As the world continues its march to net-zero, the race is on for minerals essential to decarbonisation. Copper and nickel are at the top of the mining industry’s wish list.
When OZ Minerals swiftly rejected BHP’s recent $8.4 billion takeover bid, the copper-nickel miner was clear in its reasoning.
OZ Minerals deemed BHP’s “highly opportunistic” $25-per-share offer insufficient given its strong portfolio of future-facing minerals that will prove increasingly important – and valuable – into the future.
“We are mining minerals that are in strong demand for global electrification and decarbonisation … and we have a long-life resource and reserve base,” OZ Minerals chief executive Andrew Cole told investors in a statement knocking back the offer.
“We do not consider the proposal from BHP sufficiently recognises these attributes.”
These attributes, to be specific, are copper and nickel, both of which are set to play a fundamental role in the world’s efforts to reduce emissions and achieve its climate goals.
“The critical role copper will play in achieving the Paris climate goals cannot be overstated,” Goldman Sachs said in a recent report, ‘Green metals: Copper is the new oil’.
“Without serious advancements in carbon-capture and storage technology in the coming years, the entire path to net-zero emissions will have to come from abatement – electrification and renewable energy.
“As the most cost-effective conductive material, copper sits at the heart of capturing, storing and transporting these new sources of energy.
“In fact, discussions of peak oil demand overlook the fact that without a surge in the use of copper and other key metals, the substitution of renewables for oil will not happen.”
In the same vein, nickel is a critical metal in the batteries that are increasingly being used to store energy.
So critical, in fact, that far more nickel than lithium is used in ‘lithium batteries’.
“The lithium is actually two per cent of the cell mass,” Tesla chief executive officer Elon Musk said in a 2016 presentation.
“It is like the salt on your salad.
“It’s a very small amount of the cell mass and a fairly small amount of the cost, but it sounds like it’s big because it’s called (a) lithium-ion (battery).
“But our batteries should be called nickel-graphite, because it’s mostly nickel-graphite.”
Each Tesla battery is said to contain 50kg of nickel.
Looking back on BHP’s move on OZ Minerals, many considered it a further sign the mining giant – and likely the entire resources sector – is pushing to secure more future-facing raw materials like copper and nickel.
“The deal would fast-track BHP’s desire to get more exposure to the metals needed for decarbonisation and electrification, specifically copper and nickel, after a whirlwind four years under chairman Ken MacKenzie that has seen BHP exit the vast majority of its oil, gas and coal assets,” the Australian Financial Review reported in August.
The Paris-based International Energy Agency (IEA) sparked a surge of interest in energy metals with its report, ‘The role of critical minerals in clean energy transitions’, warning that in order to meet climate pledges the world needs, among new lithium and cobalt mines, 60 new nickel mines over the next seven years.
The IEA didn’t specific how many copper mines will be required, but the industry estimates the need for at least 10 new major mines.
“Additional investment is needed in the short-term, particularly in mining, where lead times are much longer than for other parts of the supply chain,” the IEA said.
Copper
Australia is home to the second-largest copper reserves on the planet, behind only Chile, and is the sixth largest producer in the world at around 900,000 tonnes per year.
Government data shows Australia housed 38 operational copper mines in 2020, though that number has increased since then.
Some of the top copper mines in Australia include Olympic Dam (BHP, SA), Mount Isa (Glencore, Qld), Cadia (Newcrest, NSW), DeGrussa (Sandfire, WA), and Prominent Hill (OZ Minerals, SA).
Companies have also been working to develop more copper mines across the country.
Rio Tinto has been drilling tenements in Western Australia, with first ore expected at its Winu copper-gold project in 2024.
Winu is home to an inferred mineral resource of 503 million tonnes of ore at 0.43 per cent copper equivalent, with Rio saying it plans a shallow open-pit mine to take advantage of the resources.
Hammer Metals is developing its Mount Isa project in Queensland, while Havilah Resources has been bullish its Kalkaroo project in South Australia, describing it as the largest undeveloped open-pit copper discovery in the country, reporting 1.1 million tonnes of copper at the site.
“The future for copper production in Australia remains bright through the next few years thanks to increasing prices and large investments in exploration and development,” according to Investing Network News Australia.
The Australian Government forecasts a 2.6 per cent increase in copper export over coming years, with exports expected to hit one million tonnes a year in 2026–27.
Nickel
Australia was previously a major global producer of nickel, but steep price drops in the face of the global financial crisis saw dozens of mines close.
Most notable among these closures was BHP’s then-new Ravensthorpe operation in WA, which somewhat notoriously shut its doors in January 2009 after less than a year of operation.
Ravensthorpe is now owned by First Quantum Minerals and produced 14,018 payable tonnes of nickel in 2021.
Australia holds 22 per cent of the global nickel reserves and produced 170,000 tonnes of nickel in 2020.
The majority of Australia’s nickel reserves are located in WA, which is clearly reflected in the location of the country’s top nickel mines in Australia: Murrin Murrin (Glencore, WA), Nova (IGO, WA), Mount Keith (BHP, WA), Leinster (BHP, WA), and Ravensthorpe.
Armed with the knowledge more will be needed in the future, other Australian majors are looking to expand their nickel operations.
For example, when IGO purchased nickel miner Western Areas for $1.3 billion in June, it added two WA nickel mines to its portfolio – the Forrestania mine, which is already in production, and Cosmos operation, where mining is due to start by the end of 2022.
Prices up By the time BHP made its play on OZ Minerals in August, the price for copper and nickel was trending higher.
The price of nickel briefly soared to a high of $US100,000 per tonne amid a feared shortage after Russia, one of the world’s largest nickel suppliers, invaded Ukraine, but it has since settled at around $US24,000 per tonne.
According to the IEA, nickel is expected to further increase in value as demand grows.
“By 2030, nickel is facing the largest absolute demand increase as high-nickel chemistries are the current dominate cathode for electric vehicles (EVs), and are expected to remain so,” the IEA said.
BHP, for its part, is also high on nickel.
“Longer-term, we believe nickel will be a core beneficiary of the electrification megatrend, and that nickel sulphides will be particularly attractive,” the company said.
BHP currently has deals to supply nickel to Tesla, Ford and Toyota, and while its existing reserves will cover these deals, the major miner is on the hunt for more.
“We’re actively exploring globally, and we’ve significantly increased our own exploration spend within the portfolio of land tenure that we have,” BHP Nickel West asset president Jessica Farrell told the ABC in August.
“If we look out to 2030, we see a 60 per cent increase in electric vehicles, and then out to 2040 we see that going up another 30 per cent, to 90 per cent.
“So we see an incredibly good trajectory for demand, and that’s globally. We’ll also see that transition locally, I think, a lot faster than we expect.”
Looking at copper, prices have been on the rise since last year, reaching a fresh all-time high of $US10,674 per tonne in early March 2022, partially as a result of concerns over low inventory levels.
BloombergNEF believes the drive to electrification will see its value grow by 53 per cent by 2040.
Supply, on the other hand, is only expected to rise by 16 per cent, creating a shortfall of 14 million tonnes of copper by 2040.
“The world may have to rely on new recycling technologies to prevent shortages of copper as the shift toward clean energy supercharges demand for the wiring metal,” BloombergNEF said in an August report.
What is becoming increasingly clear, however, is that the world is starting to take the need to decarbonise more and more seriously and a number of specific mineral resources are needed for that ongoing transition.
Copper and nickel are at or near the top of that list, and many mining companies in Australia look set to benefit.
This feature appeared in the October issue of Australian Mining.