* BHP has made breakthroughs in the way it processes nickel
* Could make it easier to find buyer for Nickel West
division in Australia
* Nickel, aluminium, manganese businesses targeted for
By James Regan
SYDNEY, April 11 Breakthroughs in the way BHP
Billiton processes nickel ores could help the world's
biggest miner find a buyer for its ailing Nickel West division
Nickel West is among businesses that also include aluminium
and manganese which BHP has grouped into a single division set
aside in 2012 for underperforming assets deemed non-core to its
BHP has said it is actively studying the "next phase of
simplification" of the company but declined to comment on media
reports that senior executives favoured a demerger.
Chief Executive Andrew Mackenzie has said BHP will focus on
its large iron ore, copper, coal and petroleum businesses, while
selling off smaller, less profitable operations.
Macquarie Bank last month in a research note put a value of
$4.6 billion on the nickel assets.
Improvements in the way BHP mines nickel together with
better market dynamics and exploration successes could save
Nickel West from closure.
A programme at Nickel West to extract full value from ore
that would otherwise be uneconomic to treat due to high contents
of talc is opening up more of BHP's rich Mount Keith and
Yakabindie deposits in Western Australia for mining, enhancing
the potential appeal to outside investors.
BHP is a top-tier nickel producer along with Norilsk of
Russia, Brazil's Vale and Glencore Xstrata
. Excluding its Cerro Matoso nickel business in
Colombia, Nickel West's operations are located in Western
Australia, where 8 million tonnes of contained metal are known
to exist, a significant portion in large deposits high in talc.
Add to that a discovery the company made last year and
dubbed "Venus', which geologists consider among the biggest in
the world despite the paucity of information BHP has provided on
High talc-bearing ores require hotter temperatures to melt,
lifting smelting costs by 25 percent or more - a key
consideration when nickel prices are low.
Studies into treating high talc ores through a filtering
process in Australia date back to at least 2005, though it was
2011 before BHP allocated A$177 million ($165 million) to a talc
redesign project. By 2012, BHP said it was processing high-talc
ore that had been stockpiled awaiting a breakthrough.
Nickel markets are staging a comeback, with pricing up 20
percent since January 1. Driving demand is rising stainless
steel production, which relies on nickel for shine and
durability, and changes in Indonesia mining laws that has cut
off a major supply source for Chinese steel makers.
Nickel West sits outside BHP's designated four "pillars of
growth" - iron ore, copper, coal and petroleum products. Potash
mining in Canada sits as a potential fifth pillar.
"By increasing our focus on these four pillars, with potash
as a potential fifth, we will be able to more quickly improve
the productivity and performance of our largest businesses," BHP
said on April 1.
X2 Resources, an investment vehicle established by Mick
Davis, the former chief executive of Xstrata until its merger
with Glencore last year has been named by local media as a
contender for Nickel West and other BHP businesses.
X2 Resources has up to $3.75 billion in finance and operates
a mid-sized diversified mining and metals company. The backers
comprise private-equity group TPG Capital and the commodities
trader Noble Group and three unnamed sovereign wealth
and pension fund investors.
Davis is no stranger to nickel, leading Xstrata into its
2006 acquisition of Falconbridge of Canada as well as takeovers
of Australia's Murrin Murrin and Jubilee operations.
If BHP decided to sell businesses separately, smaller
Australian nickel companies Sirius Resources and
Western Areas could also be contenders to buy.
Sirius plans to start nickel production in 2017 at a rate of
28,000 tonnes a year. Western Areas already delivers nickel
concentrate to BHP's Kalgoorlie smelter for processing.
($1 = 1.0712 Australian Dollars)
(Editing by Ed Davies)