BHP takes minority stake in privately held Kabanga Nickel

Less than a month after walking away from a bidding war with Wyloo Metals for Noront Resources (TSXV: NOT) and its Ring of Fire nickel assets in Canada, BHP (NYSE: BHP; LSE: BHP; ASX: BHP) is investing an initial US$40 million for a 8.9% equity stake in privately held Kabanga Nickel, which owns the Kabanga nickel sulphide deposit in western Tanzania, one of the largest development-ready nickel sulphide deposits in the world.

BHP then has the opportunity to invest another US$50 million in Kabanga Nickel that will boost its stake in the company to 17.8%. (It also has been granted the right to make further investments in the company in the future.)

In addition, BHP is investing US$10 million in a company called Lifezone Ltd., which owns the processing technology. Lifezone has patents in more than 150 countries on its hydrometallurgical technology, which according to Kabanga is more cost-efficient than smelting, uses less energy, has a smaller footprint, and ensures that finished Class 1 battery grade nickel, copper and cobalt will be produced in Tanzania.

The funds from BHP’s investment — its first investment on the continent in many years after selling its last asset in Africa (an iron ore deposit in Guinea) in 2019 — will be used to accelerate development of the Kabanga deposit.

The U.K.-based company expects first production in 2025 and will be targeting production of 40,000 tonnes of nickel, 6,000 tonnes of copper and 3,000 tonnes of cobalt a year. Kabanga Nickel says the deposit has a mine life of about 30 years and has additional exploration potential.

The investment from BHP,  Kabanga Nickel says, “will support an acceleration in the mine’s development, including an enhanced metallurgical drilling programme to enable update of the definitive feasibility study and support the construction plans for the hydromet refinery.”

The studies, it continued, are expected to be completed by the end of 2022, and “site and infrastructure development is already underway.”

According to Kabanga Nickel, “previous resource estimates suggest the deposit contains about 58 million tonnes of ore containing about 1.52 million tonnes of nickel, alongside significant amounts of copper and cobalt.” It also stated that the deposit “has contained in-situ nickel equivalent resources estimated at 1.86 million tonnes and an in-situ nickel equivalent grade of 3.44%.”

Citing statistics from the World Economic Forum, Kabanga Nickel also noted that between 2018 and 2030, demand for high-purity Class 1 nickel is expected to increase by 24-fold.

“The quality of the ore body and its geology means the project will be a cradle-to-gate mining operation producing Class I nickel, copper and cobalt refined metals in Tanzania ready for use by OEMs [original equipment makers] and battery makers without any further processing.”

Kabanga Nickel was founded and is majority owned by Keith Liddell, Chris von Christierson and Peter Smedvig and their families. The founders along with management own more than 95% of the company.

The company was set up more than a decade ago to invest and secure deposits of metals and minerals needed in ‘green’ energy and to reduce greenhouse gas emissions, and fight global warming.

Kabanga Nickel is the founders’ most recent venture into the battery metals space, where its nickel and cobalt end products will be supplied to the lithium-ion battery industry. Lifezone Ltd. was set up by Liddell to exclusively own and develop the patented rights to the Kell process, which is a hydrometallurgical process he says can treat platinum group metal and refractory gold ore without smelting or using cyanide, respectively. Von Christierson and Smedvig invested in Lifezone in 2011.

The founders’ other investments include Talga Group Ltd., in which they invested in 2016. The Talga Group owns a high-grade graphite deposit in Sweden. They also invested in Cornish Lithium, a company that has a lithium project in the U.K.

In 2009, their first investment was in Sedibelo Platinum Ltd., which owns a platinum mine in South Africa.