BHP Billiton has again slashed the value of its Nickel West operation, revealing the mining, processing and smelting business has net operating assets worth only $US127 million ($140 million).
In its annual financial results yesterday, BHP said it had written down the value of Nickel West by $US1.7 billion, booking a $US1.25 billion after-tax impairment on the assets.
This year's tumbling nickel prices led to an underlying Nickel West loss of $US100 million before income tax, depreciation and amortisation, down from an $83 million profit for the previous year.
While BHP does not disclose the exact book value of its business divisions, the net operating asset value of Nickel West has been cut by a similar amount to the impairment, down from $US1.96 billion at June 2012.
BHP was not the only WA nickel major to slash the book value of its assets. Amidst $US7.7 billion in post-merger impairments announced in its half-year accounts, GlencoreXstrata booked a $US452 million impairment on the value of its Murrin Murrin nickel mine, despite record production of 19,100 tonnes of nickel.
Nickel West produced 27,500t of saleable nickel last financial year. In comparison, Mincor Resources, which produced 8637t of nickel in the period, is valued by the market at $126 million. Western Areas has a market capitalisation of $665 million and produced 17,500t of nickel last year.
BHP chief executive Andrew Mackenzie said the Nickel West writedown was the result of a "very challenging" nickel price.
"Strict accounting convention requires us to mark that appropriate to market, and that's what we have done," he said.
He said the company's Worsley alumina operation, the subject of a $US2.2 billion pre-tax writedown in its February half-year accounts, was now operating well.
Though its WA nickel business still faces considerable uncertainty, the jewel in BHP's crown is still its Pilbara iron ore operation. The division delivered an operating profit of $US10.3 billion, more than half of the $US19.2 billion total for the year.
Mr Mackenzie said the company was still looking at ways to push its Pilbara production past the existing 220 million tonnes per annum expansion plan, which it will complete later this year with the early opening of the 35mtpa Jimblebar mine.
"The expansion of Jimblebar to 55mt and broad capital-efficient growth will deliver annual capacity of 260-270mtpa," he said. "With our major enabling projects now largely complete, we are focusing on maximising throughput and utilisation to extract significantly more value."
BHP shares fell 50Â¢, or 1.4 per cent, to $36.54 yesterday.