Monsters of Rock: Need cash? Mining majors are buying up resources all over the joint

BHP signals its nickel intent with $10 million exploration buy in Sweden
Northern Star pays up big for ounces near Jundee mine
Valor draws gold giant Barrick into copper exploration play

We’re getting to a particularly interesting stage of the mining cycle where capital is hard to come by but, this time around, big miners are cashed up and desperate to add weight to their portfolios.

The returns generated in recent years mean many are focused on growth where, at the end of the last cycle, that large cap band of companies were looking at asset sales.

Another factor is the large caps are now looking hard at anything copper, nickel and generally aligned with the green energy/ESG thematic.

Even projects that looked like dusters a few years ago could be of interest as big miners like BHP (ASX:BHP) and Rio Tinto (ASX:RIO) spread a larger pool of resources thinner in the hopes of making a big nickel, copper or lithium discovery.

It’s put juniors and their assets even more on the radar of the majors than at any point in recent memory.

Flagged by experts in recent weeks, today has brought a cascade of activity of that ilk.

BHP forks out little big bucks for Swedish nickel

First up is BHP which is forking out $9.8 million and a 1% NSR royalty for Ragnar Metals’ (ASX:RAG) Tullsta nickel project.

BHP had its own Nickel West division on the cutting board in 2014 but no one wanted to pick up the scraps, with the unit facing the threat of closure at the end of this decade.

Since then a surge in nickel prices, rising demand from electric vehicles and BHP’s own sheepish turn to metals that can help people forget how much carbon dioxide its coal and iron ore assets are responsible for have brought that network of operations in WA to the fore.

It’s hungry for more. BHP is investing around US$100 million in the Kabanga Nickel Project in Tanzania, one of the world’s best high grade nickel sulphide opportunities, developing the $1.7 billion West Musgrave mine it acquired in this year’s OZ Minerals takeover and giving grants to juniors looking for the commodity in far flung corners of the globe.

The Tullsta acquisition is interesting beyond the fact the project shares its name with a comfy looking armchair you can pick up at IKEA. It clearly puts early stage nickel assets in the crosshairs of the world’s biggest miner.

Tullsta is an asset that has shown some promise, and some comparisons to the geological features of Canada’s Voisey’s Bay and features deposits mined around 150 years ago for nickel, but has not been a breakout success. Ragnar will move on with rare earths and lithium projects in the Scandinavian nation.

Meanwhile, BHP’s exploration team will be looking to show they’ve found a diamond in the rough.

BHP (ASX:BHP) and Ragnar Metals (ASX:RAG) share price today:

Also buying

It’s not just BHP throwing the cash around today.

In the gold world Northern Star (ASX:NST) has flung a handy $41 million cash and 1.5 million shares worth another $20 mil at Strickland Metals (ASX:STK) for its 346,000oz Millrose gold project.

The big thing Strickland had going for it was proximity.

Identifying a reasonably sized resource on the doorstep of NST’s Jundee gold mine made it a target.

That will bankroll an expansive drill program for Strickland, which will retain the rights to the 109,000oz Dusk til Dawn and 148,000oz Horse Well projects as well as the Iroquois zinc-lead discovery.

Northern Star meanwhile sees geological potential laterally and at depth at Millrose, which will provide supplementary feed to keep its Jundee mill full while it extracts higher grade ounces from underground.

“The acquisition of the Millrose Gold Project presents a very compelling development opportunity that is accretive to the Jundee life of asset plan as it should deliver us a sizeable low cost, high grade supplementary resource feed,” NST MD Stuart Tonkin said.

“This bolt-on acquisition, which also comes with significant brownfields exploration upside, will provide us with further confidence to plan organic and profitable growth for Jundee, which already is the lowest cost asset in our tier-1 portfolio.”

Jundee, bought from Newmont amid a 2013 and 2014 acquisition spree that turned NST into one of Australia’s largest gold miners, is being prepped for the energy transition with Zenith Energy locking in a PPA to incorporate 40MW of wind and solar into its power mix along with 12MW/13.4MWh of battery storage.

NST says it will provide around 56% of the Jundee mine’s power on current modelling.

The deal shows Northern Star has plenty of wiggle room to spend cash growing and sustaining its operations alongside a $1.5 billion investment over the next four years to double the size of the Super Pit’s Fimiston Mill and turn Kalgoorlie’s Golden Mile back into one of the world’s five biggest gold operations.

Also waving the chequebook in front of an ASX junior today is Barrick Gold, the Canadian gold giant which has become increasingly entranced with the taste of copper.

It reportedly had a stab at copper and nickel miner First Quantum Minerals.

For now it is setting its sights a little lower, agreeing a five year option to pick up a 70% interest in the Charaque project in Peru, housed within Australia’s Valor Resources (ASX:VAL).

It will have to pay US$800,000 and spend US$3m on exploration to exercise the option, with an additional US$1m cash payment and sole funding of a PFS required to convert that to an 80% stake.

Valor is planning to focus on drilling nearby at its flagship Picha project, while Barrick will take up the mantle at Charaque, nearby its own tenements in the world’s second largest copper producing nation.

“Barrick already holds land in the area, including tenements immediately adjacent to Charaque, and we look forward to them bringing their significant expertise to lead the exploration program while Valor
retains strong, free-carried exposure to any discoveries,” Valor’s George Bauk said.

“Barrick’s involvement in the ongoing exploration of the Charaque Project will enable Valor to focus our efforts on advancing our flagship Picha Copper Project, where we expect to commence an inaugural drilling program in the September 2023 Quarter.

“This part of Peru has become a very active exploration hotspot, with several major deposits including the San Gabriel and Berenguela polymetallic deposits. The 7.6Moz gold equivalent San Gabriel Gold-Copper Project – which lies just 7km south-east of Picha within the same mineralised corridor – is currently under development, with first production targeted for 2025.”