• OZ Minerals says the mining proposal for its $1.1bn West Musgrave nickel and copper mine has been approved
  • It comes as BHP circles after OZ rejected a $25 per share, $8.4b bid for control of the company last week
  • “Hard to see copper prices lifting from here”: CBA


OZ Minerals (ASX:OZL) says an agreement with traditional owners and final investment decision are now the last remaining pieces of the puzzle to get its West Musgrave nickel and copper mine ready to dig.

News the proposed operation near the Jameson community in the remote Ngaanyatjarra Lands of WA has received its mining proposal comes with OZ at the centre of the mining world after seven days ago rejecting a $8.4 billion offer for control of the company from BHP (ASX:BHP).

West Musgrave is expected to cost at least $1.1 billion to build, producing 32,000t of copper and 26,000t of nickel a year from later this decade over an extensive 26 year lifespan.

OZ says it has community support from the Ngaanyatjarra People for the project and remains on track for an investment decision later this year, despite having previously flagged the potential to delay that call due to WA’s tight labour and construction market.

The mine was discovered by Western Mining geos working in the region in the late 90s and early 2000s, and has the right iron and magnesium ratios to be processed at BHP’s Nickel West smelter in Kalgoorlie.

BHP sold the project for just $250,000 to Cassini Resources back in 2014 before the junior was consumed by JV partner OZ a couple years ago.

“West Musgrave is an exciting project, intended to be a modern mine, producing minerals in demand for a decarbonising world, providing value for all our stakeholders, particularly the Ngaanyatjarra community,” OZ CEO and MD Andrew Cole said.

The potential for blowouts at West Musgrave appears to be one of the primary arguments for OZ to accept BHP’s $25 per share offer.

BHP has the balance sheet strength to build the mine without fuss, even if it means running back to an old project trading for virtually nothing.


OZ holds firm as copper price wobbles on China news

Since BHP’s approach was announced last week, OZ shares have consistently traded above the offer price, lifting 0.4% to $25.79 as of 3.30pm AEST today.

That indicates shareholders think a better deal is coming, with BHP boss Mike Henry due to present the Big Australian’s full year results tomorrow.

Copper rose back above US$8000/t last week, strengthening OZ’s argument that BHP’s bid was opportunistic and didn’t reflect the underlying strength of its business and the long-term copper market.

OZ shares hit a record of more than $29 in January before lockdowns and property woes in China sent base metals prices falling.

They have recovered around 13% from mid-July lows, according to Commbank mining expert Vivek Dhar, reflecting a weaker US dollar and tight copper stockpiles.

But he says it is “hard to see prices lifting from here” with more rate rises on the way and a wait until at least November to see if China relaxes its zero-Covid policy.

“Financial markets are pricing in a peak in the Funds rate of around 3.6%. By contrast, our International Economics team expect a peak of 3.75‑4.0%,” Dhar said in a note.

“The tight labour market and strong wages growth mean that the Fed is not done fighting inflation. A higher Fed Funds rate and a stronger US dollar likely means that copper prices face headwinds in the short term.

“Combined with concerns over Europe’s copper demand, it’s hard to see prices lifting from here, particularly at the pace over the last month.

“A relaxation of China’s COVID‑zero policy, which we see as only a possibility after the National Congress in November, is a key positive risk.”

While BHP’s bid for OZ has long term strategy in mind, both in terms of its shift to ‘future facing commodities’ and securing a growth pipeline for its Olympic Dam copper-gold and uranium mine, the way copper prices fall could have a big impact on how far BHP will have to stretch for its prize.



OZ Minerals (ASX:OZL) and BHP (ASX:BHP) share prices today: