BHP Billiton returns to Africa through Tanzanian Nickel Investment

UK-based private company Kabanga Nickel said on Monday that BHP (ASX, LON, NYSE: BHP) had pledged to invest $100m in a large nickel project in Tanzania as the world's largest miner sought to expand its portfolio in commodities considered key to the green energy transition.

The move marks BHP's return to Africa, where it has been tepid since breaking up South32 (ASX: S32) in 2015, with a nickel mine in Canada less than a month after withdrawing from the bidding war against Noront Resources (TSX-V: NOT.

Nickel, traditionally used to make stainless steel, is also a key component of lithium-ion batteries, allowing carmakers to reduce the use of cobalt because it is more expensive and the supply chain is opaque.

A return to Africa is in line with chief executive Mike Henry's strategy to expand the search for key metals to "more difficult jurisdictions" because the company has traditionally focused on less risky mining areas such as Australia, Chile and Canada.

BHP Billiton will initially invest US $40 million in the Kabanga nickel mine and US $10 million in Lifezone, which has processing technology. The investment will give the Melbourne-based mining giant an 8.9 per cent stake in Kabanga, which can be raised to 17.8 per cent with an additional $50 million investment.

BHP bought a stake in Kabanga, making the project worth $658 million. This marks a strategic turnaround as the company had planned to exit the nickel business and focus on other commodities and sell its Nickel West unit in Australia in 2014.

The company overturned that decision in 2019 and is now expanding these businesses because it has put nickel at the heart of its business.

Kabanga is considered to be the largest exploitable high-grade nickel sulphide deposit in the world, and its owners have hailed it as a response to Elon Musk's nickel request.

However, the project is located in a remote area in northwestern Tanzania, near the border between Burundi and Rwanda, and lacks infrastructure.

The asset was previously owned by Barrick Gold companies (TSX: ABX) (NYSE: GOLD) and LON:GLEN, which sold the project after being stripped of their retention licenses by former Tanzanian President John Maguvri in 2018.

Kabanga Nickel is expected to start operations in 2025, with a goal of producing at least 65000 tonnes of nickel equivalent a year.

Production will be gradually increased, with the goal of producing at least 40000 tons of nickel, 6000 tons of copper and 3000 tons of cobalt per year.