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(Alliance News) - BHP Group Ltd on Thursday said its interim results will reflect the miner's ongoing operational and legal struggles in Western Australia and Brazil.
BHP, a Melbourne, Australia-based resource miner, said two items will be recognised as exceptional in its financial results for the half-year ended December 31, which the company intends to publish on February 20.
BHP will recognise a non-cash impairment charge of USD2.5 billion against the carrying value of Western Australia Nickel, the company's Australian nickel business unit, after supplies of cheap nickel from Indonesia resulted in a sharp fall in the commodity's price.
Nickel prices have fallen around 40% over the past 12 months, currently trading at USD16,113.50 per ton.
The impairment reduces the carrying value of the Western Australia Nickel's net operating assets to negative USD300 million, which includes closure and rehabilitation provisions of around USD900 million. BHP also expects to record an underlying loss before interest, tax, depreciation and amortisation of around USD200 million for its Australian nickel business in its half-year results.
BHP is reviewing the future of its Australian nickel operations, it said, and has decided to place the Kambalda nickel concentrator into care and maintenance in June. This comes after Mincor Resources NL, an Australia-focused mineral explorer, announced that it would be suspending operations at its Cassini and Northern Operations mines from May. The two mines provide the majority of ore feed to the Kambalda concentrator.
BHP said it was considering whether to put the entire Nickel West unit, which alongside West Musgrave forms the Western Australia Nickel project, into a period of care and maintenance.
Chief Executive Officer Mike Henry said: "This is an uncertain time for the western Australia nickel industry and we are taking action to address the current market conditions. We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave."
BHP also will recognise an income statement charge of USD3.2 billion in relation to the fatal failure in 2015 at the company's jointly owned Samarco dam in southeastern Brazil.
In November 2015, the dam burst, flooding the downstream villages of Bento Rodrigues, killing 19 people and polluting the Rio Doce river with tailings of iron ore. The dam was operated by Samarco Mineracao SA, a 50-50 joint venture of BHP and Rio de Janeiro-based iron ore miner Vale SA.
BHP said that the charge reflects the estimated costs of settling a 2016 claim brought against the company by the Brazilian Federal Public Prosecution Office. The prosecutor is seeking BRL155 billion, around USD31.16 billion, in relation to damages caused by the disaster.
In January, the federal court of Brazil issued a decision in relation to the claim, finding Samarco Mineracao, BHP and Vale jointly liable for BRL47.6 billion in relation to moral damages caused by the disaster. The three parties have filed a clarification motion with the court relating to certain inaccuracies in the claim and the quantification of damages, with a decision pending.
BHP also said that intends to appeal the court's decision, but that the appeals process is expected to take between two and five years.
The company said that "significant uncertainties" surround the resolution of the claim, with material outcomes potentially higher or lower than the stated amounts.
Shares in BHP were down 1.3% at 2,340.19 pence each in London on Thursday morning. They were the same percentage at ZAR560.77 in Johannesburg.
By Hugh Cameron, Alliance News reporter
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