Could 2022 be the year WA's nickel Game of Thrones spills out in the open?

BHP (ASX:BHP) has concluded its most recent corporate stoush with FMG (ASX:FMG) chair Andrew Forrest with an “L”, after choosing not to match its C$1.10 bid for Canadian nickel explorer Noront Resources.

The mano a mano has been on again, off again since July when BHP entered the fray to capture Noront from under the noses of Forrest’s Wyloo Metals.

Noront’s Ring of Fire assets — so named because of the glowing ring the nickel-copper-PGE and chrome district in Ontario appears as on electromagnetic maps — are a district-scale play starting with the Eagle’s Nest deposit Noront found in 2007.

The bet Forrest and BHP are making is not on the single mine alone, an 11-year operation with a nameplate capacity of 150,000-250,000t of nickel-copper-PGE concentrate a year, but on the idea the region could develop into the next Voisey’s Bay.

Eventually BHP decided the 47% premium Wyloo offered over its previous C$0.75 offer was too steep and exited the fray.

It begs the questions where BHP will look to grow its nickel business next, having recently elevated the Nickel West business it wanted to shut down less than a decade ago to core status.

Inspired by the energy transition and growth of the EV market, Nickel West, which finally opened a long delayed nickel sulphate plant at its Kwinana refinery this year, has emerged as Tesla’s supplier of choice for high-quality ESG-backed nickel for its cars and energy storage systems.

But the rise of other nickel forces in its home base of WA has led to market chatter that a “Game of Thrones” to consolidate the sector is simmering in the background.

WA nickel consolidation

Tribeca Investment Partners head of research Todd Warren said the potential consolidation of the WA nickel industry was one of the most intriguing stories to watch out for in 2022.

It kicked off in earnest with IGO’s (ASX:IGO) $1.1 billion cash takeover of Western Areas (ASX:WSA), announced last week after months of talks.

That deal will sure up mine life concerns for IGO, which has just five years left to run at its flagship Nova nickel mine, and increase its production profile from 25,000-27,000t of nickel metal a year to 41,000-44,000tpa.

It could potentially revive plans IGO shelved several years ago into a downstream nickel sulphate plant to rival BHP for local nickel offtake. That is a big deal for Nickel West, which is currently the natural home for nickel sulphide ore from local miners Mincor (ASX:MCR), IGO and Western Areas.

Warren said it would be a big talking point in BHP’s boardroom right now.

“The grades of the Aussie sulphides are some of the best in the world, aside from the fact that you’re in a friendly mining jurisdiction,” Warren said.

“Obviously in the immediate term it’s increasingly challenging from a cost perspective just in terms of labour availability and the like but that will pass.

“So in an environment where nickel seems to remain well sought after why wouldn’t you be pursuing a consolidation play with some of the the quality nickel resources on the planet?

“Time will tell obviously how that plays out but I think to see them step away from the Canadian project I’m not surprised.

“But they’ve got some decisions to make in Western Australia as to whether they spend a lot of money on retooling the smelter to take more of their own feed post the expiry of their third party contracts with Western Areas and Mincor and the like post-2025, or they can undertake some M&A.

“That’s, I’m sure, a conversation being had in quite some depth around that boardroom at the moment.”

Who are the houses in nickel’s Game of Thrones?

One of the world’s top five nickel producers, BHP is the dominant player in WA thanks to its integrated network of Goldfields mines and concentrators, the Kalgoorlie nickel smelter and Kambalda nickel refinery – infrastructure it would take billions of dollars to build from scratch today.

With its predecessor Western Mining Corporation, which BHP consumed in a $9.2 billion takeover in 2005, having sold its mines in Kambalda to smaller companies like Mincor, IGO and Panoramic Resources (ASX:PAN), BHP has long resisted the urge to bid for them.

Forrest is lurking in WA, too, as a long-time holder and former chairman of Poseidon Nickel (ASX:POS), which owns the Black Swan, Mt Windarra and Lake Johnston projects.

He holds stakes in Western Areas and Mincor as well, making him a potential player in the outcome of IGO’s WSA takeover, and Wyloo Metals chief Luca Giacovazzi recently told the West Australian the time was coming for a WA nickel consolidation play.

Upstart IGO has a stake in Mincor after selling its Long mine to the company a couple of years ago, and has previously bid for Panoramic, the owner of the Savannah nickel-copper-cobalt mine near Halls Creek in the Kimberley.

If it wins its bid for WSA it will emerge with Western Areas’ 19.9% stake in PAN as well.

Further down the food chain is Mincor, which will begin nickel production from its Kambalda and Widgiemooltha mines for the first time in almost 7 years in 2022, supplying enough ore to restart BHP’s Kambalda Concentrator.

It owns most of the historic WMC mines on the Kambalda Dome, home to 1.6Mt of historic nickel metal production. The only others are the Foster and Jan mines owned by 2021 float Lunnon Metals (ASX:LM8) and Lanfranchi, owned privately by Poseidon shareholder Black Mountain Metals and Tembo Capital.

Further left of field Chalice Mining (ASX:CHN) has become a $3 billion company after unveiling the world’s largest nickel sulphide resource in 20 years at its Julimar nickel-copper-PGE discovery near Perth and will no doubt be looked at by suitors in the coming years.