Pure elation as LG Chem seeks nickel and cobalt from TECH

Special Report: Pure Minerals’ plans to build a new generation battery metals refinery in north Queensland have received a major boost after the world’s largest supplier of electric vehicle batteries, LG Chem, signed on as a potential customer.

And the involvement of the South Korean company could lead to the development of a much bigger operation as it is seeking more nickel and cobalt than Pure Minerals (ASX: PM1) had originally anticipated producing.

Pure Minerals announced on Friday it had entered a non-binding memorandum of understanding (MoU) to supply LG Chem with up to 10,000 tonnes of contained nickel and approximately 1,000 tonnes of contained cobalt from its proposed Townsville Energy Chemicals Hub (TECH) Project.

The TECH Project, which is wholly owned by Pure Minerals subsidiary Queensland Pacific Metals, will employ a technology known as the Direct Nickel (DNi™) Process as the primary processing method to extract nickel, cobalt and other valuable co-products from high grade laterite ore imported from New Caledonia.

A pre-feasibility study on the project completed in April detailed an operation producing ~6,000t of contained nickel (26,400 tonnes of nickel sulphate) and ~650t of contained cobalt (3,100t of cobalt sulphate) as well as high purity alumina and iron ore.

One of the first acts to be conducted jointly under the MoU will be evaluating the potential to increase the scale of the project to meet LG Chem’s demand, a process that will include full consideration of financial outcomes, funding potential and other key factors.

Pure Minerals expects that a larger project will deliver a reduction in capital intensity, more favourable project economics, added credibility for the company and more jobs and other benefits for Townsville and north Queensland.

“When originally sizing the TECH Project, our aim was to deliver the smallest commercially sized project that would be economically viable and fundable,” CEO Stephen Grocott, a mineral processing expert and former General Manager with Rio Tinto, BHP and Clean TeQ Holdings, explained.

“With LG Chem’s involvement, there is now the potential to scale up the TECH Project to a size that offers even more attractive capital efficiency. We will immediately commence work on this evaluation and once the plant size is finalised, we will be able to formally commence a Bankable Feasibility Study and project approvals.”

The MoU with LG Chem ultimately envisages negotiations in good faith to enter into a binding offtake agreement for the purchase of nickel and cobalt over an initial term of 3-5 years.

By way of financing assistance, the South Korean company will consider a prepayment for offtake as well as the prospect of becoming a partner in the project through a direct equity investment.

Strong chance to find funding

An Independent Investment Research Report on Pure Minerals published earlier this year tipped TECH as a greater chance of attracting a heavyweight financial partner than other pre-production nickel projects.

“Because the [TECH] project is designed to produce specialty chemicals for sale directly to battery makers and has outstanding eco-friendly credentials perfectly suited for the sustainability-conscious EV market, it is much more likely to attract a strategic partner from the battery or automobile manufacturing sector than would an HPAL project,” the report said.

LG Chem, which is South Korea’s largest chemical company, accounted for a 25% share of the global EV battery market in the eight months from January to August this year, just pipping Chinese manufacturer CATL (24%) for the most sales.

This story was developed in collaboration with Pure Minerals, a Stockhead advertiser at the time of publishing.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.