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The falling nickel price is heaping pressure on BHP Billiton's Nickel West business, which will increase imports of concentrate to sustain its operations after a string of local mine closures.
Last week, Kambalda nickel miner Mincor Resources confirmed it would stop mining at its Mariner and Miitel mines "for a period of suspension until the nickel price recovers".
The suspensions, flagged by Mincor since mid-last year, came after Panoramic Resources' Lanfranchi mine in the region was put on care and maintenance in September.
Both miners supplied Nickel West's Kambalda concentrator with ore, each delivering more than 10,000 tonnes to BHP last financial year.
Diversified miner Independence Group also sends ore to the concentrator from its Long nickel mine, but this too has been reduced after Long's mine plan was altered and production forecasts were lowered due to the price slump.
The combined impact of the supply cuts forced BHP to scale back operations and halve its workforce at the Kambalda concentrator last year. The concentrator supplies BHP's Kalgoorlie smelter, which had already been operating below capacity and therefore at a higher cost than desired.
Patersons Securities resources analyst Simon Tonkin said Nickel West was under pressure at current weak nickel prices of around $US8500 a tonne.
"BHP needs sufficient concentrate to continue running their smelter, and with a lot of the local producers suspending production, they need feed," he said.
Nickel West asset president Eddy Haegel told a conference in October the operation had recently "imported concentrate for the first time in its history at a price that was value accretive", and a BHP Billiton spokeswoman confirmed on Monday the operation "intends to import more".
"Like all nickel producers, Nickel West is feeling the pressure of persistent weak nickel prices," a BHP spokeswoman said.
"To offset any impact this may have on our business Nickel West continues to identify new opportunities for our business. Last year a decision was made to run the Kambalda Mill at a reduced rate to align with reduced ore deliveries.
"Nickel West can confirm it has imported nickel concentrate and intends to import more."
Production down 23pc
Nickel West, which employs about 2000 workers and contractors, includes the Mount Keith, Cliffs and Leinster mines and concentrators, Kalgoorlie smelter, Kambalda concentrator and Kwinana refinery, all in Western Australia.
BHP said in the December half its nickel production dropped to 37,300 tonnes, down 23 per cent compared to the same period in 2014, due to "major outages at the Kalgoorlie smelter and Kwinana refinery during the December 2015 quarter, and a reduction in third party ore delivered to the Kambalda concentrator".
Nickel West brought the Rocky's Reward nickel mine back into operation in August to protect it from the dwindling supply, and is examining the prospects of mining other deposits.
BHP also agreed in March 2015 to buy half of the first three years' concentrate from Independence Group's Nova mine, which is expected to start production later this year at a rate of about 26,000 tonnes per annum.
BHP sought to sell its Nickel West business in 2014 but could not find a buyer that would offer an acceptable price.
Closure costly
Analysts believe BHP would likely have closed the long-struggling nickel operation by this point if it wasn't for the onerous liabilities a closure would trigger.
"While it is costing BHP money to run the mines, it would cost them a lot more to shut them down," Alto Capital research analyst Carey Smith said.
"Nickel West is in a difficult situation because it is an integrated business and, like a lot of these big operations, the liabilities are significant."
Glencore is also feeling the pain of the nickel price slide, chief executive Ivan Glasenberg conceding on an investor call in December that it could close its Murrin Murrin nickel operations in Western Australia.
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