The BHP Group Ltd (ASX: BHP) share price is down despite news of a potential nickel and cobalt project in Africa.
BHP is one of the world’s largest mining businesses, with exposure to iron, copper, nickel, potash, coal and oil (for now).
BHP’s nickel project
The resources giant is going to invest up to $140 million into a very large nickel and cobalt project in Tanzania, Africa, according to reporting by the Australian Financial Review.
This is part of BHP’s strategy to continue to focus on commodities that are part of a decarbonising world like copper, nickel and potash. It’s also BHP’s intention to potentially find these green commodity projects in places that may be harder to mine.
The AFR reported that BHP is going to initially invest US$40 million in the Kabanga nickel project, which is a business which is partially owned by the government. It is apparently the world’s biggest development-ready nickel sulphide deposit.
BHP will also reportedly invest another US$50 million in a second buy with unsecured convertible shares in Kabanga if certain documentation conditions are met and it has also reportedly reserved the right to make further investments.
This may not be material for the BHP share price, for now at least.
How much could this project produce?
Keep in mind that in the first quarter of FY22, for the three months to September 2021, nickel production was 17,800 tonnes (though this was down 20% year on year).
According to the AFR, the Tanzanian mine is forecast to be able to produce at least 65,000 nickel equivalent tonnes a year during an output life of approximately three decades. It’s also expected to produce 4,000 tonnes of cobalt per year.
Tech investment
It was also reported that BHP is going to invest US$10 million to assist the mining technology company Lifezone. This is so that the tech business can create a hydrometallurgical refining process that Kabanga’s operators will use as a green-friendly alternative to smelting.
My thoughts on BHP and the share price
BHP’s expansion into nickel makes a lot of sense. It has a part to play in the world becoming greener. This may not be the biggest earnings contributor to BHP, but it continues to invest in green projects that will make decarbonising a larger part of the business, and more attractive to ESG investors.
I think November 2021 was a better time to buy BHP shares, but today may still be decent for long-term investors focused on ASX dividend shares.
