second-largest nickel sulfide resource in anticipation of a sharp growth in nickel demand from the electric vehicle industry in the coming decades.

Then a global oversupply sent prices crashing and BHP announced in July 2024 the suspension of the Kwinana refinery, Kalgoorlie Smelter, and the Leinster and Mt Keith mines at Nickel West, along with the West Musgrave greenfield project, all of which comprise WAN. BHP produced 30,000 mt of nickel in Western Australia in fiscal 2025.

Now, BHP intends to review that decision by February 2027, part of which includes "assessing the potential divestment of the Western Australia Nickel assets," according to the financial results.

"Any decision to divest will be subject to an assessment against other options, including continuing temporary suspension, restart or closure," BHP's annual report said.

BHP also operates five steelmaking coal mines in its BHP Billiton Mitsubishi Alliance Pty Ltd. (BMA) joint venture with Mitsubishi Corp. -- Goonyella Riverside, Broadmeadow, Peak Downs, Saraji, and Caval Ridge in Queensland's Bowen Basin.

The annual report said that, "with no change to the ongoing negative impacts of [Queensland's] extreme royalty rates, we will maintain our existing position of not investing in any further growth at BMA. We will sustain and optimize our existing operations. However, if low coal prices persist, options to pause lower margin areas of our operational footprint will be considered.

This is despite BHP's belief that higher quality steelmaking coals like those produced by its BMA assets will be valued in the longer term "for their role in reducing the greenhouse gas emission intensity of blast furnaces."

Weighing options

Regarding selling WAN, BHP CEO Mike Henry told an Aug. 19 media call that "I wouldn't say it's a preferred outcome at all, but as we embark upon our review of where to from here for the asset in the face of our continuous update of our market outlook, it is one of the potential paths forward that we need to have in scope."

The London Metal Exchange nickel cash price was $14,956.35/mt Aug. 18, down from $16,412.70/mt on Aug. 19, 2024, according to S&P Global Market Intelligence data.

Regarding its steelmaking coal, Henry told the media that due to the changes that were made to Queensland's royalty regime in 2022, "the benefit of any upswing in coal prices has been seriously eroded from a BMA perspective."

"So in the face of tougher times like we see currently, there's less ability or willingness on the part of the business to see through those tough times and perhaps carry some negative cash flows. We have to act even more expediently to shut in loss-making production because we don't get the benefit on the other side of the equation when prices rise," Henry said.

"Last year, the effective tax rate for the BMA business in Queensland was over 67%, taking into account the higher royalty burden that we face there now. So this is a pretty significant impact on the business for sure."

BHP's Queensland steelmaking coal volumes rose 5% in fiscal 2025 with improved truck productivity offsetting heavy wet weather and geotechnical challenges, with "improved operational productivity" boosting production at BMA, excluding Blackwater and Daunia, which were sold in April 2024.

Excluding Blackwater and Daunia production, BHP's metallurgical coal production rose 5% in fiscal 2025 to 18 million mt, or 36 million mt on 100% basis. Fiscal 2026 production is expected to increase to between 18 million mt and 20 million mt, or between 36 million mt and 40 million mt on a 100% basis.

Platts assessed the premium hard coking coal Australia export FOB East Coast Port price at $191.40/mt Aug. 19, down from $204.50/mt a year prior.