Consequently, the company’s Yabulu refinery in Queensland will stop processing mixed nickel cobalt hydroxide product from Ravensthorpe and will revert to processing ore only. BHP Billiton said it plans to complete a future options study for Yabulu during the first half of calendar year 2009.

According to the company, the decision to shut down the operation is the result of the diminished prospects for profitability of Ravensthorpe and Yabulu in the current environment, significant and continuing deterioration in the outlook for the nickel market, and the projected level of capital expenditure required in order to achieve and sustain projected production volumes at Ravensthorpe. As a result, the total workforce at these operations and associated Perth-based functional areas will be reduced by approximately 800 employees and 1,000 contractors by June 2009.

In addition, the rate of mining at the Mount Keith operation will be reduced. The overall rate of concentrate production at Mount Keith will remain largely unchanged. The company stated that improved processing technology will enable the operation to source and process more ore from existing stockpiles. The Mount Keith workforce was to be reduced by approximately 100 employees and 200 contractors by the end of February 2009.

The company noted that the decision to close these operations will require revision of their carrying values. Accordingly, an additional pre-tax impairment charge of approximately US$1.2 billion will be reflected in the results for the half year ended December 31, 2008. It is also likely that an estimated pre-tax charge of approximately US$400 million will be acknowledged in the second half of the 2009 financial year. Both charges will be categorized as exceptional items.

BHP Billiton announced approval for the development of the Ravensthorpe project and expansion of the Yabulu refinery in March 2004, and the mine opened last May, roughly nine months behind schedule. The original capital cost estimate for the combined project was US$1.4 billion but the final figure was closer to $2.3 billion.

The project was designed to increase nickel production capacity from the expanded Yabulu Refinery by more than 140% from 31,200 mt/y to an estimated 76,000 mt/y, with the life of the refinery being extended by approximately 25 years.