Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
BHP Billiton (ASX, NYSE: BHP)(LON: BLT), the world’s biggest mining company, confirmed Tuesday it has discovered a significant high-grade nickel deposit, named Venus, which could “reshape the future profitability and direction” of its struggling Nickel West business, Financial Times reported (subs. required).
The finding, near its Perseverance mine in Leinster, Western Australia, is still in its early stages of delineation and development – meaning no guidance yet – reports The Australian.
In an e-mail communication with MINING.com, a company spokesperson said BHP has not confirmed the $4 bn float, but analysts quoted by The Australian are already estimating the current value of its nickel division between $3.5bn and $4.5bn on a combined basis.
Unlike BHP’s profitable Cerro Matoso nickel operation in Colombia, Nickel West has been severely affected by lower nickel prices and a strong Australian dollar, resulting in a $205 million loss for the December half.
Although the giant miner has “deprioritized” future investment in the businesses, it is said to be concerned about exiting in a trade sale while prices remain depressed. Analysts told The Australian that BHP could circumvent the issue by spinning the division off to shareholders, with optimism about a potential Venus game-changer sure to lend support.
BHP consolidated its aluminum and nickel assets into a single Perth-based division last year.
“The wide range in valuations reflects differing nickel price assumptions, with the key stainless steel ingredient the most price-volatile of all the base metals,” the article says.
The Director of Corporate Finance at Patersons Securities, Alex Passmore, told ABC Net that BHP’s nickel assets might not fit into the company’s long-term plans.
“The nickel business is a very small part of BHP’s overall earnings, so one has two questions whether it’s worth the management time and effort and can attract the capital from within BHP to maintain those assets,” he said late last year.
This fit with Andrew Mackenzie’s vision, as the incoming BHP chief executive has said he wants to simplify the company’s portfolio and focus on big ore bodies in Chile and Australia, as well as oil and gas assets in North America.
(Image by Edler von Rabenstein/Shutterstock.com)
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