South Korea’s POSCO pays $US240m for part-stake in First Quantum’s Ravensthorpe nickel mine in WA
Canada’s First Quantum Minerals has cut the biggest Australian nickel deal in years as battery makers jostle for position in the once-unloved commodity
Canada’s First Quantum Minerals has cut the biggest Australian nickel deal in years, selling 30 per cent of its Ravensthorpe nickel mine to metals giant Posco for $US240m as the pair look to establish the mine’s foothold in the battery production chain.
The deal is the biggest since IGO’s $1.8bn merger with Sirius Resources in 2015, and underscores the resurgence of Australia’s nickel sector as companies jostle for position in the battery minerals supply chain.
South Korea’s Posco is a major supplier of anodes and cathode materials used in battery making, and the deal secures the South Korean major a long-term offtake deal for 7500 tonnes of nickel produced at Ravensthorpe, about a quarter of its 30,000 tonne-a-year nameplate capacity
The agreement will also drive the pair’s potential move further downstream in the nickel industry in Australia, as they look to the feasibility of converting Ravensthorpe’s nickel hydroxide concentrate to nickel sulfate, mirroring BHP’s recent move to build a nickel sulfate plant for its Nickel West operations in WA.
The Posco deal puts a valuation of $US740m on Ravensthorpe, an extraordinary turnaround for First Quantum given the Canadian miner paid only $US320m to BHP for the entire operation in 2009.
It also offers another lease on life for the once troubled nickel mine, built by BHP as the new centrepiece of its WA nickel division when the price was booming in the mid-2000s but mothballed within months of its official opening in 2009 – years late, and at $US2.1bn, more than twice its original cost estimate.
The late start meant the mine missed the height of the nickel boom, and BHP put Ravensthorpe into care and maintenance as the price plunged and the complex processing plant, which uses high pressure acid leaching to turn difficult-to-treat laterite ore into a concentrate, struggled with teething troubles.
First Quantum picked up the mine for a bargain $US320m in late 2009, and Ravensthorpe returned to production in 2012. But a burst acid tank forced its temporary closure in 2014, and falling nickel prices saw it back in mothballs in 2017, before reopening again last year.
The Canadian miner said Ravensthorpe produced 4642 tonnes of nickel in concentrate in the first quarter of the year, and has a mine life of more than 20 years.
Always among the most volatile of commodities, interest in nickel has surged as major miners have progressively identified the commodity as a key opportunity for the world’s energy transition.
Nickel helps increase the energy intensity of batteries used in electric vehicles, and Posco is currently expanding its battery material business to account for the shift to the next generation of technology, likely to require even more nickel than the last.
While nickel use in batteries still accounts for only a small portion of the total market – most nickel produced still goes into stainless steel – the growth in battery use in vehicles and for industrial and home-storage use is expected to dramatically expand the market later this decade.
At the same time, nickel’s price volatility has made it difficult to justify developing new mines until the past two years, when a sharp lift in prices – nickel was worth only about $US10,400 a tonne in January 2019, and peaked at $US19,700 a tonne earlier this year – helped underpin the return of interest to the sector.
Only a few years ago BHP was looking to sell Nickel West, but the company has now returned the division to become a core part of its portfolio. Rio Tinto has been on the hunt for nickel assets over the past two years, and other major mining houses, including South32 and OZ Minerals, have also identified the commodity as a key part of the futures.
At the same time, mid-tier miners such as WA’s Western Areas and Mincor Resources are developing new mines, underscoring the return of the commodity to favour in Australia’s mining sector.
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