Top Australian miner BHP’s partner in an emerging African nickel and cobalt venture expects sales of their future output to fetch a premium as carmakers increasingly focus on sourcing electric-battery raw materials as ethically and sustainably as possible.
In the latest sign of resources giants expanding into metals poised to benefit from the clean-energy transition, Melbourne-based BHP this week signed a deal to invest up to $US100 million ($130 million) in Tanzania’s Kabanga Nickel project containing a large deposit of nickel and cobalt — two metals urgently needed to build more batteries for plug-in cars.
Kabanga Nickel chief executive Chris Showalter said BHP’s investment decision would enable the venture to fast-track its pre-development works and strengthen its ability to keep to its timeline targeting first production by 2025.
“We’ve heard a number of the auto manufacturers saying, ‘By 2025, we really need to ramp up production, we really need these metals’,” Mr Showalter told The Age and the Herald.
As the era of electric vehicles begins to dawn and analysts forecast demand for some battery metals to surge four-fold by 2030, battery manufacturers and global carmakers such as Volkswagen, General Motors and Elon Musk’s Tesla are racing to lock in large-scale supply agreements.
However, supplies are failing to keep up with ballooning demand, leaving the auto industry reliant on metals sometimes sourced from jurisdictions with known environmental or human rights problems.
At least 60 per cent of the world’s cobalt comes from the Democratic Republic of Congo, where the extraction of the cobalt is at risk of being conducted by “artisanal”, or informal, miners who dig by hand and have been linked to child labour allegations. Nickel suppliers in Russia have drawn concerns over the environmental impact of sulphur dioxide emissions, while Indonesian producers are overwhelmingly reliant on coal-fired power.
Mr Showalter said Kabanga was planning to refine the ore it produced using a “hydrometallurgy” technology, which was less carbon-heavy than smelting, eliminated sulphur dioxide altogether, and removed the carbon footprint from shipping it long distances for processing at overseas plants.
“Not only was the quality of the deposit a big emphasis for BHP, but also the ESG [environmental, social and governance] credentials that we bring are increasingly important for not only them but the investor community around the world,” he said.
While commercial offtake negotiations had not yet begun, Mr Showalter said the company was fielding interest from a number of battery manufacturers and carmakers.
“It’s quite widely known they are really scrambling to try to secure the inputs for batteries… and it’s going to become increasingly harder for them to do that in an ESG-friendly way,” he said.
“When we look at demand in 2025, the quality of the metal we will be producing will not only be in demand but there will be a premium attached to that for being able to provide the market with some of the ‘tick boxes’ that will be demanded.”
Tesla, the world’s most valuable electric carmaker, has outlined its intention to work directly with mineral producers to “address sustainability issues” including biodiversity impact, energy consumption, human rights and mine-waste management across its supply chains.
Under the BHP-Kabanga deal, the Australian mining giant said it would invest $US40 million to accelerate the nickel mine’s development and a further $US10 million in the hydrometallurgy refining process. Subject to certain conditions, BHP has agreed to invest another $US50 million, which would take its stake to nearly 18 per cent.
“This investment secures access to a world-class nickel sulphide resource and is aligned with BHP’s strategy to capture opportunities in future-facing commodities,” a BHP spokesman said.
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