BHP shares tumble on nickel bombshell

BHP Group Ltd (ASX: BHP) shares are under pressure on Friday morning.

At the time of writing, the mining giant’s shares are down over 1% to $43.09.

Why are BHP shares falling?

Investors have been selling the Big Australian’s shares this morning after it dropped a major bombshell announcement.

According to the release, BHP will temporarily suspend its Nickel West operations and West Musgrave project (Western Australia Nickel) from October.

This won’t be a short term suspension. BHP advised that it intends to review the decision to temporarily suspend Western Australia Nickel by February 2027. That’s up to two and a half years away.

Management has blamed the suspension on weak nickel prices and expectations for prices to remain at low levels for the foreseeable future due to “oversupply in the global nickel market.”

It highlights that “forward consensus nickel prices over the next half of the decade have fallen sharply reflecting strong growth of alternative low-cost nickel supply.”

What will this cost?

BHP advised that during the temporary suspension, it will continue to support its workforce and local communities. It plans to invest approximately US$300 million (A$450 million) per annum following completion of a transition period to support a potential re-start of Western Australia Nickel.

Among the assets that are being suspended are the Kwinana nickel refinery, Kalgoorlie nickel smelter, and Mt Keith and Leinster operations, as well as the development of the West Musgrave project.

BHP’s Australian President, Geraldine Slattery, commented:

Since BHP announced a review of Western Australia Nickel in February, we have explored options to stem losses in the short-term and identify a viable path forward for the business. Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel. We have made the difficult but necessary decision to temporarily suspend the Nickel West operation and West Musgrave project.

We will continue to invest approximately AU$450 million (US$300 million) per annum in the Western Australia Nickel facilities to enable a potential re-start. Western Australia remains an important investment destination for BHP globally, with investment in the State expected to be greater than AU$12 billion over the next five years and we will continue to work with all of our Western Australian partners to advance the economic prosperity of the State.

BHP shares are down almost 15% since the start of the year.

The post BHP shares tumble on nickel bombshell appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.