By Rhiannon Hoyle
Oz Minerals Ltd., the target of a recent takeover bid from BHP Group Ltd., said its board has approved the 1.7 billion Australian dollar (US$1.1 billion) West Musgrave copper-nickel project in Western Australia.
The Adelaide, Australia-based miner last month rejected a takeover approach from the world’s biggest mining company by market value, which is seeking to expand its copper and nickel operations, calling the offer highly opportunistic following a fall in copper prices.
Oz Minerals’s approval of the project in Western Australia’s remote Musgrave Province adds to the company’s two copper-and-gold mining operations in South Australia, and another in Brazil.
On Friday, the miner said key regulatory approvals and a land access agreement have been finalized and first concentrate is expected in the second half of 2025. It said a number of banks have provided credit-approved commitment letters for a new A$1.2 billion syndicated facility to support the development and that it is also considering selling down a minority interest in the project to a strategic partner.
“The potential for a strategic alliance follows significant inbound expressions of interest from parties with a strategic interest in modern minerals over the last circa six months,” the company said.
Costs for the project have increased. The A$1.7-billion nominal capital-investment estimate, and a A$1.6-billion estimate in real terms, compare to a A$1.1-billion real projection from the company’s updated prefeasibility study in 2020.
“The macroeconomic and geopolitical environment has been highly volatile, resulting in inflation and cost pressure,” while the project scope and design has also been altered since the earlier study, Oz Minerals said.
First production in 2025 should align with the start of a forecast nickel-market supply deficit, Oz Minerals said. Nickel, which has historically mostly been used to make stainless steel, is in increasing demand as a battery ingredient for electric vehicles.
Oz Minerals expects average annual production of roughly 35,000 metric tons of nickel and 41,000 tons of copper in the first five years, and roughly 28,000 tons of nickel and 35,000 tons copper annually over the mine’s projected 24-year life. The company estimated an internal rate of return on the project of 18-22%.
“Investment approval for West Musgrave unlocks one of the largest undeveloped nickel projects in the world and, with expected lowest quartile costs, it is set to generate circa A$9.8 billion undiscounted cash flow over its 24-year operating life,” Chief Executive Andrew Cole said.
The West Musgrave project is one of the draws for rebuffed suitor BHP, which is already a major producer of nickel in Western Australia and last year entered a nickel-supply deal with Tesla Inc.
BHP has said it is disappointed Oz Minerals didn’t entertain its offer, but Mr. Cole recently told reporters Oz Minerals’s shareholders backed the miner’s decision to reject the A$25-a-share takeover approach.
Write to Rhiannon Hoyle at firstname.lastname@example.org