Forrest makes a ‘whatever it takes’ bet on clean nickel

Brad ThompsonJul 5, 2023 – 10.44am

Andrew Forrest checks out the Mincor operations on his first visit to an underground mine in about 15 years. Picture: Travis Haytonone

Billionaire Andrew Forrest is willing to invest “whatever it takes” to become a global force in the supply of nickel as his privately-owned Wyloo Metals finalises its $760 million takeover of Mincor Resources.

Wyloo and Forrest are counting on a looming lithium-like moment for nickel as car makers and original equipment manufacturers, known as OEMs, look to shore up supply of a mineral that makes up more of a typical electric vehicle battery than lithium.

Andrew Forrest checks out the Mincor operations on his first visit to an underground mine in about 15 years. Picture: Travis Haytonone

A massive divide is opening up between supply from nickel sulphide deposits favoured by battery makers, and nickel laterite operations like those being heavily backed by China in Indonesia, Dr Forrest and Wyloo argue, given their uneven environmental toll.

He wants no part in nickel laterite operations in tropical regions like Indonesia. “We have had significant opportunities in tropical laterite, where the only way to dispose of your tailings is into the oceans,” he said.

“We’re not satisfied that the environmental and ecological analysis has been done to justify deep sea tailing disposal at all.”

Dr Forrest is confident the market will come around to Wyloo’s thinking as it embarks on becoming a major supplier of nickel to car and battery makers, and potentially Fortescue Metals Group-owned battery maker Williams Advanced Engineering.

“Wyloo has targeted nickel sulphides as they are the greenest and cheapest option for battery manufacturing. They have the best economics, can be processed into battery grade nickel with the lowest environmental footprint and are fully recyclable,” he said.

“We are going to give the market a choice between clean nickel and dirty nickel.”

Eyeing other ways back to nickel

The Mincor acquisition gives Wyloo control of mines near Kambalda in Western Australia, a nickel belt that has already produced 1.6 million tonnes of the metal over 50 years.

But Wyloo boss Luca Giacovazzi believes there is much more nickel sulphide in the ground, and that the main ore body may not yet have been discovered.

Wyloo Metals chief executive Luca Giacovazzi. Trevor Collensnone

When Dr Forrest inspected both Mincor’s new Cassini mine and older Long operations and met its workforce, it was his first time underground in about 15 years. The Fortescue founder made his fortune in open pit iron ore mining, but his first big business venture was Anaconda Nickel.

Despite some painful memories from the Anaconda days, Dr Forrest said he remained on the lookout for a way back into nickel, and now regarded it as the most recyclable and undervalued of the battery minerals.

He built up Anaconda from nothing in the late 1990s but was dumped as chief executive in 2001 and later quit the board after losing the support of major backers Glencore and Anglo American when the Murrin Murrin laterite mine failed to deliver on time on the back of processing plant problems.

The Anaconda misfire left Dr Forrest near broke before his spectacular business comeback with Fortescue in iron ore. Murrin Murrin, about 300 kilometres north of Kambalda, has gone on to become a very successful mine under Glencore ownership.

Mr Giacovazzi said producers in the Kambalda region going all the way back to Western Mining Cororation had tended to operate almost hand-to-mouth, only looking to extend mine lives by three-to-five years, but Wyloo would put a heavy emphasis on exploration of both the Kambalda and Widgiemooltha domes.

“I don’t think we have actually found the main ore body in Kambalda. We’d like to go through it systematically and understand the ore body and drill some more of the targets we think are there,” he said.

Final decision in 2024

The Forrest entity now has mines, projects and exploration ground in what it regards as the three best nickel sulphide belts in the world outside Russia: Kambalda, the Ring of Fire region in northern Ontario, and the Cape Smith belt in Quebec that is home to Glencore’s Raglan mine.

Mr Giacovazzi gave the strongest indication to date that Wyloo, in partnership with critical minerals producer IGO, will take Australia further down the road in batteries by building a processing plant at Kwinana, south of Perth, that would mix nickel, cobalt and manganese to make a “precursor” material for battery cathodes.

The partners are due to make a final investment decision on the plant before the end of 2024.

In a statement on Wednesday confirming it had acquired more than 90 per cent of Mincor stock and would proceed to compulsory acquisition, Wyloo said high-grade nickel production from Kambalda would feed a future downstream processing plant in Kwinana.

Mincor has an off-take agreement to supply BHP with nickel that runs into 2025 and is unaffected by the change of control.

BHP’s Nickel West division has signalled it was preparing to make a multi-billion dollar investment decision on the future of its ageing nickel smelter at Kalgoorlie by seeking approval for a 1000-bed temporary workers camp.

The BHP proposal suggests the camp will help house up to 2000 workers it will need for a potential upgrade of the smelter over two years.

Nickel smelting is not required as part of the Wyloo-IGO process to make precursor material, but the Mincor operations rely on using the BHP-owned nickel concentrator at Kambalda.

Wyloo previously upset BHP’s plans when it outfoxed its bigger rival in a battle for Noront Resources and its high-grade nickel discovery in the Ring of Fire.

Resolving the arsenic issue

Wyloo aims to have its Eagle’s Nest project in the Ring of Fire up and running before the end of the decade which, in combination with Mincor, could see it producing 40,000-60,000 tonnes of nickel a year. BHP Nickel West produces about 80,000 tonnes a year, including from Kambalda.

Mr Giacovazzi said BHP was a very good customer for Mincor, and Wyloo looked forward to working with Nickel West. “They are an important part of Kambalda and we recognise that,” he said.

The Wyloo bid for Mincor launched in March was rocked soon after when Mincor revealed some of its product had fallen short of the standards set by BHP, its sole customer. Those quality problems relate mainly to arsenic content in the nickel and are ongoing.

Mr Giacovazzi said the arsenic issues were related to the ramp-up of production at the new Cassini mine and he was confident they could be overcome by blending ores from the Mincor operations.

He refused to speculate on whether Wyloo would have faced a much tougher time securing Mincor with its opening offer, pitched at $1.40 a share, if the quality issues had not been revealed just 10 days later.