BHP Sees $5.7 Bln Charges In H1 On Nickel Operations, Samarco Dam Failure; Stock Down

(RTTNews) - BHP Group Ltd. (BHP, BHP.AX, BHP.L, BHPLF) shares were losing around 2 percent in Australian trading as well as in extended trading on the NYSE after the Australian mining company said it expects to record around $5.7 billion charges in the first half.

These charges are related to an impairment of Nickel West operations and West Musgrave project, i.e., Western Australia Nickel, and an increase to the provision for the Samarco dam failure.

For the half year ended December 31, BHP will recognise a non-cash impairment charge of approximately $2.5 billion post tax or around $3.5 billion pre-tax against the carrying value of Western Australia Nickel.

BHP will also record Underlying EBITDA of around negative $0.2 billion at Western Australia Nickel in the first half results.

Regarding Samarco dam failure provision, BHP said it will recognise an income statement charge of $3.2 billion post tax or around $3.1 billion pre-tax. BHP Brasil's provision for the Samarco dam failure will be $6.5 billion as of December 31.

As disclosed in the January Operational Review, the nickel industry is facing challenges and there has been a sharp fall in nickel prices.

BHP Chief Executive Officer, Mike Henry, said, "This is an uncertain time for the Western Australia nickel industry and we are taking action to address the current market conditions. We are reducing operating costs at Western Australia Nickel and reviewing our capital plans for Nickel West and West Musgrave."

BHP said it is also reviewing the development plans for Western Australia Nickel with a focus on preserving cash. This includes the potential to place Nickel West into a period of care and maintenance.

The West Musgrave project is in execution and is 21 percent complete. BHP is currently assessing phasing and capital spend for the development of the West Musgrave project as part of this review.

Henry further said, "BHP Brasil along with Samarco and Vale continue to progress negotiations towards a settlement of the Federal Public Prosecutor Office Claim and Framework Agreement obligations in Brazil. The Renova Foundation has made good progress on reparation and compensation programs and over 84 percent of the community resettlement cases have been completed."

The company plans to release its first-half results on February 20.

In Australia, BHP shares were trading at A$45.09, down 1.87 percent. In the after hours trading on the NYSE, the shares were at $58.56, down 2.16 percent.