Lifezone buys BHP’s stake in Kabanga, estimates $1.6B project value

[Redator]

Lifezone Metals (NYSE: LZM) on Friday published the results of a feasibility study for its flagship Kabanga nickel project, following up on the more speculative initial assessment released over a month ago.

Located in northwest Tanzania, Kabanga is considered to be one of the world’s largest and highest-grade undeveloped nickel sulfide projects, containing over 2 million tonnes of the battery metal in resources. The deposit also contains significant copper and cobalt as byproduct.

The feasibility study (FS), prepared in accordance with S-K 1300 regulations, outlines the initial development phase of Kabanga, focused on the construction and operation of a 3.4-million-tonne-per-annum underground mine and concentrator. It builds on the project’s first technical report published in June, which was based on the above resource estimate.

The FS now includes an upgrade of the resource to reserves for the sulphide nickel project, totalling 52.2 million tonnes grading 1.98% nickel, 0.27% copper and 0.15% cobalt. This represents the first ever reserve estimate for Kabanga in the project’s 50-year history.

In a press release, Lifezone CEO Chris Showalter said the completion of the feasibility study “is a defining moment” for Lifezone and its Kabanga project. “It confirms the technical and economic strength of one of the world’s most significant undeveloped nickel sulfide deposits.”

However, shares of Lifezone Metals fell by 5.6% on the feasibility results, giving the company a market capitalization of $344.2 million.

Feasibility highlights

According to the FS, mining of the ores would occur for 18 years, during which the concentrator is expected to produce a total of 902,000 tonnes of nickel, 134,000 tonnes of copper and 69,000 tonnes of cobalt in intermediate product. In comparison, the June report outlined a 22-year mine life with total production of 1.15 million tonnes of nickel, 171,000 tonnes of copper and 87,000 tonnes of cobalt.

The all-in sustaining costs rose to $3.36 per lb. of nickel contained in concentrate, net of copper and cobalt byproduct credits, versus $2.71 per lb. previously. Despite this, analysis by CRU International shows that Kabanga would still fall within the first quartile of the global nickel cost curve, Lifezone said. Pre-production costs, meanwhile, decreased to $942 million from $991 million, but with a lower contingency.

As a result of lower production and higher costs, the project’s after-tax net present value (at 8% discount) has decreased to $1.58 billion from $2.37 billion before, while the internal rate of return rose slightly to 23.3% from 22.9%. The payback period is pegged at 4.5 years from first production.

Following the feasibility study’s approval by the board, Lifezone is now proceeding with the execution readiness phase of the project, including the financing process leading to a final investment decision, which is expected in 2026.

Increased control

Also on Friday, the company reached an agreement with BHP to acquire the Australian miner’s 17% equity interest in Kabanga Nickel Limited (KNL), the majority owner of the Kabanga project.

As consideration, Lifezone will pay up to $83 million, comprising a fixed payment of $10 million upon completion of funding or making an investment decision. The rest is contingent on commercial production at Kabanga.

Upon closing the transaction, Lifezone would own 84% of the Kabanga project, with the remainder held by the government of Tanzania. The company would also assume full control of 100% of the offtake from the nickel mine.

“This transaction to own 100% of Kabanga Nickel Limited allows Lifezone to fully align our technical, commercial, and ESG strategy as we advance Kabanga toward the final investment decision,” stated Lifezone founder and chair Keith Liddell.