BHP Billiton Ltd. (BHP) said Tuesday morning that, because of safety concerns, it is not re-opening mining operations at its Nickel West Leinster Perseverance underground mine in Western Australia after suspending production in October following an earthquake. The decision was made after an evaluation was conducted by BHP’s technical team and independent experts on the sub-level cave operations.
In October, Western Australia was hit by what Geoscience Australia’s Hugh Glanville described as a “swarm” of seismic activity (albeit Glanville was referencing an area to the southwest of Leinster). At that time, Glanville said that the string of small earthquakes could continue into 2014. Earthquakes are not something new to Australia, or the region in the whole. Take a look at the recent activity as compared to the world on the Geoscience Australia website.
In the 3.7-magnitude quake that hit the mine late in October, nine men were trapped underground for more than nine hours. The workers were rescued unharmed.
Operations at Nickel West employ about 500 people, but that number is going to be trimmed by up to 200 with the shutdown, according to BHP.
“The health, safety and wellbeing of our people is paramount; it is the first of Our Charter values. As this change is implemented, we will continue to treat our people and stakeholders with the utmost care and respect and maintain our strong focus on safety,” said Nickel West Asset President Paul Harvey in a statement this morning.
The company said that it would continue to maintain the underground infrastructure at the mine. Nickel West’s processing facility at Leinster will continue to operate, along with other operations in Western Australia. Mining will also resume at Rocky’s Reward open cut mine, providing an alternative ore supply to the processing plant. The impact of the shuttering the mine is expected to be detailed in the next operational review.
Just like so many others in the industry, BHP, the world’s biggest miner, has been focused on cutting expenses and improving cash flow amid stagnating or declining commodity prices over the past two years. BHP CEO Andrew Mackenzie, who replaced Marius Kloppers in October, told investors last week that the company will continue to reduce capital and exploration expenditure this year and will cut it even more in the next fiscal year as it aims to provide a higher return to shareholders by focusing on core, low-risk/high-return investments. Across the last couple years, the company had poured about $20 billion into U.S. shale gas projects, investments that it is optimistic will start turning into cash in 2014.
The nickel division has been struggling for BHP and the markets in general, as the worst performing base metal in 2013. On the bright side, BNP Paribas said recently that it expects global demand for nickel, a key ingredient in stainless steel, to rise as much as 8 percent in 2014, meaning that the market may see a New Year’s rally.
Shares of BHP edged up 0.7 percent in Monday trading to close the day at $64.20, marginally cutting into a loss of about 14 percent so far this year.
