Why Mining Companies Wage War Over Nickel. Report Ft

In remote northern Ontario, hundreds of kilometers from the nearest railroad or tarmac road, the world's largest mining group and an Australian metal magnate are in a bidding war over a deposit containing millions of tons of nickel, reports the Financial Times. .

The battle between BHP and Andrew Forrest's Wyloo Metals for the takeover of Noront Resources comes as miners race to meet the increased demand for battery metals due to the spread of electric vehicles.

Demand for nickel, which is used in the batteries of the most powerful electric cars and will become the keystone for larger vehicles such as electric trucks, is set to grow 19-fold by 2040, should the world meet its climate targets. of Paris, according to the International Energy Agency.

However, most of the increase in supply over this decade is set to come from Indonesia, a market that is overwhelmingly powered by coal-fired electricity, where Chinese companies are building nickel-processing projects.

This has sparked a rush to secure new sources of supply as companies in rich nations are forced to drastically reduce their carbon footprints.

Australia's IGO said last month that it was in preliminary talks regarding the acquisition of Western Areas, while Rio Tinto supported a US nickel mine developed by Talon Metals. PolyMet, a subsidiary of Glencore, is developing a large copper and nickel project in Minnesota.

We can see an increase in mergers and acquisitions in the nickel industry that is driven by the need for both sustainable nickel and outside the Chinese supply chain, ”said Steven Brown, a nickel consultant. "There has been a bit of geopolitics that has influenced this process – people are trying to de-risk the supply chain by reducing dependence on a country."

BHP's bid for Noront on July 27 was part of CEO Mike Henry's efforts to gain greater exposure to the “metals of the future,” following the company's decision to sell its oil business last month.

But Wyloo Metals, a company created by Forrest, which already owns 24% of Noront, responded last week with an offer 27% higher than that of BHP ($ 325 million).

As we have demonstrated from day one of this process, Wyloo Metals is fully committed to working swiftly and collaboratively to formalize a binding superior proposal for the benefit of Noront's shareholders, ”said Luca Giacovazzi, head of Wyloo.

Shares of Noront were up 146 percent from BHP's offering to trade at $ 0.80 cents.

Alan Coutts, Noront's chief executive, said the mine's sustainability was a key factor behind the interest in the acquisition. The company plans to dispose of its tailings underground, rather than behind a dam on the mainland, and also relies on hydroelectric and nuclear power rather than coal.

"I think provenance is important, and Ontario is a very attractive jurisdiction, because the power grid is not dependent on carbon in any form – all the coal plants have been decommissioned," he said. "This gives a competitive advantage."

Coutts said the provincial government has pledged to build a 300km road to the Eagle Nest depot, in consultation with a number of First Nations communities. He said he expects the road to be built by 2027.

Auto companies are willing to pay a premium for sustainably produced nickel outside Indonesia, analysts say. Since 2024 the EU has proposed that only carbon footprinted batteries can be sold in Europe, making it difficult for them to rely on Indonesian supply.

Tesla has already signed deals to buy nickel from BHP in Australia, Vale in Canada and a consortium backed by Trafigura in New Caledonia. Meanwhile, Korean battery company LG Chem signed a deal last month to buy nickel for six years from Australian Mines, which is developing a project in northern Queensland.

Joe Biden's administration is also keen to develop a North American supply chain for minerals such as nickel, said Henri van Rooyen, chief executive of Talon Metals. At the moment the only nickel produced in the United States is sent to China to enter the battery supply chain, he added.

But Western mining companies will struggle to compete with the volume of nickel coming from Indonesia, according to Jim Lennon, a Macquarie analyst who predicts Indonesian supply will make up 60% of global supply by 2027, up from 30-40%. of today.

"The difference is that China is actually building such plants, while virtually none of the projects outside China are under construction," he said. “These projects are part of the supply solution, but the bulk of the supply will come from Indonesia. There is no alternative ”.

Brown said Chinese companies involved in Indonesian projects, including stainless steel producer Tsingshan and cobalt producer Huayou Cobalt, would also clean up their operations and switch to renewable energy if customers asked.

"It is not impossible for Indonesian producers to move towards a greener product," he said. "Once they do, this green premium will disappear."

(Extract from the press review of Eprcomunicazione)