Safety scare forces BHP to close WA nickel mine

Almost 200 workers are facing an uncertain future after BHP Billiton made the rare decision to close a mine on safety grounds.

BHP confirmed on Tuesday that the Perseverance Nickel mine in Western Australia would close, after a safety scare in October when nine men were trapped underground. That incident was linked to a seismic event nearby, but was the latest in a string of safety scares over the past few years.

After more than six weeks of review, BHP decided it could not guarantee the safety of workers if the mine continued operations.

While BHP shut the Gregory and Norwich Park coalmines for financial reasons last year, several observers of the company could not remember a time when BHP shut an Australian mine for safety reasons.

BHP's official historian, Professor Geoffrey Blainey, was unable to be contacted on Tuesday.

The closure was applauded by Simon Ridge from WA's Department of Mines and Petroleum. "It's tough to make decisions like this, but people's safety must come first," he said.

But while the decision was made on safety grounds, the financial case for the mine was hardly strong, with nickel considered one of the biggest laggards within BHP's diversified portfolio.

BHP said in August that nickel prices had averaged 15per cent lower during the year to June 30, and its nickel assets in WA suffered a $US1.2 billion ($1.3 billion) write-down in the same financial year.

The division is grouped with aluminium and manganese on the BHP balance sheet. The three commodities delivered a combined profit of just $US164 million in fiscal 2013.

BHP predicted nickel would continue to be over-supplied for the forseeable future, although the outage at Perseverance since October is expected to have some impact on nickel production when the company reports in mid January.

But the closure of Perseverance mine does not necessarily mean the end of nickel production in the northern goldfields of WA. The company will continue processing nickel on site.

BHP will reopen the nearby "Rocky's Reward" mine five years after it it shut to partially offset the Perseverance closure. High grade nickel was also discovered close to Perseverance within the past 12 months, which BHP hoped would breathe new life into the struggling division. That prospect continues to be evaluated.