• OZ Minerals puts 20-27% IRR on proposal to produce an intermediary nickel product for battery makers at its West Musgrave mine
  • The mine is set to produce first nickel and copper concentrate in the second half of 2025
  • It comes after OZ approved the construction of the $1.7b mine and rejected an $8.4b takeover bid from BHP


OZ Minerals (ASX:OZL) boss Andrew Cole says mixed hydroxide precipitate could become a chosen nickel feedstock of battery makers as they look to rid their supply chains of carbon emissions.

The copper and gold miner says a plan to head downstream and sell mixed hydroxide precipitate from its $1.7b West Musgrave nickel and copper mine, due to open in late 2025, would be value accretive.

At a capital cost of ~$310 million, a scoping study today put an NPV of $250-460m on the proposed MHP plant at the remote WA nickel project, where OZ is seeking a deep-pocketed partner to help develop one of Australia’s largest nickel deposits.

Producing 35,000tpa of nickel and 41,000tpa copper over its first five years, OZ says the additional step of converting that nickel from a smelter concentrate into MHP would deliver an IRR of 20-27% at this early juncture.

“There has been strong interest from potential customers in the MHP product and we have become increasingly confident that MHP will be one of the preferred feedstocks for battery manufacturers as the world looks to step up its decarbonisation journey in coming years,” Cole said.

“We expect a MHP product from West Musgrave to generate strong demand given its favourable sustainability credentials, with customers placing value on supply from a project that is located in a quality jurisdiction, produced from a project with a low carbon footprint and with the ability to transparently trace nickel from mine site right through the supply chain to final product and end-consumer.”


Nickel sulphate premium

OZ says its pilot plant delivered an MHP product with substantially lower manganese and zinc impurities than competitors, ramping up its attractiveness to customers.

According to CRU Group analysis presented in the OZ study, nickel sulphate for batteries will command a US$2800/t premium long term over LME grade nickel metal.

The main sources of supply for the nickel sulphate market will be MHP (36%) and lateritic matte (40%), with the nickel sulphate market to grow at a CAGR of 18% between 2021 and 2030 to service a rising EV market.

RBC’s Kaan Peker says most of OZ’s savings will be made on the transport side of the equation, with the payabilities not substantially better than selling nickel concentrate in his view.

But there could be a bigger picture at play here, with OZ just months on from rejecting an $8.4 billion takeover bid from BHP, an offer BHP’s CEO Mike Henry again last week indicated the mining giant was not keen to increase.

“Importantly, OZL also indicated that progression to feasibility study will be considered in parallel with a “potential strategic partner”, which in our view, could be considered as a signal for 1) BHP to re-engage post the rejected indicative proposal, 2) further engage parties that are in the data room for West Musgrave, and 3) entice IGO/Wyloo on the project since they remain short nickel units for their own downstream ambitions,” Peker told clients.

OZ said the partner selection process had generated “potential value accretive opportunities outside West Musgrave”.


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