OZ happy to talk about everything except BHP bid

Company News

by Glenn Dyer

No new news on rumours of BHP’s (ASX:BHP) $25 per share marriage to OZ Minerals (ASX:OZL) on Monday, but there was an intriguing technical update about the latter’s newest mining project - the West Musgrave copper nickel development in far eastern WA.

The statement was intriguing because it contained two major points – the first being technical and all about West Musgrave’s possible attraction as a source of nickel suitable for use in batteries, the second was another hint that OZ is still looking for a partner for the project itself.

OZ revealed in the statement that it had been conducting a Mixed Hydroxide Precipitate (MHP) Project Study which is looking at the opportunity of further processing nickel concentrate from the West Musgrave copper-nickel Project in Western Australia into a high-grade nickel product.

MHP is becoming the preferred route for nickel, as the Metal Bulletin’s Fastmarkets group reported earlier this year;

“Mixed hydroxide precipitate (MHP) is increasingly emerging as the preferred nickel intermediary product for nickel sulfate producers in China and beyond, Fastmarkets understands. Companies are now opting for MHP over other traditional routes such as nickel metal (briquettes) and nickel matte.”

“While not new, the production and demand for MHP is set to increase exponentially. On the production side, MHP output has increased by 1,691% since 2011 to the 113,500 tonnes expected to be produced in 2022, according to Fastmarkets research.

“Currently, much of the demand for nickel sulfate can be found in the domestic Chinese market.

“But there is a growing expectation among market participants as Western nations begin to catch up in regard to battery production and consumption that a liquid spot market for nickel sulfate will emerge internationally in the next few years, as both production and demand increase.”

Thus why OZ launched the study into the MHP route. OZ said its study confirms the technical and commercial opportunity of producing a high quality and high grade MHP product and the potential for significant value uplift to the West Musgrave Project (WMP).

“The value uplift includes improving road safety, reducing transport movements, costs and carbon emissions due to a ~65% mass reduction of the non-valuable component of the concentrates transported to customers, a potential for improved payability for the contained metal, and its attractiveness to the battery value chain given its traceability.

“A decision whether to proceed to Feasibility Study phase will be made in parallel with the current West Musgrave potential strategic partner review. The MHP process plant would be constructed after the mine begins production.

“The West Musgrave Project commenced construction this month following final investment approval in September 2022,” OZ said.

Now this sounds a bit techy and eggheaded, but MHP is all the go in the global nickel business and it is emerging as a preferred feedstock for battery makers.

BHP is using the process to eventually produce around 100,000 tonnes of nickel product a year from its plant at its WA refinery in Kwinana, south of Perth.

This product is being sold to companies offshore like Tesla, Posco and Toyota. BHP has spent well over $100 million on its plant.

It is now the dominant use for nickel from Nickel West (BHP says around 85% of its production goes to the battery and EV sector).

Given that example it’s ironic that OZ Minerals is going down the route of its putative suitor in helping to justify spending $1.1 billion on West Musgrave.

OZ Minerals CEO Andrew Cole, said: “An important technical milestone was achieved during the study with a successful pilot plant, confirming the flowsheet and producing a MHP product that is high in nickel content with very low impurities, making West Musgrave MHP a high-quality product when benchmarked against other MHP products in the market today

“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.

“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.

“The work done to date is to a level that allows us to commence a Feasibility Study when ready. A decision on project next steps will be considered in parallel with the current strategic partnership (minority interest) process for the West Musgrave Project.

“Strong interest has been received with high quality responses received to date to enhance the value of the project. The process is also generating further value accretive opportunities for OZ Minerals outside of the West Musgrave Project which we are currently exploring.”

And there was the second point to emerge from the statement on Monday – that unlike BHP, OZ Minerals wants to go down the MHP route with a partner. Which looks increasingly like a foreign battery maker.

But why not BHP, then, if an outside partner is going to be needed?

Mr Cole didn’t mention that and OZ shares remained resolutely above the $25 a share indicator price yesterday, ending the day up 1.1% at $25.56, helped by firmer copper prices on Friday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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