New buyer may target Anglo’s Brazilian nickel prospects at battery market

The producing Brazilian nickel assets snapped up by Hong Kong-listed MMG from London-headquartered Anglo American produce ferronickel targeted largely at the stainless steel market. But the new owner may target Class 1 battery-grade output form two greenfield sites also included in the deal.

Anglo’s Nickel Brasil business comprises producing ferronickel operations — the Barro Alto mine and processing plant, the Niquelandia mine and Codemin processing plant — but also the Jacare and Morro Sem Bone (MSB) greenfield growth projects. The producing assets outputted a combined 39,400t in 2024, while Jacare has c.300mn t of mineral resources and MSB boasts total potential mineralisation of 65mn t.

“Jacare and MSB will require a higher nickel price environment to get developed,” says MMG general manager, strategy development and projects Brent Walsh, before backtracking slightly that such a conclusion could be “premature”, ahead of being able to study the new sites in detail. “We are confident that we can add significant value to these projects through our unique model,” he continues.

“We believe they present a very attractive opportunity, given the size of the nickel endowment we have highlighted. Another unique advantage our group offers is the expertise of our parent company and related companies in nickel processing technology in Indonesia, through both HPAL technologies and other pyrometallurgical processing methods.”

Nickel Brazil also offers a “platform to pursue future organic and inorganic growth opportunities”, Walsh adds. “The expansion potential presented by these projects could transform MMG into a leading global nickel producer, which aligns with our vision to become a leading global base metals producer that is leveraged to a decarbonised future.” And he specifically mentions lithium, another battery metal, as well as copper in its Brazilian M&A considerations.

Opportunities in Class 2

But MMG does not appear to be considering investment in switching existing ferronickel production towards the battery-grade market. “Class 2 nickel supply is actually tighter than the market might realise,” Walsh suggests.

“Global ferronickel production has decreased from 375,000t/yr in 2021 to around 110,000t/yr now. There will always be strong demand from stainless steel producers in Europe and the US for a premium ferronickel product, which this asset provides.

“Nickel Brazil consistently produce a high-quality ferronickel product that has typically received better pricing in the market than other ferronickel competitors,” Walsh says. 

It also champions the bottom quartile production costs of its new assets. “Positively, this business generates robust cash flows and earnings even at low points in the cycle and so can withstand the current market better than its competitors,” says MMG CEO Cao Liang.

Anglo actually predicts its nickel operations will produce more in the coming years. “The strong operational performance and process stability demonstrated in 2024 resulted in a higher confidence for 2025 and 2026, which has led to a modest increase in our production guidance there,” says Anglo CEO Duncan Wanblad.

Buying low

Another slightly unusual aspect to the deal is that both buyer and seller acknowledge that the transaction is likely to be followed by a recovery in nickel prices. But that has not persuaded Anglo to vary a strategy that foresees it exiting four of its seven production areas to leave a miner focused purely on iron ore, copper and crop nutrients.

Anglo’s nickel arm “performed very well during the course of last year despite the very challenging nickel markets”, according to Wanblad. Yet the Anglo chief pronounces himself “very pleased” with the deal, “especially considering that these assets were under consideration for care and maintenance not that long ago”.

“Credit there to the team who rapidly had to adjust their operational plans in the context of some really tough prevailing nickel market conditions,” Wanblad adds. “The transaction structure gives us upfront proceeds but also allows us to retain some of the upside as and when nickel prices recover in the coming years”.

The firm expects the deal to be completed during the second half of this year. It anticipates $350million of non-contingent proceeds be received in 2025, with the potential for up to $100mn in an earnout linked to price recovery, plus a contingent cash consideration of $50mn linked to taking final investment decision on the development projects.

The price-linked earnout comprises uncapped semi-annual payments, calculated on a quarterly basis, of up to $100mn in aggregate, applicable for four years starting from the first day of the quarter following the transaction completion date. The payment will be calculated as 50pc of incremental post-tax revenue post tax from nickel sales above an agreed realised nickel price — which is $7.10/lb contained nickel, after typical discounts received for ferronickel product have been applied to the LME benchmark price.

MMG also thinks its timing is right in terms of market conditions, doing the deal at a “low point in the nickel price cycle”. “Consensus expectations are for [nickel prices] to rise by around 25pc over the next three to five years,” says Liang.

“In recent years, increased Indonesian supply has created a short- to medium-term surplus, adversely affecting nickel prices,” says Walsh. “However, as resource depletion accelerates and demand from stainless steel and electric vehicles continues to grow, the nickel market is expected to shift into deficit post-2030 — a shift that MMG and Nickel Brazil will be well placed to capitalise on.”

But Walsh stresses that the price assumptions his firm has made in striking the deal are “below consensus”, while remaining optimistic about a recovery in nickel prices towards the consensus level in the longer term. “Rest assured, we have not factored in an aggressive ‘hockey stick’ recovery in the nickel price,” says Walsh of the economics underpinning the transaction.