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BHP Billiton set to exit nickel business Comments
December 22, 2009

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Resources giant BHP Billiton is reportedly preparing to exit the nickel business by selling its remaining assets for up to $7 billion (R54 billion).

Australian newspaper The Age on Tuesday said Chinese buyers were tipped to be the most likely buyers of the West Australian and Colombian assets.

The rumoured sale of the remaining nickel assets follows BHP Billiton's sale earlier this month of its Ravensthorpe nickel operation in Western Australia.

Ravensthorpe was sold to First Quantum Minerals Australia, a wholly owned subsidiary of First Quantum Minerals, for $340 million.

The transaction is expected to be finalised during the first quarter of 2010 calendar year.

First Quantum has said it would cost $145 million to restart the mothballed facility and that it expects to begin commercial production at the site within 18 months.

But in BHP Billiton's hand's Ravensthorpe's closure and its impact on the downstream processing at Yabulu in Queensland forced a $4.12 billion write-down on the value of Ravensthorpe and Yabulu in the June year.
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The Yabulu project has also since been sold. These sales have left BHP Billiton with the Nickel West assets picked up with its 2005 takeover of WMC and the Cerro Matoso ferronickel project in Colombia that came with BHP's merger with the Anglo-African miner Billiton in 2001.

BHP Billiton could fetch between $3 billion and $7 billion for the assets. The wide variance in valuations is explained by equally wide market assumptions on the price of nickel, historically the most volatile of metal prices, with a 65 percent price swing in the past two years alone.

As the repoprt pointed out, the sale of the nickel assets would be in keeping with BHP Billiton's internal assessment that the emergence of a nickel pig-iron industry in China in 2007 and 2008 in response to record nickel prices means that future nickel prices are capped at no more than $12 a pound, compared with $7.80 a pound at present.