African Nickel: An Uncertain Future
Africa’s nickel industry faces significant uncertainty, with established producers halting production, and question marks over future development. Africa produces 1.4% of world finished nickel and 5% of mined nickel, a level which has remained relatively stable since 2010. This masks significant volatility, as increased nickel production from PGM producers in South Africa and Zimbabwe and new production from Madagascar, mask the decline in output from traditional producers like Botswana.
There have been notable success stories in the African nickel industry.
Consistent nickel output has been seen from the PGM producers which produce nickel as a by-product, such as Anglo American Platinum (Amplats) and Impala Platinum (Implats) in South Africa, and Zimplats in Zimbabwe. Mined nickel production from Amplats has increased from 19kt in 2010 to around 30kt in 2016, while mined production from Implats has remained stable at around 13kt. Mined output from the Zimplats and Mimosa operations in Zimbabwe, which feed into the Implats smelter in South Africa, have risen slightly from 6kt to 8kt over the period. Finished nickel output from Amplats has increased from 18.5kt in 2010 to over 25kt in 2016, with Implats finished output remaining stable at 15-16kt in recent years.
The growth in finished nickel output from the Ambatovy HPAL, operated by Sherritt in Madagascar, has been a standout success in the context of previous poor HPAL performance worldwide, and by comparison to other nickel producers in Africa in recent years. Ambatovy commenced production in 2012, increasing output to 55kt by 2015, close to the 60ktpa nameplate capacity of the plant.
Domino Effect in the Supply Chain
However, operations such as the Selebi-Phikwe mine and smelter and the Tati/Phoenix mine in Botswana, the Empress refinery in Zimbabwe, and to a lesser degree the Nkomati mine in South Africa, have each faced significant challenges in recent years. Each of these operations are high-cost, sitting in the fourth quartile of the cost curve, and the fact that these operations have formed part of a linked supply chain has meant that issues at individual sites have compounded challenges for downstream and upstream operations. This culminated in the closure of Empress in 2015, and Selebi-Phikwe and Tati in late 2016.
BCL’s Selebi-Phikwe mine and smelter, in operation for decades, has traditionally produced nickel matte which has been exported to the Nikkelverk and Harjavalta refineries in Europe as well as the Empress refinery in Zimbabwe. Output from the smelter declined from around 30kt in 2007 to around 15kt in 2014, because of increasing operating costs and issues sourcing sufficient third party feed. To remedy these issues, in late 2014 BCL agree to purchase Norilsk’s 85% stake in the Tati-Phoenix mine in Botswana and 50% stake in the Nkomati mine in South Africa, to secure concentrate feed for the smelter, and awarded a contract to Outotek modernise the Selebi-Phikwe smelter.
The low-grade polymetallic Tati/Phoenix mine has over the last decade faced falling mined grades and concentrator recoveries over the past decade, with nickel grades more than halving from over 0.5% to around 0.15%, while nickel recoveries have also dropped from around 70% to around 45%, causing a drop in nickel output from around 20ktpa to 5ktpa, with similar grade and recovery declines also seen in copper production. This lead Tati to be one of the highest cost mines globally by AME estimates.
A lack of availability of matte from BCL’s Selebi-Phikwe smelter resulted in RioZim halting operations at its 6ktpa Empress refinery in early 2015.
In October 2016, it was announced that BCL would be placed into provisional liquidation by major shareholder, the Government of Botswana, with the closure of Selebi-Phikwe and Tati. This has had a knock-on effect on Nkomati. While Norilsk’s sale of its 85% position in Tati to BCL was completed in 2015, the sale of its 50% stake in the polymetallic Nkomati mine, which produces 24ktpa of nickel in concentrate, had not been completed by the time BCL was placed into provisional liquidation despite all conditions precedent for the deal being met in September 2016. This lead Norilsk to commence legal action in the London International Court of Arbitration against BCL to enforce the sale terms or seek damages.
Light on the Horizon
While AME does not expect production to recommence in Botswana in the near to medium term, there are other projects elsewhere in Africa with potential to make significant contributions to global nickel supply:
- First Quantum’s Enterprise is the second of three mines in First Quantum's Zambian Copperbelt portfolio that also include the Sentinel and Intrepid projects. Enterprise is expected to have a capacity of 38ktpa of nickel in concentrate over a mine life of 9 years. Mining will be conducted by open cut methods, with ore from Enterprise transported around 12km to the Sentinel process facility jointly used by Sentinel and Enterprise. Enterprise will take significant advantage of shared services with the adjacent and more progressed 300ktpa Sentinel copper mine, also owned by First Quantum, with ore from Enterprise mine processed in a separate circuit located at the Sentinel processing plant. Commissioning of some priority sections of the Enterprise plant, which can be incorporated into the Sentinel copper processing operations, was expected from the March Quarter of 2016 onwards, with the balance of the Enterprise project construction and pre-strip mining activities deferred and no nickel production forecast from Enterprise until after 2018. Cash operating costs for Enterprise at full production are forecast to sit in the lower third quartile of production.
- One of the most exciting new nickel projects in recent years is Comet Minerals’ Titan discovery in Nigeria, announced to the market last year. Titan is a major new style of nickel mineralisation, with nickel occurring within metal balls containing up to 90% nickel within the soil profile. Project economics are expected to be extremely attractive, as mining will only requires simple open-cut operations, processing could be limited simply to screening, with no further processing required to produce a product ready to be charged into a stainless-steel smelter. As the project is at an early stage of development, production capacity is unclear, and no nickel supply from this project is included in AME’s base case supply estimates. However, the project may have a significant contribution to nickel supply in the long-term.