Carmakers are desperate for nickel and have nowhere to look. It’s spurring majors to invest big
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The head of Andrew and Nicola Forrest’s mining vehicle Wyloo Metals says carmakers are struggling to find nickel to stick in electric vehicles in a sign the sector is ripe for investment.
It comes as BHP (ASX:BHP), a customer of Wyloo’s recently acquired Mincor Resources business in WA’s historic Kambalda nickel district, launches into one of the biggest investment splurges its once near dead nickel division has seen in 50 years.
Wyloo Metals CEO Luca Giacovazzi, who has spearheaded a dramatic expansion of Fortescue founder and iron ore billionaire Forrest’s private mining enterprise in recent years, told the Diggers and Dealers Mining Forum in Kalgoorlie last week contracts signed to date showed how short carmakers would be of the key cathode material.
“We took those agreements and we converted them into volume, and we converted it into the number of electric vehicles that we can actually produce from the total volume with the contract,” he said.
“And what you can see is a pretty big difference. a vast difference between lithium and nickel, which I think really kind of tells the story.
“The scarcity of nickel projects to be able to invest in is real. Car companies are genuinely struggling to try and lock up nickel supply for some of these gigafactories that they are busy building.”
Wyloo also boasts investment in rare earths play Hastings Technology Metals (ASX:HAS) and gold-copper explorer Greatland Gold, but counts prospective investments of around $3b in the nickel business as its main game.
The Kambalda and Widgiemooltha Dome have delivered 1.6Mt of high grade nickel sulphides since the discovery of the Silver Lake mine on January 28, 1966.
But Giacovazzi says just $12 million was spent actively exploring for new sources of high grade nickel on Mincor’s ground until the discovery of its new Cassini mine in 2015.
Following its $760m takeover by Wyloo this year, Giacovazzi says the well-funded private owner is looking to ramp up drilling, review mines shut by Mincor and previous owner WMC in times of low nickel prices and dust off prospects from the past drilled once then placed in the filing cabinet.
“One thing that I found really fascinating was prior to the discovery of Cassini, Mincor had spent $12 million on exploration over 12 years. That’s $1 million a year, which is basically just keeping tenements in good standing and probably not doing a whole lot of exploration work,” he said.
“So I think it’s an area that’s been kind of unloved for a good, you know, 15-20 years and I think we’re really excited … not only have we got a great asset that’s producing free cash flow, but we also bring our own balance sheet to be able to actually go out and explore it.”
Nickel is currently fetching US$20,554/t, down around a third year to date as supply of battery grade nickel ramps up from Indonesia, the world’s largest producer the metal through a supply chain heavily linked to China’s major stainless steel and battery companies.
But that is around three times the decade long lows of US$7600/t that prompted Mincor to enter a six year period of care and maintenance in early 2016.
At current prices, Giacovazzi sees plenty of reasons to be bullish on Kambalda’s future.
“A lot of these mines were shut when nickel was at US$3 a pound, it was a very different environment. And a lot of those mines still have nickel at the bottom of them,” he said.
“I think the message I’d really like people to latch on to is Kambalda is a significant nickel belt, it’s unique.
“There’s not another Kambalda anywhere else in the world. And I think as West Aussies we’ve kind of lost sight of that. We’ve forgotten about Kambalda in a lot of ways.
“But this is kind of our crown jewel of nickel and I think we were super excited to buy Mincor because you know we could see the potential and I think we’ve got the capital to be able to actually really go out and explore it.”
Mincor’s main customer is BHP, which takes ore from Kambalda as well as other third parties like IGO (ASX:IGO) and turns it into a concentrate at its nearby Kambalda concentrator.
From there the ore is delivered to the Kalgoorlie Nickel Smelter where it joins concentrate from BHP’s own northern operations at Leinster and Mt Keith to be turned into nickel matte.
That ~66% pure product is exported or sent to Kwinana where BHP refines it into nickel briquettes, powder and sulphate — 85% of it for the battery market, with EV makers Ford, Toyota and Tesla among is customers.
BHP has signalled its own interest in expanding its WA nickel fiefdom beyond its current ~80,000tpa capacity by purchasing OZ Minerals and continuing the development of its remote 35,000tpa West Musgrave mine.
Its smelter is also coming up for a major furnace rebuild around the middle of this decade. BHP has already secured ground from the City of Kalgoorlie-Boulder for a 1000 person camp in Kalgoorlie, a hint at the scale of the renovations.
It’s a pretty big deal given it wasn’t long ago that BHP tried to sell and considered closing the WA nickel assets, not even good enough for hiving off into South32 (ASX:S32), colloquially known as ‘CrapCo’ when the spin off was first proposed.
Nickel West boss Jessica Farrell recently revealed the smelter rebuild planning had begun, with BHP crafting a ‘credible upside scenario’ that could see the EV fleet globally grow 10-fold to over 400 million cars by 2030.
BHP and Wyloo’s thirst for nickel was highlighted in a bidding war across late 2021 and early 2022 that saw Forrest and Giacovazzi win out for Canada’s Noront Resources in Ontario’s Ring of Fire domain. Its re-branded Ring of Fire Metals is looking to complete studies in 2027 and open the new nickel district — also expected to be among the largest western sources of chrome — by 2030.
The nickel supply contract between Mincor and BHP will run up in 2025, at which point Forrest et. al. will be free to move their product elsewhere.
Tensions emerged between MCR and BHP in the weeks following the Wyloo offer after BHP decided not to take development ore with off-spec arsenic levels.
The relationship is all good now by all accounts, but that doesn’t mean Wyloo couldn’t look to take its business elsewhere.
There are plenty of unfed concentrators in the vicinity, including Poseidon Nickel’s (ASX:POS) Black Swan and Lake Johnston plants, once owned by Russian giant Norilsk.
Meanwhile, Wyloo leveraged its stake in Western Areas to cut a deal with IGO on studying the development of downstream nickel sulphate and battery pre-cursor material plant in Kwinana.
Giacovazzi said in response to a question from Stockhead the challenge facing it taking control of its downstream would be the quantity of material it could source in WA.
Its partner IGO recently revealed an expected major cost blowout at the Cosmos nickel mine near Leinster along with an $880-980m impairment on the value of the assets acquired in last year’s $1.3b takeover of WSA. An update on the plans for the 85% complete Cosmos is due later this year.
Giacovazzi said the proposed pCAM plant was an example of the industry working together to find solutions that benefit the Australian mining sector.
“My gut instinct is always to say yes, you know, you want to control things so that you can operate it in the way that you want to operate it, but in the case of the downstream actually think it’s a great example of industry working together,” he said.
“A lot of the obstacles facing downstream processing in Australia is that you’ve got a lot of small mining operators that don’t have enough scale individually to actually justify building a downstream facility.
“So I think us working with IGO is a great example of actually industry coming together to achieve scale to build something to beneficiate the minerals in this country.
“The partnership with IGO is a really good one. And it allows us to get that scale which improves the economics of our project.”