Kabanga Nickel owns the Kabanga project in Tanzania, which boasts the largest development-ready nickel sulphide deposit in the world, with in-situ nickel equivalent resources estimated at 1.86 million tonnes at 3.44% nickel equivalent.
The Tanzanian government has a 16% interest in the project through local partnership entity, Tembo Nickel Corporation.
BHP has also invested $10 million into Lifezone to advance the roll-out of its patented hydrometallurgical technologies to support Class 1 battery grade nickel, copper and cobalt production at the project.
BHP can invest an additional $50 million in a second tranche and make further investments, subject to Kabanga achieving agreed milestones.
The first tranche of $40 million will convert into an 8.9% equity stake in Kabanga Nickel (7.5% see-through interest in Tembo), once approvals and conditions are met.
Once invested and on conversion the second tranche of $50 million, BHP's equity stake in Kabanga Nickel will increase to 17.8% (or 15% of Tembo), thereby valuing the project at $658 million post-money.
The investment will be used to accelerate the development of the project, including an enhanced metallurgical drilling program to an updated definitive feasibility study, and to support construction plans for the hydromet refinery.
These studies are expected to be completed by the end of 2022, with first production targeted for 2025, ramping up toward 40,000 tonnes of nickel, 6000t of copper and 3000t of cobalt, for a life-of-mine of over 30 years.
"BHP's investment reflects the project's strong ESG credentials and its role in improving environmental performance throughout the nickel value chain," Kabanga Nickel CEO Chris Showalter said.
"Through development of Kabanga and Lifezone hydromet, Tanzania will have a growing role in the supply of the battery metals needed to move to a global low carbon economy."
Kabanga Nickel's executive chairman is Panoramic Resources founder Keith Liddell.
The company acquired the project, which once belonged to Glencore and Barrick Gold, in 2019.
BHP's investment comes just three weeks after it abandoned a takeover bid for Canadian nickel developer Noront Resources due to its bid being trumped by Andrew Forrest's Wyloo Metals.
BHP CEO Mike Henry said in November that the company would pursue more options in nickel and copper.
He also recently indicated the company could be open to riskier jurisdictions.
"It all depends on the opportunity," he told the FT Mining Summit in October.
"From a capability perspective, I am confident that we have the capabilities to pursue opportunities in what some would see as tougher jurisdictions, but of course the size of the opportunity needs to be commensurate with the increased management effort that is going to be required to pursue opportunities in jurisdictions that we may not currently be operating in."
BHP believes "that nickel will be a substantial beneficiary of the global electrification mega-trend and that nickel sulphides will be particularly attractive".
"The big miners are scrambling to secure nickel sulphide opportunities suitable for production of low carbon intensity nickel products suitable for NCM battery production," Argonaut analysts said this morning.
"There are few high-quality and large-scale nickel sulphide developments that will meet this criteria."