Canada Nickel Company Inc V.CNC

Twiggy is moving fast where BHP is moving slow

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Via @ourrug  at CEO : 


 Twiggy is moving fast where BHP is moving slow

https://www.afr.com/companies/mining/twiggy-is-moving-fast-where-bhp-is-moving-slow-20230321-p5cu05

Andrew Forrest talks a lot about fixing climate change and cleaning up the world’s oceans, but it seems his main mission in life is to frustrate BHP. Not content with busting open the Australian iron ore duopoly that BHP enjoyed with Rio Tinto in the first decade of this century, Forrest’s private company, Wyloo Metals, has gone around the world the past couple of years buying whatever it reckons BHP wants or needs.


It started with the 2021 bidding war for Canadian explorer Noront – and Tuesday’s $760 million bid for Mincor is the latest example. Mincor is a small fish, but it produces nickel ore that is important to BHP both from a volume and geology perspective.


BHP can’t dig up enough nickel ore to run its Kalgoorlie smelter at the desired efficiency, so in recent years it has relied on neighbours like IGO, Western Areas and Mincor to supply extra volumes. The Kalgoorlie smelter also has a chemistry problem; it was built to digest ore with a certain amount of iron for each unit of magnesium oxide, but BHP’s mines have in recent years served up ore with dramatically lower iron levels.


So when Mincor opened a small mine in the Kambalda region that originally fed the Kalgoorlie smelter in the 1970s, it provided more than a pleasant dose of nostalgia; it was the Goldilocks material for the smelter.


A mystery Mincor’s market capitalisation was about $93 million when BHP negotiated a term sheet with the junior for supply of its nickel ore into the BHP system in March 2019. Why BHP didn’t just swallow Mincor whole back then remains a mystery, as we watch Forrest’s offer of $760 million for Mincor and wonder whether BHP will make a counterbid.



After all, the renaissance of nickel has been a central part of BHP’s public narrative since 2019 when the company declared it was no longer trying to sell its WA nickel business. If Forrest does get hold of Mincor, it will be the second time in a year that a supplier to BHP’s Kalgoorlie smelter has been acquired by someone other than BHP: Western Areas was swallowed by IGO last year. Forrest stuck his nose into that saga too.


His rapid buying of Western Areas shares during the takeover bid garnered for himself an improved takeover price and a right to own part of any nickel sulphate plant that IGO chooses to build in Australia.


Nickel sulphate is a crystalline commodity that battery makers and electric vehicle manufacturers need. Volume problems BHP built Australia’s first nickel sulphate plant at Kwinana over the past five years and now sells the majority of its nickel to battery and electric vehicle manufacturers like Tesla, rather than the less-fashionable, stainless steel makers that traditionally bought from its Nickel West division.




BHP risks being held to ransom here; if IGO and Forrest get enough nickel resources to warrant investment in their own nickel sulphate refinery, the volumes that Mincor and IGO currently sell into BHP’s Kalgoorlie smelter could be diverted, exacerbating BHP’s volume problem. Throw in Noront, and Forrest’s private company, Wyloo Metals – led by Luca Giacovazzi, is starting to look like many of the things BHP wants but doesn’t have.



BHP partially mitigated the Kalgoorlie smelter’s volume problem last year when it offered $9.6 billion for OZ Minerals, whose West Musgrave project will provide exactly the sort of nickel geology the Kalgoorlie smelter needs. But even the OZ Minerals deal – likely to be formalised on April 13 by a vote of OZ shareholders – raises questions whether BHP is moving too slowly on these potential deals.



BHP had worked closely with OZ in the South Australian copper fields – the region that was the major motivation for the $9.6 billion acquisition – for a long time before deciding to pay $28.25 for each OZ share. OZ shares traded between $3 and $11 between 2013 and mid-2020, a period when BHP regularly predicted that future copper supply would fall short of future copper production, ensuring attractive prices for the red metal.


What took BHP so long to move on OZ? BHP is a well-run company full of smart people; it’s not just possible, but entirely probable they know things about the nickel industry we don’t.



Teck on the menu?

Perhaps within their WA nickel mining tenements there is a secret, monster resource we haven’t heard about, that will solve all their volume problems. Perhaps they have bigger fish to fry. Rival diversified miners such as Teck Resources and Vale are either talking about, or actively separating their future-facing metals from their steelmaking commodities like coal and iron ore.


It is entirely possible that BHP’s priority is gobbling up the nascent Teck Metals company that BHP alumnus Jonathan Price is creating in his new office in Vancouver, or the base metals company that Vale regularly threatens to spin out. But even if those bigger fish are on the menu, it’s hard to work out why BHP hasn’t started with a quick canap like Mincor.