How Did Lifezone Acquire BHP's Stake in Kabanga Nickel?
Lifezone Metals, the NYSE-listed mining company, has completed a strategic acquisition of BHP's 17% stake in Kabanga Nickel, giving Lifezone complete ownership of one of the world's most significant undeveloped nickel sulphide projects. This transaction, announced on July 21, 2025, marks a pivotal moment in the development of the Tanzanian nickel project.
The acquisition structure includes:
- Lifezone now owns 100% of Kabanga Nickel, which holds an 84% interest in Tembo Nickel (the Tanzanian operating company)
- The Tanzanian government maintains its 16% stake in Tembo Nickel
- All previous agreements between BHP and Lifezone, including the T2 option agreement, have been terminated
- Lifezone has secured 100% control of the project's offtake
Transaction Structure and Financial Terms
The deal employs a deferred consideration model with two key payment milestones:
- Initial payment: $10 million cash, due either 12 months after final investment decision (FID) or once Lifezone raises $250 million in funding
- Secondary payment: Due 12 months after commercial production begins, with the amount indexed to Lifezone's share price performance
- Total consideration cap: $83 million, which reduces to $75 million if a resettlement action plan trigger event occurs
BHP has agreed to a 12-month lock-up period for its Lifezone shares and has granted Lifezone right of first offer on any future divestment plans.
"The transaction structure allows for financial flexibility while securing full project control," notes Chris Showalter, Lifezone CEO, who acknowledged that "BHP had been a supportive and value-adding partner" throughout their involvement.
Why Is BHP Exiting the Kabanga Nickel Project?
BHP's exit from Kabanga comes amid the major's ongoing strategic evaluation of its nickel operations globally. The company has been reassessing its position in the nickel sector, with several significant developments:
- BHP's Western Australia nickel operations have been under temporary suspension since early 2025
- The company confirmed last week it is considering multiple options for these assets, including:
- Potential divestment
- Operational restart
- Permanent closure
This withdrawal from Kabanga aligns with BHP's broader strategic repositioning in the nickel market, which has faced challenging conditions in recent years despite the metal's importance in critical minerals energy transition.
Market analysts point to BHP's focus on tier-one copper and iron ore assets as driving this strategic shift. The nickel market's volatility, coupled with increased supply from Indonesia, has created challenging economics for even the largest miners in this space.
What Makes the Kabanga Project Significant?
Comprehensive Feasibility Study Results
Coinciding with the acquisition announcement, Lifezone filed a comprehensive feasibility study for the Kabanga project, declaring the first mineral reserves in the project's 50-year history. Key highlights from the study include:
- Project scale: 3.4-million tonne-per-year underground mine with processing infrastructure and tailings storage
- Production focus: High-grade nickel, copper, and cobalt concentrate for downstream processing
- Mine life: 18 years based on current reserves
- Economic metrics:
- After-tax net present value: $1.58 billion
- Internal rate of return: 23.3%
- Pre-production capital requirement: $942 million
- Expected after-tax free cash flow: $4.6 billion over the mine's life
- Cost position: Independent analysis places Kabanga in the first quartile of the global nickel cost curve
Strategic Value and Economic Impact
The Kabanga project represents a significant opportunity for both Lifezone and Tanzania:
- The Tanzanian government is projected to receive $3.6 billion in royalties, taxes, and dividends through its 16% free-carried interest and under the country's economic benefit-sharing principle
- The project's development aligns with global demand for battery metals essential to the energy transition
- Kabanga's high-grade nature and cost position make it particularly valuable in the global nickel market
What separates Kabanga from many other nickel developments is its sulfide composition, which is significantly more suitable for battery applications than lateritic nickel deposits. The high-grade nature of the deposit (reported at over 2.5% nickel equivalent) places it among the richest undeveloped nickel resources globally, similar to the Tamarack Nickel-Copper Project in North America.
How Is Lifezone Financing the Kabanga Project?
Lifezone has established a multi-phase financing strategy to advance the project:
Short-Term Development Financing
- Standard Chartered Bank has been appointed as financial adviser
- Focus on arranging bridge financing to fund:
- Early works
- Resettlement activities
- Development through to final investment decision
Long-Term Project Financing
- Societe Generale is advising on the comprehensive project finance package
- Potential support from international financial institutions, including:
- US International Finance Corporation
- Export credit agencies
This financing approach aims to ensure the project maintains momentum while securing the substantial capital required for full development.
Industry analysts note that the involvement of both Standard Chartered and Societe Generale signals strong institutional confidence in the project fundamentals, particularly important given current market conditions in the battery metals sector.
What's Next for the Kabanga Project?
With the acquisition complete and feasibility work finalized, Lifezone has outlined its path forward:
- Final Investment Decision (FID): Targeted for 2026
- Development timeline: Following FID, construction and development will commence
- Strategic focus: Implementing capital-efficient and environmentally responsible development approaches
Leadership Perspectives
Lifezone's leadership has emphasized the strategic importance of this transaction:
Keith Liddell, Lifezone founder and chairperson, stated: "This transaction to own 100% of Kabanga Nickel allows Lifezone to fully align our technical, commercial, and ESG strategy as we advance Kabanga toward the FID. We are committed to delivering the project responsibly and to creation of long-term value for all our stakeholders."
CEO Chris Showalter added that while BHP had been "a supportive and value-adding partner," the major's exit coincided with the project's transition to its next development stage. According to recent reports from Reuters, Lifezone takes full control of Kabanga Nickel as BHP exits to focus on its core operations.
How Does This Project Align with Sustainable Mining Practices?
Lifezone has emphasized its commitment to responsible development throughout the project:
- Environmental focus: Minimizing environmental impact through careful project design
- Community engagement: Maintaining transparent engagement with host communities
- In-country beneficiation: Creating value within Tanzania through local processing
- Sustainable supply chains: Contributing to cleaner metal supply chains for the energy transition
COO Gerick Mouton highlighted that the company's technical and strategic approach aims to deliver a sustainable, capital-efficient operation that creates enduring value for all stakeholders.
"Our approach to Kabanga centers on minimizing environmental impact while maximizing social benefits," Mouton explained. "This includes implementing industry-leading water management systems, exploring renewable energy options, and ensuring transparent community engagement throughout the project lifecycle."
The company plans to implement its proprietary hydrometallurgical processing technology, which reportedly reduces energy requirements and environmental impact compared to traditional pyrometallurgical processing for nickel sulfide concentrates. These mine reclamation innovations are becoming increasingly important in the mining industry evolution toward more sustainable practices.
What Does This Mean for the Global Nickel Market?
The development of Kabanga comes at a critical time for the global nickel market:
- Supply diversification: Adds a significant new source of high-quality nickel outside traditional producing regions
- Battery-grade material: Provides nickel suitable for the growing electric vehicle battery market
- Cost-competitive production: First-quartile cost position strengthens the project's viability across market cycles
- Strategic resource: Enhances security of supply for a critical energy transition metal
The project's advancement comes as battery manufacturers increasingly prefer high-grade nickel sulfate for next-generation lithium-ion batteries. Kabanga's sulfide composition makes it particularly valuable in this application, with simplified processing routes compared to lateritic nickel deposits that dominate new supply coming from Indonesia.
With annual production expected to supply materials for approximately 175,000-200,000 electric vehicles, the project represents a significant contribution to sustainable supply chains for the automotive industry's electrification efforts. Similar projects like the Halls Creek Cobalt Expansion in Australia are also contributing to the growing battery metals supply chain.
FAQs About the Kabanga Nickel Project
What is the current ownership structure of the Kabanga project?
Lifezone Metals now owns 100% of Kabanga Nickel, which holds an 84% interest in Tembo Nickel. The Tanzanian government maintains a 16% stake in Tembo Nickel, the operating company.
When is production expected to begin at Kabanga?
While specific production start dates haven't been announced, the company is targeting a final investment decision in 2026, with construction and development to follow. Based on similar projects, first production could potentially occur 24-36 months after FID.
How does this project compare to other global nickel developments?
Kabanga is considered one of the world's most significant undeveloped nickel sulphide deposits, with high-grade resources and a projected first-quartile position on the global cost curve. Its grade and scale place it among the top tier of new nickel projects globally.
What metals will be produced at Kabanga?
The project will produce a high-grade concentrate containing nickel, copper, and cobalt – all critical metals for the energy transition. The multi-metal nature of the deposit enhances project economics through by-product credits.
How will this project benefit Tanzania?
The Tanzanian government is expected to receive $3.6 billion in royalties, taxes, and dividends over the mine's life, in addition to economic development, infrastructure improvements, and skills development. The project aligns with Tanzania's industrial development goals by creating value-added processing within the country.
Disclaimer: This article contains forward-looking statements regarding project development timelines, production capabilities, and economic projections. Actual results may differ materially from these projections due to various factors including commodity price fluctuations, permitting timelines, construction challenges, and other risks inherent to mining development projects.
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