PERTH (miningweekly.com) – Copper miner OZ Minerals has taken a final investment decision (FID) on the A$1.7-billion West Musgrave copper/nickel project, in Western Australia.

All key regulatory approvals for the project are in place, and OZ has signed land access agreement with Traditional Owners in the region, as well as securing a A$1.2-billion syndicated funding facility from key relationship banks, subject to final binding agreements.

“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 some A$9.8-billion undiscounted cashflow over its 24-year operating life,” said OZ Minerals CEO Andrew Cole.

“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 A$1.2-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.”

Since completing the prefeasibility study update at the end of 2020, OZ Minerals has embedded a number of value uplift opportunities in the design, project delivery and operations, including increasing the capacity from 12-million tonnes a year to 13.5-million tonnes a year, introducing renewable energy with diesel back-up to the power grid, and adding future ways of working, enabled with autonomous haulage systems and remote operations from day one.

The West Musgrave project is expected to have a mine life of 24 years currently, producing an average of 35 000 t/y of nickel and 41 000 t/y of copper in the first five years of operations, and some 27 000 t/y of nickel and 33 000 t/y of copper in the remaining mine life.

Operating costs for the project are estimated at A$34/t of ore.

The project’s post-tax net present value has been estimated at between A$1.5-billion and A$2.2-billion, and its internal rate of return at between 15% and 19%, while the project pay-back is estimated at 6.5 to 7.5 years.

“In addition to the near 80% 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,” said Cole.

“Our project execution strategy will enable us to mitigate industry-wide cost inflation being experienced globally. An increase in direct project capital to approximately A$1.7-billion is offset by a substantial increase in project value and results in stronger cash flow generation of circa A$1.9-billion 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 A$190-million and our construction schedule allows for first concentrate in the first half of 2025.”

With the FID now taken, the OZ Minerals team will look to award major contracts, increase capacity at the mining camp, mobilise equipment to start earthworks and finalise the power purchase agreement and Living Hub agreements.

OZ Minerals in August this year fielded a surprise A$8.4-billion takeover offer from major BHP, which had offered the copper company A$25 a share.

OZ Minerals said at the time that the offer did not reflect the company’s unique investment proposition, as it is the only primary copper company in the ASX100, or the low carbon intensity of the company’s assets, relative to its peers, or the quality of the company’s growth projects, which includes the West Musgrave asset.