OZ Minerals’ (ASX: OZL) Board has given final investment approval to develop its fourth operating asset, the West Musgrave copper-nickel Project in Western Australia, for direct capital investment of approximately A$1.7 billion.
Investment approval for West Musgrave unlocks one of the largest undeveloped nickel projects in the world and, with expected lowest quartile costs, it is set to generate ~A$9.8 billion undiscounted cashflow over its 24-year operating life,” OZ Minerals CEO, Andrew Cole, said.
“Along with the support we have received from the Ngaanyatjarra people and Western Australian government, with all key regulatory approvals now in place, a number of our relationship banks have provided credit approved commitment letters for a new $A1.2 billion syndicated facility to support development of the West Musgrave Project in addition to our existing facilities.
“We are also considering the option to sell down a minority interest in the Project to a strategic partner building on the significant in-bound interest we have received over the past six months.
“In addition to the ~80 per cent renewable energy sourced from wind and solar for power generation, the Project scope includes a pathway to net zero scope 1 emissions by 2038. The pathway is aligned with the potential transition to an electric haulage fleet at the first engine change out, together with exploring other initiatives to reduce diesel and the application of offsets.
“Our project execution strategy will enable us to mitigate industry-wide cost inflation being experienced globally. An increase in direct Project capital to approximately $1.7 billion3 is offset by a substantial increase in Project value and results in stronger cash flow generation of circa $1.9 billion7 during the first five years of production.
“We have a strong track record of project delivery and we are supported by our key supply partners, who will share development risk towards delivery of the Project on time and on budget. To further manage inflationary pressures, we have increased our contingency allowance to ~$190 million and our construction schedule allows for first concentrate in H2 2025.”
Chairman, Rebecca McGrath, said the Board’s approval of West Musgrave is a fundamental step towards realising OZ Minerals’ strategy to evolve into a modern minerals producer set to supply global copper and nickel markets as the world moves into the de-carbonisation and electrification era.
“The funding approach to West Musgrave allows us to continue to fund the current sequencing of brownfields expansions underway in the OZ Minerals portfolio through operating cashflow while providing certainty and flexibility to further maximise the value of West Musgrave.
“Key to today’s announcement is the support for the Project by the Ngaanyatjarra people, with the signing this week of the Land Access Agreement after more than five years of collaboration to facilitate a productive long- term partnership.
“The Board considered the value created for all stakeholders when making the final investment decision. We can see the enormous potential of this Project for:
- our workforce in a modern flexible working environment
- the local community in economic and wellbeing opportunities
- our shareholders in realising our growth potential
- governments in income from royalties, exports and jobs
- customers who we will assist in meeting demand for minerals critical to the electrification and decarbonisation era
- our suppliers who we look forward to working with to build a modern, low carbon emissions mine.”
The West Musgrave Project team has been working closely with key contracting partners to design and prepare for rapid execution of the Project. Site mobilisation is set to commence next month. Long-lead items have been secured along with production slots and contract partners have been identified for 80 per cent of the material contracts.
Value uplift opportunities have been embedded in the design, project delivery and operations in the period since completion of the Pre-Feasibility Study Update (PFSU) in December 20209. They include:
- Processing capacity uplift from 12 Mtpa to 13.5 Mtpa through mine planning and plant optimisation
- Validation of vertical roller mills through pilot plant testing
- Renewable energy (solar, wind and battery) with diesel backup to be delivered under a Power Purchase Agreement (PPA), with final vendor selection and confirmation of indicative pricing currently being advanced into definitive agreements
- Future ways of working enabled with Autonomous Haulage System and remote operations from day one
- Living Hub modern accommodation and lifestyle facilities to be delivered, owned and operated by a third-party provider.
Next steps
The Project team will immediately progress:
- Award of contracts with major partners
- Increase capacity of the camp to ~250 beds by early 2023
- Mobilisation of equipment to commence earthworks
- Finalisation of the PPA and Living Hub agreements
- Increase owner team resources in line with plan including operational readiness personnel.
