Monsters of Rock: Andrew Forrest is now 'major supplier of critical minerals' as Mincor nickel deal closes

Andrew Forrest’s Wyloo Metals to become a supplier of “green” nickel as Mincor deal hits compulsory acquisition threshold
Wyloo CEO Luca Giacovazzi targets new discoveries in historic Kambalda nickel sulphide field
Ardea Resources soars on Japanese support for Kalgoorlie nickel project

Iron ore billionaire Andrew Forrest is poised to become a “major supplier of critical minerals” after his privately-owned Wyloo Metals completed its $760 million acquisition Mincor Resources (ASX:MCR).

The Fortescue (ASX:FMG) executive chairman, who in a previously life built one of Australia’s largest standalone nickel mines, Murrin Murrin, is putting his weight behind Australia’s nickel sulphide industry as it continues to emerge as a key cog in the global EV supply chain.

In Mincor, Forrest will take control of a network of high grade mines from which most of Kambalda’s historic output of 1.6Mt of nickel metal has come.

It is in stark contrast to the largest source of nickel globally, low grade laterite orebodies in Indonesia, which have traditionally serviced the stainless steel industry but are quickly being converted to supply the EV market.

Forrest says nickel sulphides like those mined by Mincor will be the greenest on the market.

“Wyloo has targeted nickel sulphides as they are the greenest and cheapest option for battery manufacturing: they have the best economics, can be processed into battery grade nickel with the lowest environmental footprint and are fully recyclable,” he said after hitting the 90% compulsory acquisition threshold for the $1.40 per share cash offer.

“We are going to give the market a choice between clean nickel and dirty nickel.”

More to discover

Outside of Cassini, a greenfields discovery made in 2015, the vast bulk of Mincor’s operations are, to some extent long in the tooth.

Despite over 50 years of history stretching back to the Kambalda field’s discovery under the famous Australian mining company WMC, Wyloo CEO Luca Giacovazzi insists it remains underexplored.

Mincor notably made the 22,600t “Golden Mile” discovery in the underexplored stretch between its Long and Durkin mines, announcing the 3.9% nickel resource in July 2022.

“Kambalda is one of the most prolific nickel sulphide regions in the world. It has produced more than 1.6 million tonnes of nickel over the past 50 years or so and hosts some of the highest-grade nickel sulphide orebodies on the planet,” Giacovazzi said.

“The mines in Kambalda have had five-year mine lives since the 1970s. Mining companies have historically focused on incrementally extending production, but none have taken a systematic approach to exploring the Kambalda and Widgiemooltha Domes.

“We think the district has huge potential and we’re looking forward to investing more into exploration.”

The plan for Wyloo is to become a ‘fully integrated nickel business’ with the Kambalda mines sidling up alongside its Eagle’s Nest project in Ontario’s Ring of Fire district in Canada and some exploration ground in Quebec.

Wyloo is also planning to partner with IGO (ASX:IGO) on a nickel sulphate and precursor facility in Kwinana, challenging BHP’s (ASX:BHP) dominant position as the sole producer of downstream nickel products for the EV industry in Australia.

Mincor is the main supplier currently of ore for BHP’s Kambalda nickel concentrator, part of the BHP Nickel West business, and has a contract to supply ore there until 2025.

But Mincor has suffered ramp up issues, with off-spec arsenic levels in ore from the early stages of its revived operations causing some of its material to be knocked back by its customer.

BHP meanwhile, has signalled its intention to begin a major revitalisation of the Nickel West business, applying last month to the City of Kalgoorlie-Boulder council for a 1000-person worker’s camp ahead of a planned smelter rebuild in the middle of the decade.

BHP lost out to Wyloo on the Ring of Fire assets in a bidding war in 2021 and 2022 for TSX-listed Noront Resources, but has signalled its interest in developing new nickel assets amid a broader push to focus on ‘future facing commodities’ necessary for the energy transition.

Its $9.6 billion purchase of OZ Minerals this year will include taking over the $1.7b development of the West Musgrave nickel and copper mine, while it has also invested US$100 million to get a foot in the door in the development of the massive high grade Kabanga nickel project in Tanzania.

Mincor Resources (ASX:MCR) and BHP (ASX:BHP) share prices today:

Speaking of nickel …

Soaring today was Ardea Resources (ASX:ARL), rising 55% after revealing a consortium of Japan’s largest companies had signed a non-binding MoU to develop a massive but long dormant nickel discovery near Kalgoorlie.

Ardea’s Kalgoorlie Nickel Project, which contains a 194.1Mt ore reserve at 0.7% nickel and 0.05% cobalt accounting for 1.36Mt of nickel metal and 99,000t of cobalt, would cost over $3 billion to bring into production according to a PFS today.

But the addition of Japan’s Sumitomo, Mitsubishi and Mitsui as potential project partners for the multi-generational asset could bring the corporate muscle needed to get the operation across the line.

A large laterite discovery, the project north of Kalgoorlie-Boulder has been known about for decades and once had BHP and Vale lining up to help develop it.

In its current form it would produce 30,000t of nickel and 2000t of cobalt a year for over 40 years, helping supply nickel as mixed hydroxide precipitate for battery makers.

Ardea says the project would deliver a post-tax NPV of $4.98b, IRR of 23% and average EBITA of $800m, paying itself back in 3.1 years.

$125 million capped Ardea and the consortium plan to negotiate a binding agreement to complete a DFS, funded by the Japanese groups, ahead of a final investment decision, with the aim of tapping Australian and foreign export credit agency loans to fund the mine.

“The Ardea Team will be working with well-regarded and experienced partners who recognise the global significance of the Kalgoorlie Nickel Project to the renewable energy supply chain and see the development advantages derived from our location within the best resources operating jurisdiction in the world,” ARL CEO and MD Andrew Penkethman said.

“Sumitomo Metal Mining are most successful in developing and operating nickel-cobalt laterite operations, whilst Mitsubishi and Mitsui have decades of project development and operations experience in Australia and globally.

“Australia and Japan have particularly strong geopolitical alignment, with enduring successful business relationships. Japan has been integral to the development of Australia’s iron ore, natural gas, and coal sectors for the benefit of both nations.

“We look forward to Ardea and the KNP Goongarrie Hub joining the successful Australia and Japan project development model and welcome the contribution of the Consortium in developing Ardea’s Battery and Critical Minerals projects.”