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"Future-facing" BHP invests $100m in new African nickel mine

Wed 12 Jan 22, 10:34am (AEST)
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Key Points

  • BHP has been inactive in Africa since its South 32 spin off in 2015
  • BHP's stake values Kabanga at $658m
  • Nickel prices are on the verge of breaking out to 12 year highs

BHP (ASX: BHP) is staying true to its word in investing further in “future-facing commodities” after making a $100m commitment in a huge nickel project in Tanzania.

BHP will initially make a $40m investment in Kabanga Nickel and $10m in Lifezone, the processing technology-arm of the business. 

The investment will give the iron ore giant an 8.9% stake in Kabanga, which it can double to 17.8% after making the remaining $50m investment. 

About Kabanga 

Kabanga believes it is the largest development-ready nickel sulphide deposit in the world with. 

The project is forecast to reach first production in 2025, targeting a minimum annual nickel equivalent production of 65,000 tonnes with more than 30 years life of mine. 

To add some perspective, local nickel player Western Areas (ASX: WSA) mined 16,812 tonnes of nickel in FY21. The company has a market cap just over $1bn. 

The additional $10m investment in Lifezone will help accelerate the company’s low-carbon hydrometallurgical processing technology. 

In simple terms, Lifezone has a processing technology that is more cost-efficient with a significantly lower environmental impact. 

Commenting on the partnership, Kabanga CEO Chris Showalter said: 

“BHP is the ideal partner for Kabanga Nickel, bringing significant advantages and expertise that will enable us to move ahead with the project. BHP’s investment reflects the project’s strong ESG credentials and its role in improving environmental performance throughout the nickel value chain.” 

Hello old friend 

Back in July 2021, BHP announced a nickel supply agreement with Tesla. 

BHP will supply Tesla with nickel from its Nickel West asset in WA, coined “one of the most sustainable and lowest carbon emission nickel producers in the world.”

While Kabanga and Tesla are two separate events, it does signal BHP’s pursuit of commodities to support global decarbonisation and focus on delivering long-term shareholder value outside of iron ore.

Nickel breaks out 

Coincidentally, the Bloomberg Nickel Subindex broke out to all-time highs overnight.

This was supported by an uptick in nickel prices, pushing to its highest level in more than one month.

20211215-nickel-prices

 

This week, Reuters reported that nickel stocks in LME warehouses have declined around 62% since April 2021.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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