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From West Musgrave to the world

West Musgrave

OZ Minerals has clicked go on its $1.7 billion West Musgrave mine in South Australia. What is the global significance of this decision?

While OZ Minerals’ Prominent Hill, Carrapateena and Carajás mines are key assets in the company’s copper portfolio, West Musgrave adds exposure to another important base metal: nickel.

OZ expects West Musgrave to produce approximately 35,000 tonnes per annum (tpa) of nickel across its first five years of life, with an average annual production of 28,000tpa over a 24-year operating life.

There’s no doubting West Musgrave’s nickel potential, with OZ chief executive officer Andrew Coles labelling the asset “one of the largest undeveloped nickel projects in the world”.

West Musgrave’s final investment decision (FID) is good timing, not just because of nickel’s growing profile amid the green energy transition but also because majors are hunting for more exposure to ‘future-facing’ minerals.

BHP – which made a play for OZ Minerals in August – has a strong copper foothold in Chile, but Olympic Dam is its only copper asset in Australia.

While Prominent Hill and Carrapateena are natural geographic additions to BHP’s portfolio – given their proximity to Olympic Dam – West Musgrave complements the major miner’s Nickel West assets in Western Australia.

Interestingly, BHP used to own West Musgrave before selling it to Cassini Resources in 2014. OZ Minerals acquired Cassini in 2020.

One variable that may have lessened West Musgrave’s value is its growing capital cost. In finalising the project’s feasibility study, OZ announced it would cost $1.7 billion to develop, a considerable increase from the $1.1 billion of prior estimates.

But the cost hike coincides with a significant increase in West Musgrave’s net-present value, from $1.5 billion to $2.2 billion.

Now that West Musgrave is certified, the plot thickens in terms of the external pursuit of OZ Minerals.

Will there be another offer from BHP (or a different company, for that matter)? Or will OZ Minerals be left to its own devices?

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