Tag Archives: West Musgrave

BHP eyes South Australian copper basin consolidation with latest OZ Minerals offer

BHP has submitted a revised non-binding indicative proposal to the Board of OZ Minerals Limited (OZL) that, subject to a successful four-week due dilligence period, could see the major miner acquire the mid-tier base metal-focused miner.

The offer to acquire 100% of OZ Minerals by way of a scheme of arrangement for a cash price of A$28.25/share ($18.9/share) is a 13% increase on the offer BHP previously put forwad and was rejected by the OZ Minerals Board. It, according to BHP, represents the best and final price the mining major is willing to offer under, in the absence of a competing proposal.

The OZ Minerals Board has confirmed to BHP that it intends to unanimously recommend the revised proposal to OZ Minerals shareholders as being in their best interests in the absence of a superior proposal, subject to the parties entering into a binding scheme implementation agreement (SIA) following completion of BHP’s confirmatory due diligence and an independent expert concluding that the revised proposal is in the best interests of OZ Minerals shareholders, it said.

The proposed transaction, valuing OZ Minerals at an enterprise value of A$9.6 billion, is expected to deliver significant value creation for both BHP and OZ Minerals shareholders, BHP says, explaining that OZ Minerals shareholders would receive an offer price significantly above trading levels and average broker price targets, prior to BHP’s initial proposal on August 5, 2022. At the same time, BHP shareholders would gain increased exposure to future-facing commodities, adding copper and nickel resources that are essential to support the global megatrends of decarbonisation and electrification.

The deal would also create a South Australian copper basin, which, according to BHP, could unlock potential operational synergies due to the proximity of OZ Minerals’ Carrapateena and Prominent Hill operations with BHP’s existing Olympic Dam asset (pictured) and Oak Dam development resource.

The West Musgrave project, meanwhile, will add a large greenfield nickel option to BHP’s Nickel West premier nickel sulphide resource position in Western Australia.

BHP has now entered into a Confidentiality and Exclusivity Deed with OZ Minerals in relation to the revised proposal. This has seen OZ Minerals grant BHP four weeks to undertake exclusive confirmatory due diligence and negotiate a binding SIA reflecting the key terms of the revised proposal. The four-week period is expected to commence on or around November 21, 2022.

BHP CEO, Mike Henry, said: “BHP’s proposal represents a highly compelling offer for OZ Minerals shareholders, providing certainty at a time of macroeconomic uncertainty and market volatility, and increasing risks for the industry.

“The combination of BHP and OZ Minerals’ assets, skills and technical expertise provides a unique opportunity not available under separate ownership, with complementary resources including the Oak Dam exploration prospect and existing facilities within close proximity, backed by BHP’s strong balance sheet, capital discipline and commitment to sustainable development.”

OZ Minerals Managing Director and Chief Executive Officer, Andrew Cole, said: “BHP’s revised proposal is a clear reflection of OZ Minerals’ unique set of highly strategic, quality assets in quality jurisdictions and an enviable multi-generational growth pipeline of copper and nickel
assets in strong demand due to global electrification. We look forward to working with BHP in a collaborative way to progress the revised proposal in the best interests of OZ Minerals’ and its stakeholders.”

OZ Minerals’ West Musgrave copper-nickel plan receives board approval

The OZ Minerals Board has greenlit the build of the West Musgrave copper-nickel project in Western Australia, paving the way for the development of a remote asset using dry grinding technology, autonomous haulage and a significant volume of renewable power.

West Musgrave is set to become OZ Minerals’ fourth operating asset when it starts producing concentrate in the second half of 2025, in the process becoming the company’s cleanest and greenest mine with plans to reach net zero Scope 1 emissions by 2038.

The feasibility study the board signed off on details a 13.5 Mt/y operation with average production of circa-28,000 t/y of nickel and circa-35,000 t/y of copper over a 24-year operating life. Coming with a A$1.7 billion ($1.1 billion) direct initial capital expenditure bill, West Musgrave could provide cash flow generation of circa-A$1.9 billion during the first five years of production based on OZ Minerals’ projections.

One of the interesting additions to the process flowsheet – which has been mentioned in previous economic studies – is the use of LOESCHE’s Vertical Roller Mill (VRM) technology.

Two VRMs will operate in parallel after the primary and secondary crushing circuit at West Musgrave, with OZ Minerals noting benefits in reducing power consumption by around 20%, supporting higher flotation recovery and the operational flexibility to be ramped up and down. The latter is particularly important given OZ Minerals plans to make West Musgrave one of the largest fully off-grid, hybrid renewable powered mines in the world with an initial circa-80% renewable penetration rate, powered off wind and solar energy with a battery energy storage system in tow.

Dr Thomas Loesche, Managing Shareholder and owner of LOESCHE, said: “As a mining engineer with a degree in mineral processing, it has always been a vision of mine to develop dry-comminution technologies that enable better sorting efficiencies, reduced power and consumables. We are very pleased to be involved in such an important project. OZ Minerals is breaking new ground and proving that sustainability does not stand in the way of project development, but rather makes such projects possible.”

The application of the VRM technology has been peer reviewed for the project by independent experts and has been de-risked through pilot test work campaigns, OZ Minerals added.

Further upstream of the VRMs, OZ Minerals has stated plans to operate the mining fleet remotely from day one at West Musgrave, with the acquisition of an autonomous haulage system-enabled fleet on a leasing basis in the feasibility study outline.

OZ Minerals did not include details of the size of truck involved in the latest study, but the prefeasibility study originally released in 2020 highlighted the use of up to 25 220-t payload haul trucks.

There is also potential for these haul trucks to be electric in the future, with OZ Minerals saying its pathway is aligned with the potential transition to an electric haulage fleet at the first engine change out.

While OZ Minerals says it has the capacity to fully fund West Musgrave with a new A$1.2 billion syndicated facility supported by key relationship banks awaiting final binding agreements, it said potential strategic partnership in the project via a minority interest was being explored.

The next steps for the project involves award of contracts with major partners – it has already signed up GR Engineering to build the process plant; increasing the capacity of its camp to around 250 beds by early 2023; mobilisation of equipment to commence earthworks; finalise the power purchasing agreement and Living Hub – the latter of which has 350 permanent ensuite rooms; and increasing its owner team resources in line with the plan, including operational-readiness personnel.

OZ Minerals turns down BHP’s A$25/share cash offer

OZ Minerals says it has rejected an unsolicited, conditional and non-binding indicative proposal from BHP to acquire all shares in the company for A$25/share ($17.3/share) in cash, valuing the company at an reported A$8.34 billion.

Having assessed this proposal, which represents a 13.1% premium to the volume weighted average price (VWAP) of OZ’s share price for the six months prior, the Board has unanimously determined that the offer significantly undervalues OZ Minerals and, as such, is not in the best interests of shareholders.

For its part, BHP points out in a separate press release that the consideration represents an “attractive premium” of 32.1% to OZ Minerals’ closing price of A$18.92/share on August 5 and 41.4% to OZ Minerals’ 30-day VWAP of A$17.67/share up to and including August 5.

OZ Minerals says the proposal is subject to a number of conditions including:

  • The completion of extensive financial, legal, technical and operational due diligence over a proposed six-week timeframe;
  • Various financial assumptions;
  • A unanimous recommendation of the OZ Minerals Board; and
  • Entry into a scheme implementation agreement subject to a range of conditions including no material adverse change, regulatory, shareholder and court approvals and conduct of business restrictions.

OZ Minerals says the Board has been advised by BHP that it has accumulated an interest in OZ Minerals shares via derivative instruments amounting to an interest of less than 5%.

OZ Minerals Managing Director and Chief Executive Officer, Andrew Cole, said: “We have a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations. We are mining minerals that are in strong demand particularly for the global electrification and decarbonisation thematic and we have a long-life resource and reserve base. We do not consider the proposal from BHP sufficiently recognises these attributes.”

In coming to its decision, OZ Minerals says the Board considered that the proposal does not adequately compensate shareholders for:

  • The unique nature of OZ Minerals’ core business which represents a high-quality portfolio of copper and nickel assets, located in a Tier-1 mining jurisdiction with long mine lives, first quartile cost positioning and extensive strategic optionality;
  • The unique investment proposition which OZ Minerals provides as the only primary copper company in the ASX 100;
  • The low carbon intensity of OZ Minerals’ assets relative to its peers with a defined and market- leading plan for further decarbonisation to meet our target of net zero Scope 1 and 2 operational emissions by 2030;
  • The high-quality nature of OZ Minerals’ growth projects which include the West Musgrave project (final investment decision scheduled for H2 2022), the Carrapateena Block Cave and the Prominent Hill Extension which together are expected to generate significant production growth over the next five years;
  • The strong long-term outlook for both the copper and nickel markets underpinned by increasing geological scarcity, global electrification and accelerating decarbonisation, to which OZ Minerals is highly leveraged; and
  • The strong and consistent returns that the OZ Minerals management team has delivered with a total shareholder return of circa-145% over the past five years.

In addition to the above, OZ Minerals would deliver significant synergies and other benefits to BHP which the Board considers are not reflected in the value of BHP’s indicative proposal.

Among there are the operational synergies in both South Australia (between Olympic Dam, Carrapateena and Prominent Hill) and in Western Australia (between Nickel West and West Musgrave).

BHP says the cash offer it has made would deliver immediate value to OZ Minerals shareholders and de-risk any value which may (or may not) eventually be reflected in the company’s share price.

BHP CEO, Mike Henry, said: “Our proposal represents compelling value and certainty for OZ Minerals shareholders in the face of a deteriorating external environment and increased OZ Minerals operational- and growth-related funding challenges.

“We are disappointed that the Board of OZ Minerals has indicated that it is not willing to entertain our compelling offer or provide us with access to due diligence in relation to our proposal.”

OZ Minerals wades into uncharted renewables territory at West Musgrave

You do not get much more remote than OZ Minerals’ West Musgrave copper-nickel project. Located in the Ngaanyatjarra Aboriginal Lands of central Western Australia, it is some 1,300 km northeast of Perth and 1,400 km northwest of Adelaide; near the intersection of the borders between Western Australia, South Australia and the Northern Territory. The nearest towns include the Indigenous Communities of Jameson (Mantamaru), 26 km north; Blackstone (Papulankutja), 50 km east; and Warburton (Milyirrtjarra), 110 km west.

This makes the company’s ambition of developing a mine able to produce circa-32,000 t/y of copper and around 26,000 t/y of nickel in concentrates that leverages 100% renewable generation and can conduct ‘zero carbon mining’ even bolder.

OZ Minerals is not taking this challenge on by itself. In addition to multiple consultants and engineering companies engaged in a feasibility study, the company has enlisted the help of ENGIE Impact, the consulting arm of multinational electric utility company ENGIE, to come up with a roadmap that could see it employ renewable technologies to reach its zero ambitions.

“We’re providing an understanding of how they could decarbonise the mine to achieve a net zero end game,” Joshua Martin, Senior Director, Sustainability Solutions APAC, told IM.

While ENGIE Impact is focused solely on the energy requirements side of the equation at West Musgrave, its input will prove crucial to the ultimate sustainability success at West Musgrave.

Having worked with others in the mining space such as Vale’s New Caledonia operations (recently sold to the Prony Resources New Caledonia consortium), Martin says OZ Minerals is being “pretty ambitious” when it comes to decarbonisation.

“Our job is to assess if the renewable base case stacks up for West Musgrave, create multiple decarbonisation pathways for their consideration and look at what technology should be adopted to achieve their overall aims,” he said.

This latter element is particularly important for an off-grid project like West Musgrave, which is unlikely to start producing until around mid-2025 should a positive investment decision follow the upcoming feasibility study.

While solar, wind and battery back-up are all likely to play a role in the power plans at West Musgrave – technologies that are frequently factored into hybrid projects looking to wean themselves off diesel or heavy fuel oil use – more emerging technologies are likely to be factored into a roadmap towards 100% renewable adoption.

“We are developing a series of roadmaps that factor in where we think technologies will be in the future,” Martin said. “These roadmaps come with a series of decision gates where the company will need to take one option at that point in time if they are to pursue that particular decarbonisation pathway.”

These roadmaps utilise ENGIE Impact’s consulting and engineering nous, as well as the consultancy’s PROSUMER software (screenshot below) that is used on any asset-level decarbonisation project roadmap, according to Martin.

“This software was specifically built for that purpose,” Martin said. “There is nothing on the market like this.”

Progress at PFS level

OZ Minerals’ December 2020 prefeasibility study update went some way to mapping out its decarbonisation ambition for West Musgrave, with a 50 MW Power Purchase Agreement that involved hybrid renewables (wind, solar, battery, plus diesel or gas).

The company said in this study: “Modelling has demonstrated that circa 70-80% renewables penetration can be achieved for the site, with the current modelled to be an optimised mix of wind, solar and diesel supported by a battery installation.”

OZ Minerals said there was considerable upside in power cost through matching plant power demand with the availability of renewable supply (load scheduling), haulage electrification to maximise the proportion of renewable energy used, and the continued improvement in the efficiency of renewable energy solutions.

ENGIE Impact’s view on hydrogen and electric haulage in the pit may be considered here, complemented by the preliminary results coming out of the Electric Mine Consortium, a collaborative mine electrification project OZ Minerals is taking part in with other miners such as Evolution Mining, South32, Gold Fields and IGO. And, on the non-electric pathway, ENGIE Impact’s opinion is being informed by a study it is undertaking in collaboration with Anglo American on developing a “hydrogen valley” in South Africa.

If OZ Minerals’ early technology views are anything to go by, it is willing to take some risk when it comes to adopting new technology.

The preliminary flowsheet in the prefeasibility study factored in a significant reduction in carbon emissions and power demand through the adoption of vertical roller mills (VRMs) as the grinding mill solution, and a flotation component that achieves metal recovery at a much coarser grind size than was previously considered in the design.

Loesche is working with OZ Minerals on the VRM side, and Woodgrove’s Direct Flotation Reactors got a shout out in the process flowsheet.

While mining at West Musgrave is modelled to be conventional drill, blast, load and haul, the haulage fleet will comprise up to 25, 220 t haul trucks, with optionality being maintained to allow for these trucks to be fully autonomous in the future, OZ Minerals said.

‘True’ zero miners

OZ Minerals is aware of the statement it would make to industry if it were to power all this technology from renewable sources.

“With a future focus on developing a roadmap to 100% renewable generation, and reducing dependency upon fossil fuels over time, West Musgrave will become one of the largest fully off-grid, renewable powered mines in the world,” it said in the updated PFS. “The solution would result in the avoidance of in excess of 220,000 tonnes per annum of carbon dioxide emissions compared to a fully diesel-powered operation.”

The company’s Hybrid Energy Plant at Carrapateena in South Australia, whose initial setup includes solar PV, battery storage, diesel generation and a micro-grid controller, will provide a test case for this. This is a “unique facility designed to host experiments on how various equipment and energy technologies interact on an operating mine site”, the company says.

Martin and ENGIE Impact agree OZ Minerals is one of many forward-thinking mining companies striving for zero operations with a serious decarbonisation plan.

“The mining projects we are working on are all looking to achieve ‘true’ net zero operations, factoring in no offsets,” he said. “Having said that, I wouldn’t say the use of offsets is an ‘easy out’ for these companies. They can form part of the decarbonisation equation when they have a specific purpose, for instance, in trying to support indigenous communities.”

These industry leaders would do well to communicate with each other on their renewable ambitions, according to Martin. Such collaboration can help them all achieve their goals collectively, as opposed to individually. The coming together of BHP, Rio Tinto, Vale, Roy Hill, Teck, Boliden and Thiess for the ‘Charge on Innovation Challenge’ is a good example of this, where the patrons are pooling resources to come up with workable solutions for faster charging of large surface electric mining trucks.

“In the Pilbara, for example, there is a real opportunity to create a decarbonisation masterplan that seeks to capitalise on economies of scale,” he said. “If all the companies work towards that end goal collaboratively, they could achieve it much faster and at a much lower cost than if they go it alone.”

When it comes to OZ Minerals, the miner is clearly open to collaboration, whether it be with ENGIE Impact on decarbonisation, The Electric Mine Consortium with its fellow miners, the recently opened Hybrid Energy Plant at Carrapateena, the EU-funded NEXGEN SIMS project to develop autonomous, carbon-neutral mining processes, or through its various crowd sourcing challenges.

OZ Minerals, Loesche team up following West Musgrave vertical roller mill test work

OZ Minerals, following a successful prefeasibility study of vertical roller mills (VRM) at the West Musgrave project in Western Australia, has signed a “Partnering Agreement” with Loesche.

The agreement with the leading original equipment manufacturer (OEM) of VRMs will help the company as it moves to the next phase of the project, OZ Minerals said.

“By working in a collaborative, innovative and transparent way, we believe we will deliver superior outcomes for the project when compared to more traditional ways of engaging with suppliers,” OZ Minerals said.

In November 2017, OZ Minerals and Cassini, which owns 30% of West Musgrave, announced that the West Musgrave project would progress to a prefeasibility study. This prefeasibility study timeline was extended in 2019 to complete a detailed evaluation of additional value-add opportunities, the most significant of which was the use of a dry VRM to reduce power consumption.

The study, released earlier this year, showed off plans for a 26-year open-pit mine with “bottom quartile cash costs” and average production of circa-28,000 t/y of copper and circa-22,000 t/y of nickel in concentrates, OZ Minerals said.

It also included details of an “innovative mineral processing plant” that would be built on site.

The grinding circuit for West Musgrave was expected to consist of two stages of crushing followed by two parallel VRMs treating nominally 5 Mt/y each. The second stage of crushing and VRMs replaced a traditional SAG mill, ball mill and pebble crushing circuit.

OZ Minerals explained in the study: “Vertical roller mills are widely used in the grinding of cement plant feeds and products, slag, coal and other industrial minerals, with thousands currently in operation worldwide. The mill has benefits in reducing power consumption by circa-15%, no ball charge grinding media, higher flotation recovery and can be ramped up and down in response to the availability of low-cost renewable energy.”

The VRM uses compression-style comminution principles taking 75 mm rock to flotation feed size in the one machine, according to OZ, adding that the application of the VRM had reduced processing costs and provided a circa-2% improvement in nickel recovery compared with a previous scoping study.

“The technology has been peer reviewed for West Musgrave by an independent expert and has been substantially de-risked through a series of pilot tests whereby 5 t of West Musgrave ore has been tested,” the company said.

Reviewing the prefeasibility study, OZ Minerals Chief Executive Officer, Andrew Cole, said: “We have been able to achieve a further significant reduction in carbon emissions and power demand through the adoption of vertical roller mills as the grinding mill solution and a flotation flowsheet which achieves metal recovery at a much coarser grind size than was previously considered in the design.

“This lower power usage has resulted in a reduction in operating costs, while the use of dry grinding from the vertical roller mills has also resulted in an improvement in nickel recovery.”

Another innovation the company plan to use at West Musgrave include the use of hybrid renewables that could include a combination of wind and solar energy, battery back-up, and diesel or gas.

Mining at West Musgrave is modelled to be conventional drill, blast, load and haul and is assumed to be contractor operated during the first five years of operation, transitioning to owner operate in year six.

The haulage fleet will comprise up to 25 220 t haul trucks and optionality is being maintained to allow for these trucks to be fully autonomous in the future, OZ Minerals said.