BHP Group to Record $5.7 Billion Impairment on Samarco Dam Failure and Nickel Operations
BHP Group’s Impairment Charges
BHP Group, the world’s largest listed miner, has announced an additional $3.2 billion impairment related to the Samarco dam failure in Brazil and a $2.5 billion non-cash impairment charge for its Western Australia Nickel business. This decision comes after a federal judge in Brazil ruled that BHP and Vale, along with their joint venture Samarco, must pay up to 47.6 billion reais ($9.67 billion) in damages for the 2015 dam collapse, which is still subject to appeal.
Environmental Impact and Provision
The collapse of the dam in Mariana, Brazil, resulted in a massive mudslide that caused the death of 19 people and severe pollution of the Rio Doce river, affecting its outlet in the Atlantic Ocean. BHP Brasil’s provision for the Samarco dam failure will amount to $6.5 billion as of December 31, 2023.
Impact on Nickel Operations
BHP’s Western Australian nickel operations are also facing challenges due to a surge in nickel supply from Indonesia, leading to a significant drop in nickel prices. As a result, BHP has lowered its nickel price assumptions, leading to a $2.5 billion non-cash impairment, including closure and rehabilitation provisions of approximately $900 million, reducing the carrying value of its Nickel West assets to minus $300 million.
Operational Review and Future Plans
With the operations now under review, there is a possibility of them being placed on care and maintenance. BHP’s Kambalda concentrator will be put into care and maintenance in June, following the suspension of mines that feed the plant. Additionally, BHP is assessing development plans for its West Musgrave nickel project, which is currently 21% complete.
Upcoming Reports
BHP is scheduled to report its first-half results on Tuesday, February 20. The company continues to face challenges related to the Samarco dam failure and nickel operations, and it remains to be seen how these impairments will impact its overall financial performance in the coming months.
