Struggling nickel sector ‘disappointed’ by critical minerals snub
Dec 18, 2023 – 12.01am
Warning: Wyloo Metals chief executive Luca Giacovazzi. Trevor Collensnone
The boss of Andrew Forrest’s private mining company says nickel’s omission from Australia’s expanded critical minerals list is “disappointing” at a time when weak prices for the battery metal areendangering“hundreds” of Australian mining jobs.
Wyloo Resources bossLuca Giacovazziissued the warning on the same day the federal department of industry warned of more “downward pressure” on nickel prices in 2024 because Indonesian miners were poised to oversupply nickel markets for years to come.
Warning: Wyloo Metals chief executive Luca Giacovazzi. Trevor Collensnone
The Australian nickel sector has enjoyeddecade-high pricesover the past two years as companies such as IGO, Wyloo and POSCO collectively spent more than $2 billion buying smaller miners in the belief nickel would enjoy strong future demand from battery manufacturers.
But those dea ls arelooking troublednow that a supply surge has outpaced demand growth, almost halved nickel prices since January, andforced Australian miners such as Panoramicinto administration.
Mr Giacovazzi has previously floated a desire to build downstream nickel processing in WA but said a decision by Resources Minister Madeleine King to deny nickel access to the government’s “critical” minerals list was a blow.
“It’s disappointing that nickel has not been classified as a critical mineral given its importance to the energy transition and its supply concentration risk. Indonesia now accounts for over 50 per cent of global nickel supply, with ownership tightly held,” he said.
“Australian nickel producers are struggling to compete in a low nickel price environment, potentially impacting hundreds of West Australian jobs, while we see more dirty nickel from overseas competitors come to market and international governments prioritise investment in domestic supply chains.”
First Quantum and POSCO’sRavensthorpe nickel minein WA lost $US28 million ($41.7 million) in the three months to September 30. Wyloo’s Mincor business had cash outflows of $17.1 million in the eight weeks to May 26 – a period when nickel prices were more than 30 per cent higher than current levels.
Inclusion on the critical minerals list is expected to make it easier for project proponents to apply for funding from the federal government’s $4 billion critical minerals facility.
Ms King has created a new supplementary list of “strategic” minerals that includes nickel and copper – a similar approach to that taken by the European Commission.
Strategic raw materials are those identified as being important for sectors such as defence and decarbonisation, and which could face a supply threat in future, but are not at apparent risk today.
However, nickel is included on the US critical minerals list and Mr Giacovazzi said Australia should be trying to maximise the advantages offered by eligibility for the US Inflation Reduction Act.
“Australia also has an advantage as an IRA-compliant producer of clean nickel and should be adopting policies to leverage this position and avoid the shift of talent, expertise and capital to other countries,” Mr Giacovazzi said.
“We need government support if we are to build a long-term nickel industry in our country and make Australian batteries from Australian metals, rather than take up the significant incentives offered by countries like South Korea and build our facilities there.”
Warren Pearce from the Association of Mining and Exploration Companies said excluding nickel and copper from the critical minerals list was a “wasted opportunity” that “missed the mark completely”.
Mr Pearce said the economic opportunity for Australia in developing nickel and copper projects was dramatically bigger than for minerals like arsenic, selenium and molybdenum, which were awarded “critical” status last week.
The benchmark price for nickel measured by the London Metals Exchange was $US16,762 ($25,000) per tonne on Friday night; the metal was fetching just over $US30,000 a tonne in January.
The department of industry predicted there would be no dramatic improvement in nickel prices in the near future, forecasting an average nickel price of $US17,875 per tonne in 2024 and $US18,875 a tonne in 2025.
Those sorts of prices could test BHP’s willingness to continue investing billions in its WA nickel division, which could report a loss at the miner’s half-year results in February based on the fact it made just $US7 million of underlying earnings before interest and tax when nickel prices were stronger in the six months to June 30.
BHP told investors in August it would spend about $US800 million on its nickel division in the year to June 30, 2024, and that spend does not include construction of the $1.7 billion West Musgrave nickel mine, which BHP inherited via acquisition of OZ Minerals.
BHP is considering whether tospend more than $500 million on a big renewalof its Kalgoorlie nickel smelter to enable it to consume a wider range of ore chemistries.
BHP has not publicly announced a final investment decision on the Kalgoorlie smelter renewal, despite signalling in documents to the federal government in April that procurement and construction activities would be underway in 2023 with a view to completing the project by 2027.
The vertically integrated nature of BHP’s nickel division – it owns mines, refineries and smelters in WA – means it is best placed to continue investing in nickel projects through the cyclical downturn.
But the nickel price rout will make it difficult for other miners to justify new investment.
According to the department of industry, there were ten local nickel or cobalt projects – the two metals typically occur together in the same geology – in the works as of October 31.
Three of those ten projects were at the advanced feasibility study stage. Those three projects would inject $3.7 billion of investment to the economy if sanctioned, but with nickel and cobalt prices depressed, they appear unlikely to go ahead.
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