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Nickel West left out in the cold

Nickel West's operations in the Goldfields.

BHP Billiton delivered two big surprises in yesterday's annual financial results, leaving Nickel West out of a proposed asset spin-off and quietly adding another 20 million tonnes a year to its Pilbara iron ore expansion.

The revised 290mtpa production target was overshadowed by BHP's shock decision to continue the hunt for a trade sale of Nickel West.

But yesterday's results again underscored the impact of its most profitable division, showing cost-cutting and productivity measures dropped the company's average iron ore cash costs by almost $US2 to $US27.53 a tonne last financial year.

BHP's Pilbara iron ore operations were again the biggest contributor to its $US13.4 billion ($14.3 billion) underlying profit. WA iron ore booked before-tax profits of $US11.55 billion, $US900 million ahead of the previous year's result.

But boss Andrew Mackenzie delivered less welcome news to other parts of the State's workforce, with Nickel West's 1800 WA employees facing an uncertain future after the division was left out in the cold.

A spin-off company, to be led by BHP chief financial officer Graham Kerr, will be based in Perth and will include the Worsley alumina operation as one of its core assets, along with Queensland's Cannington base metals mine, manganese operations and coal in South Africa and NSW. But while the Cerro Matoso nickel mine in Colombia is included in the new company, Mr Mackenzie said Nickel West was not wanted by either BHP or its spin-off.

"We think the best outcome for Nickel West is for that business to be owned by an operation that is much more committed to the nickel business," he said. "And we continue with a process and talk with buyers at the moment to see how we might actually sell that business, either in whole or in part.

"But it's not actually a part of the long-term strategy for BHP Billiton, nor would it be appropriate because of its maturity and some of its complexities, to put it in NewCo."

This year's resurgent nickel price failed to lift Nickel West back into profitability, with the unit booking a before-tax loss of $US208 million for the financial year, up from $US314 the previous period.

BHP released its accounts after the close of the Australian market. Although its local shares were up 53¢ yesterday to $39.68, its London-listed scrip was down sharply in early trade on news BHP would not run a share buyback in parallel with its proposed asset spin-off.