Lifezone cuts Kabanga project value to $1.6B

Lifezone Metals‘ (NYSE: LZM) feasibility study for the flagship Kabanga nickel project cuts the asset’s net present value and mine life while boosting production costs compared with a more speculative initial assessment published last month. The stock dropped.

Based on an 8% discount rate, Kabanga’s after-tax net present value now stands at $1.58 billion compared with $2.37 billion before, while the internal rate of return climbs to 23.3% from 22.9%, Lifezone said Friday. The payback period is pegged at 4.5 years from first production.

The feasibility study – prepared in accordance with S-K 1300 regulations – outlines the initial development phase of Kabanga, focusing on the construction and operation of a 3.4-million-tonne-per-annum underground mine and concentrator. It builds on the project’s first technical report from June, which was based on the above resource estimate.

Located in northwest Tanzania, Kabanga is considered to be one of the world’s largest and highest-grade undeveloped nickel sulfide projects, containing over 2 million tonnes of the battery metal in resources. The deposit also contains significant copper and cobalt as byproduct.

The feasibility study “is a defining moment” for Lifezone and its Kabanga project, Lifezone CEO Chris Showalter said in a statement. “It confirms the technical and economic strength of one of the world’s most significant undeveloped nickel sulfide deposits.”

Lifezone shares fell by 5.6% on the feasibility results, giving the company a market capitalization of $344.2 million.

Feasibility highlights

The study now includes an upgrade of the resource to reserves for the sulphide nickel project, which total 52.2 million tonnes grading 1.98% nickel, 0.27% copper and 0.15% cobalt. This represents the first ever reserve estimate for Kabanga in the project’s 50-year history.

Mining at Kabanga would occur for 18 years, during which the concentrator is expected to produce a total of 902,000 tonnes of nickel, 134,000 tonnes of copper and 69,000 tonnes of cobalt in intermediate product, according to the study. In comparison, the June report outlined a 22-year mine life with total production of 1.15 million tonnes of nickel, 171,000 tonnes of copper and 87,000 tonnes of cobalt.

All-in sustaining costs are now pegged at $3.36 per lb. of nickel contained in concentrate, net of copper and cobalt byproduct credits, versus $2.71 per lb. previously. Despite this, analysis by CRU International shows that Kabanga would still fall within the first quartile of the global nickel cost curve, Lifezone said. Pre-production costs, meanwhile, decreased to $942 million from $991 million, but with a lower contingency.

Following the feasibility study’s approval by the board, Lifezone is now proceeding with the execution readiness phase of the project. This will lead to a final investment decision that’s expected next year.

Increased control

Also on Friday, the company said it reached an agreement with BHP to acquire the Australian miner’s 17% equity interest in Kabanga Nickel Limited (KNL), the project’s majority owner.

As consideration, Lifezone will pay up to $83 million, comprising a fixed payment of $10 million upon completion of funding or making an investment decision. The rest is contingent on commercial production at Kabanga.

Upon closing the transaction, Lifezone would own 84% of the Kabanga project, with the remainder held by the government of Tanzania. The company would also assume full control of 100% of the offtake from the nickel mine.

“This transaction to own 100% of Kabanga Nickel Limited allows Lifezone to fully align our technical, commercial, and ESG strategy as we advance Kabanga toward the final investment decision,” said Lifezone founder and chair Keith Liddell.