BHP target Oz Minerals hits go $1.7b copper, nickel mine
By Peter Milne
ASX-listed miner Oz Minerals has given the green light to a $1.7 billion copper and nickel project in WA, in a move that may entice mining giant BHP to lift its $8.4 billion takeover offer for the company.
The Adelaide-based miner on Friday said it plans to start production at the remote WA desert site near the NT and SA borders in late 2025 when it predicts the nickel market, which has been buoyed by demand for electric vehicle batteries, will enter a sustained period of undersupply.
Oz Minerals chief executive Andrew Cole said the decision to approve the West Musgrave project unlocked one of the largest undeveloped nickel projects in the world and production costs were expected to be in the bottom quartile for both nickel and copper.
“No other metals will have the same intensity of use as the world shifts to cleaner energy and electrification, electric vehicles, wind farms and solar panels,” Coles said.
BHP, which has been looking to boost its exposure to ‘future facing’ minerals used in electric cars and clean energy technologies including copper and nickel, lobbed a $25-a-share takeover for Oz Minerals last month, but the company’s board dismissed the offer as “opportunistic”.
Speculation has been growing that BHP would wait for the West Musgrave final investment decision before making a second move at Oz. BHP declined to comment when asked if it would reconsider its August offer in light of the additional information and certainly about West Mulgrave.
Oz said the construction cost of $1.7 billion excludes power generation, the truck fleet and worker’s accommodation that will be provided by third parties.
The cost to build West Musgrave has risen $600 million since late 2020 but the updated design has a 12 per cent higher ore processing capacity of 13.5 million tonnes a year and substantially higher nickel and copper production in the first five years.
Oz has secured a $1.2 billion 18-month bridging loan facility to support early construction while it considers long-term funding options that include partners wanting to secure offtake for the materials they need to decarbonise.
RBC capital markets analyst Kaan Peker said he viewed the updated costs and production volumes as value neutral.
“While the net present value of the project has increased, it is the result mainly of higher metal prices as operating and capital costs have actually increased,” he said.
Four-trailer road trains will truck West Musgrave output about 800km along largely unsealed roads to a hub at Leonora where product for export will be railed 600km south to the port of Esperance.
The rail route passes through Kalgoorlie where BHP’s nickel smelter could be a customer for Oz Minerals.
Oz Minerals will release a study later this year into an additional investment to process the 26,000 tonnes of nickel concentrate West Musgrave will produce each year that would significantly cut the volume of material shipped from the remote site.
Renewable energy from wind and solar will supply 80 per cent of West Musgrave’s power. The initial truck fleet will driverless and diesel-powered with the option of a transition to electric haulage at when the initial engines are due to be replaced. Oz plans to achieve net-zero emissions by 2038.
Friday’s announcement followed the signing of a land access agreement with the Ngaanyatjarra people the day before.
The Oz Minerals share price closed 1.7 per cent higher at $26.50.
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Source: Thanks smh.com