Tanzania’s nickel provides alternative to Russia for auto industry says Kabanga CEO

By David Whitehouse
Posted on Monday, 4 April 2022 13:02

The Kabanga project in Tanzania (Photo: Facebook)

Nickel from Tanzania is well placed to supply a global automotive industry seeking alternative sources to Russia to feed the transition to electric vehicles, Kabanga Nickel CEO Chris Showalter tells The Africa Report.

Class one nickel, which is found at the Kabanga project in northwest Tanzania, is used in the lithium-ion batteries needed for electric cars. It is the “sweet stuff” for auto manufacturers, Showalter says in Dar es Salaam. He expects the car industry to buy more than half the nickel produced at Kabanga, which is scheduled to come into production in 2025. The mine will also produce cobalt and copper.

The project timeline predicts minimum annual nickel equivalent production of 65,000 tonnes, with the mine having a life of at least 30 years. Showalter has already had approaches from carmakers looking for offtake agreements but prefers to bide his time. He expects a “very competitive process” which may lead to more than one off-taker, and which may enable him to negotiate further investment into the project. “We know the demand is out there.”

Standard & Poor’s estimates that Russia accounted for 15.2% of global class one nickel production in 2021. The invasion of Ukraine triggered a price shock, with the London Metals Exchange on 8 March being forced to suspend nickel trading after the three-month spot price doubled in early trades to hit an all-time record.

  • Prices have since eased, but research from S&P analyst Jason Sappor argues that there remains the risk of another short squeeze.
  • S&P at the end of March raised its 2022 nickel price forecast by 45.9% to $32,868 per metric ton.
  • Showalter predicts that electric-vehicle demand alone will be enough to keep nickel prices rising over coming years.

Development-ready

Kabanga Nickel, which is  a private UK company, owns 84% of the project and Tanzania’s government the remaining 16%. The company in January secured an investment of $40m from BHP to accelerate the project’s development. BHP may make further investments in Kabanga subject to milestones being reached.

The Kabanga feasibility study is now being updated in light of BHP’s investment. The $300m which was spent by previous owners Glencore and Barrick Gold means that the project is the largest development-ready nickel high-grade nickel sulfide deposit  in the world, Showalter says.

The project did not fit into Glencore’s portfolio because the company wanted to carry out smelting in Canada and refining in Norway, Showalter says. Kabanga Nickel, which signed an agreement with the government to develop the project in 2021, will use its own technology for local processing. “We will add value in-country.”

  • The site will benefit from the building of a new railway line which will go past the mine and the refinery.
  • The ability to refine the nickel in the same place, he argues, means that Kabanga’s nickel is an environmentally friendly option.

The permitting process for a new nickel mine is easier in Tanzania than in North America as it is “critical” for the country to get it running, Showalter says. President Samia Suluhu Hassan, who took over from the late John Magufuli in in March 2021, has been “extremely reassuring” for the business community and “very impressive in terms of engaging the international community,” Showalter says.

He was part of a delegation which travelled with Hassan to the United Nations in September.

Other junior miners are also benefiting from perceptions of Hassan as being business friendly, he says. “The entire mining sector is really reviving.”

Bottom line

Kabanga is confident that global automakers won’t be able to ignore Tanzania’s nickel supply.

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