Snub adds to Nickel West stress
The decision to leave Nickel West out of BHP Billiton's second-tier asset spin-off makes it even more critical for the business to secure offtake deals with Western Areas or Sirius Resources, according to Deutsche Bank analysts.
BHP shares were battered yesterday as investors digested the flood of information of its planned asset spin-off. The company's ASX-listed shares fell almost 3.9 per cent to $38.13 after the company disappointed investor expectations a $3 billion buy-back would accompany Tuesday afternoon's spin-off news.
Nickel West was not among assets sent into NewCo, a decision Deutsche analysts said highlighted the uncertainty facing the WA business. BHP has flagged Nickel West's increased reliance on third party ore - about 55 per cent of its feed will come from third parties, up from about 40 per cent previously - making it even more critical for BHP to lock up offtake with one or both of Western Areas and Sirius. High-quality ore from either would improve Nickel West's margins by 4 per cent, Deutsche said.
BHP is also keenly aware of the importance of Nickel West to WA's other nickel miners, adding to talk it may seek to split out the sale of the Kambalda concentrator, Kalgoorlie smelter and Kwinana refinery from the fate of its Mount Keith and Leinster mines.
