BHP will invest up to $100m in Kabanga Nickel and has rights to make further investments in a major boost to the Tanzanian firm’s mine development plans.
If BHP invests the full $100m it will have a 17.8% stake in Kabanga Nickel valuing the Kabanga project at $658m.
Describing itself as owning the world’s largest mine-ready nickel sulphide mine in the world, Kabanga Nickel is set to produce its first concentrate in 2025.
Its agreement with BHP sees the Australian-headquartered firm pump $40m direct into Kabanga Nickel and a further $10m to progress Lifezone, a bespoke processing technology unlike traditional smelting and has a reduced carbon impact.
A further $50m will be invested by BHP once certain conditions have been met. Similarly, BHP can make more investments on completion of development milestones.
Kabanga is targeting minimum annual nickel equivalent production of 65,000 tons over a 30 year life of mine consisting of 40,000 tons of nickel, 6,000 tons of copper and 3,000 tons of cobalt. There is exploration upside potential, the company said.
For BHP the investment in Kabanga Nickel makes good on comments from the group in October last year that it would assess investment in riskier jurisdictions having suggested it was interested in the Democratic Republic of Congo’s copper.
“BHP is the ideal partner for Kabanga Nickel bringing significant advantages and expertise that will enable us to move ahead with the project,” said Chris Showalter, CEO of Kabanga Nickel in a statement.
“BHP’s funding support of Lifezone’s hydromet technology – the future of sustainable metals processing – will drive progress towards a greener world,” he said.
He added in an interview with Miningmx that BHP had exclusivity on the investment in Kabanga for a period of time. Conditions ahead of its second tranche related to comfort on legal and regulatory aspects of Kabanga Nickel.
“There are no technical conditions to further investment. But we need to get BHP on the ground and roll our sleeves up,” he said. Covid-19 travel restrictions had held back site visits, Showalter said.
BHP’s investment will be through unsecured convertible debentures. The first $40m tranche converts into an 8.9% stake in Kabanga Nickel. The Tanzanian government has a 16% stake in the project through a local partnership vehicle Tembo Nickel Corporation in which Kabanga Nickel holds the balance.
Proceeds from the BHP investment will be used the accelerate an enhanced metallurgical drilling programme which will support the definitive feasibility programme including as well as construction plans for the hydromet refinery.
The interest of BHP is an important moment for Tanzania’s mining sector following the uncertain direction of the administration of the late former president, John Magafuli. Barrick Gold signed a joint venture with Tanzania in 2020 but the special mining licence granted to Kabanga Nickel by the country in October was its first in ten years.
“This is a turning of the page for Tanzania on its previous history. It is a credit to the administration,” said Showalter of BHP’s proposed investment.
Samia Suluhu Hassan is Tanzania’s current president.