OZ Minerals is testing the idea of processing its own nickel and supplying battery makers direct
Nickel from OZ Minerals’ West Musgrave project could be processed on-site and supplied direct to electric vehicle or battery makers, with the company now looking into the idea.
OZ Minerals will consider on-site nickel processing at its $1.1bn West Musgrave project in Western Australia in a bid to supply battery and vehicle makers hungry for emissions-free metals.
In releasing its full year production report on Thursday, the company said its West Musgrave project, in remote northern WA, was on track for a final investment decision in the second half of this calendar year.
The project is being designed to be self-sufficient from an energy perspective, powered by its own on-site renewable energy plant.
The company has now revealed it is also at the early stage of considering whether on-site processing, as opposed to shipping concentrate offshore to a third party smelter, is viable.
Battery manufacturers have increasingly been going up the supply chain to secure battery minerals, with Tesla supplier Sichuan Yahua Industrial Group for example investing directly in, and securing an offtake agreement with NT-focused lithium developer Core Lithium last year, along with fellow Chinese company Ganfeng Lithium.
OZ managing director Andrew Cole said Australian nickel concentrates were typically shipped to smelters around the world for refining, and that was certainly the base case for the project.
“Having said that, we have started a project now, we’ve actually just recruited a dedicated project director to run this, to take nickel concentrate and turn it into nickel on-site,’’ Mr Cole said.
“There’s a number of benefits potentially that we could recognise by doing that.
“It also allows us to integrate into the energy storage value chain. Instead of selling it to a smelter, we potentially could form a partnership with a battery manufacturer or a car manufacturer who is looking for that dedicated supply chain link.’’
Mr Cole said the company also had a goal of delivering zero Scope 1 emissions.
“In order to do that, it would be great to have line of sight all the way from the resource on the ground, through to that product being used in a clean, green electric vehicle for example.’’
Mr Cole said OZ was talking to “a number of interested third parties’;’ who were interested in getting involved further up the value chain.
Mr Cole said while there was a general shortage of battery metals, end users were also focused on the emissions profile of the metals they were buying.
Along with West Musgrave, OZ has several developments in train this year, with project starts and updates weighted to the second half.
These include the Wira shaft project at the Prominent Hill mine in SA, which will push mine life there out to 2036 at least, while the construction of a new crusher at the Carrapateena mine, also in SA, will start in the third quarter.
OZ said on Thursday its full year revenue came in at $2.096bn, up 56 per cent, with the uplift due to increased production and strong copper prices.
OZ said its cash balance as at December 31, 2021 was $215m and it had an undrawn debt facility worth $480m, “providing significant liquidity to progress expansions at Carrapateena and Prominent Hill’’.
The miner produced 125,486 tonnes of copper in calendar 2021, at the lower end of its guidance range of 120,000-145,000, and 237,263 ounces of gold, against guidance of 220,000-243,000 ounces.
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Guidance for the current year has been set at 127,000-149,000 tonnes of copper and 208,000-230,000 ounces of gold.
Costs are expected to spike however, with C1 cash costs expected to jump from US64.2c per pound last year to US85c-95c, although all in sustaining costs will grow in a more measured fashion up from US134.3c to US135c-US155c.
Mr Cole said the industry was again dealing with high labour costs, while materials inputs were also getting more costly.
“I think the site teams have done very well with operating costs,’’ he said.
“The inflation that we’re seeing in some areas of our business are on some of the more staple things like concrete, steel, certainly freight, both domestic and international.
“Labour availability and labour rate escalation are also under pressure.’’
Mr Cole said the company had recently recruited several key executives including a new head of IT as it set itself up for the next phase of growth.
“We have a growth pipeline built which we’re now working our way through,’’ he said.
“We’re now looking at what’s next for the company. What is the next growth platform for this group, so I brought in another executive to help us dig through that.’’
RBC Capital Markets said it has an “underperform’’ rating on the stock, after a weak quarterly result to end the year, with “copper and gold production at Prominent Hill the key miss’’.
RBC has a $24 price target on OZ, whose shares were 3.8 per cent lower at $25.26 in afternoon trade.