On May 19, First Quantum Minerals (TSX:FM) announced it had signed a binding agreement with Posco to sell a 30 per cent stake in Ravenshorpe Nickel, a Western Australian Nickel mine, for $240 million.
First Quantum will retain a 70 per cent stake in Ravenshorpe and continue to operate it.
Proceeds from the deal will be used to reduce the company's debt.
Posco and First Quantum have also signed a MOU to produce battery precursor materials from nickel produced by Ravenshorpe.
Starting in 2024, 7,500 tonnes of nickel-cobalt hydroxide mixture (MHP) will be produced annually at Ravenshorpe.
The remainder of Ravenshorpe will continue to be sold by First Quantum.
The transaction is subject to approval by Australia's Foreign Investment Review Board (" FIRB ") and is expected to close in the third quarter of 2021.
Posco is South Korea's largest steel producer and the fourth-largest in the world.
Posco is also a leading integrated producer of positive and negative electrode materials for electric vehicle (" EV ") batteries, and is expanding its second battery materials business, for which Ravenshorpe will provide some of the materials.
Ravenshorpe is a large open pit nickel and cobalt mine in Western Australia that was acquired by First Quantum in 2010 and began production in 2011.
In 2017, because the nickel price had been in a long-term position and shut down for maintenance, in the first quarter of 2020 successfully restarted the operation.
Ravenshorpe has three laterite nickel ore bodies and is expected to produce 30,000 tonnes of nickel per annum.
In addition to Ravenshorpe, First Quantum also owns the Enterprise Nickel project in Zambia.
Enterprise is 15km from the company's Sentinel mine and has a processing facility capable of producing 4m tonnes a year.
Standard Chartered Bank is the financial adviser to First Quantum and Mindy Ellison is the legal adviser.
Steel's share of Posco's business had fallen to 49 per cent by 2020 and the company plans to reduce it further to 40 per cent by 2030.
Posco also plans to increase its share of "new growth engines" -- mainly battery electrode materials -- to 20% from 2% now.
The transfer of minority stakes to downstream industries while retaining control is also a common pattern for mining companies, the most recent example being Luoyang Molybdenum's transfer of 50% of its Kisanfu copper-cobalt mine to downstream producer Ningde Times.
In addition to First Quantum, BHP also owns nickel mines in Western Australia, which were once targeted for sale.
