Diggers and Dealers: BHP tips EVs will send nickel demand up to 300% higher in the next 30 years
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EVs are here to stay, and the world’s biggest miner says it’s going to spur a run for nickel demand well beyond anything seen before.
Following on from IEA figures last week, which show we could need a ludicrous 60 new nickel mines by 2030 to achieve announced carbon reduction pledges, BHP’s Nickel West boss Jessica Farrell told delegates at the Diggers and Dealers Mining Forum in Kalgoorlie demand for nickel to 2050 would increase 200-300% on the previous three decades.
Mind-boggling. No wonder BHP has decided to reinvigorate the division which almost closed down a few years ago when stainless steel demand fell off a cliff and tanked prices.
At ~US$22,500/t, nickel is currently fetching a pretty penny, with BHP selling upwards of 85% of its product into the battery market, including MoUs with current and future EV makers Tesla, Toyota and Ford.
In just eight years, 3 in 5 car sales will be electric.
“Electrification of autos is gathering pace and we expect that by 2030, around 60% of all car sales will be electric,” Farrell said.
“Further… we expect that by 2040, 90% of car sales will be electric. The dominant battery chemistry powering this global fleet is expected to rely on nickel.
“Locally, Canberra is the first jurisdiction in Australia to mandate that all new cars must be electric, by 2035.
“This megatrend, combined with a firm demand base from the traditional stainless and class 1 applications, means we anticipate demand for nickel in the next 30 years will be 200 to 300 per cent of demand, in the previous 30 years.”
At BHP’s (ASX:BHP) own internal 1.5C global warming scenario, that could rise to fourfold.
BHP, which produces around 85,000t of nickel metal a year in WA, is cautious to provide an estimate on where it thinks nickel prices will go as demand for the commodity ramps up.
But with class 1 nickel sulphides in short supply, its confidence can be shown in the level of investment BHP is putting into its Nickel West division, along with its up to US$100 million investment earlier this year in the Kabanga nickel project in Tanzania.
BHP holds 7.4Mt of nickel resources in the Agnew-Wiluna Belt in WA, where it has started up two new mines in recent years and has another, the Leinster B-11 block cave, due to complete its development in 2023.
Farrell said the previously unloved and underfunded division is now spending millions on exploration, more than at any point since BHP acquired the division in its $9.2 billion takeover of Western Mining Corporation in 2005.
“To scale Nickel West – we need to not only develop new mines, but also explore the different pathways we have available to unlock more nickel,” she said.
“Our planned furnace rebuild at the Kalgoorlie Nickel Smelter is fundamental to our future – it provides an opportunity to sustain our integrated supply chain, further unlock our resource, with the potential to increase capacity and recovery, and could create a pathway for
additional feed sources.
“These investments take a lot of planning and preparation and we’re well advanced in the project, which continues in line with our Capital Allocation Framework.
“In the meantime, there are extensive debottlenecking opportunities to increase capacity and recovery at each of our operations, such as potentially introducing expanded milling capacity.”
After delivering first production last year after a delayed construction and ramp up, BHP’s nickel sulphate plant is expected to hit its 100,000t rate (22,000t of nickel metal) by the end of the year, although it has gone mum on a previously discussed plan to double its capacity.
Chalice Mining’s (ASX:CHN) Alex Dorsch, which last year announced its Julimar nickel, copper and PGE deposit 70km north of Perth was the largest nickel sulphide discovery in 20 years, says sanctions and boycotts against Russia will add to a looming supply crisis that should push nickel prices higher.
Russia is a bit of an elephant in the room at Diggers. It has been responsible for an inflationary environment that has added significantly to energy costs, but also provided steam for higher prices of the stuff companies are currently digging for like nickel and copper.
You know, maybe no one wants to look like a war profiteer…
But Russia’s Norilsk produces around 16% of all class 1 nickel sulphide supply and dominates global resources for nickel sulphides, as well as 40% of palladium.
“It’s the world’s largest nickel sulphide resource by a long, long way even compared to very large accumulations like Jinchuan, Sudbury, the Agnew-Wiluna Nickel West operation? It is enormous, right?” Dorsch said on the sidelines of the conference.
“So that is the elephant in the room per se that Russia has the nickel metal in the ground, and it has the very large mining complex or number of very large mining complexes to potentially feed the nickel that we need.
“But obviously, there’s geopolitical forces at play there.
“I would say the prospect of finding 60 more mines given that our discovery is the largest one in 20 years … you get to understanding how unrealistic it is to think that the world is even capable of finding anywhere near enough metal for decarbonisation.”
Dorsch says Chinese-backed Indonesian nickel laterite supplies can fill a gap globally, but are unlikely to find favour with Western battery and carmakers who want sustainable nickel supply, with Russia quickly looking challenged from an ESG perspective as well.
“Will it be acceptable for Western battery and auto manufacturers?” he asked.
“My impression is that it’s not, so without really the Indonesian supply, without the Russian supply, we can foresee the price going again, very, very high, like what we saw in the LME when the LME effectively shut down back in March.
“And we see there’s going to be massive shortfalls of class 1 or battery grade nickel.”
Chalice has had land access challenges and serious social licence issues to navigate, given local environmental opposition to its plans to explore beneath the Julimar State Forest.
Dorsch says the footprint of miners in environmentally sensitive areas will be smaller than other industries like agriculture, and said the looming shortage of nickel and other battery metals presented a strong case to develop critical minerals deposits.
“I think (Julimar’s) going to be a very important test case for (whether) the mining industry (can) build social licence, even in challenging (environmentally sensitive areas) with competing land use,” he said.
“The reality is that there’s not many discoveries of this size around so the idea that we could be selective about which ones we develop, and which ones we don’t, it’s just not realistic.
“We’ve been very clear that this is a very unique discovery, but … we’ve certainly committed to the very best environmental standards, Western Australia has the world’s best mining regulations and environmental regulations.”
Also looking to move into the nickel battery space is IGO (ASX:IGO), which has revived plans for a new nickel sulphate plant after closing its billion-dollar and then some takeover of Western Areas.
Given mine life concerns at its Nova nickel mine, the longer mine life of the WSA assets, including the new Odysseus mine near BHP’s Leinster operations, mean its studies to produce both nickel sulphate and potentially go further downstream to produce precursor for batteries are both in play.
Interestingly billionaire and green energy waffler Andrew Forrest will have a 30% stake in any plant as part of a deal made earlier this year to ensure Twiggy’s Wyloo Metals didn’t block the bid.
Given IGO has nothing like the scale of BHP’s Nickel West operations and its exploration efforts to extend or find a major new discovery at Nova have failed so far to bear fruit, it could still be an acquirer of assets in WA.
The focus has turned to Panoramic Resources (ASX:PAN), which IGO previously failed to take out a few years ago and now has a near 20% stake in courtesy of its WSA buyout.
“First step is fully integrate western areas into IGO, understand the value proposition around nickel sulphate and at some stage we’ll come up for air and see if there’s any other opportunities,” IGO MD Peter Bradford said on the sidelines of the Diggers conference.
“But first prize would be delivering that transformative discovery through exploration, whether it be on the Nova Fraser Range belt, or whether it be in the Kimberleys. We wouldn’t have any other comment on things we might do corporately.”