Andrew Forrest’s nickel bet: Australia’s richest man walks into a nickel bar

Andrew Forrest is making a big bet on nickel for the second time in his career.

He’s the richest man in Australia, but when Andrew Forrest walked into the Nickel Bar of the Kambalda Hotel no one could put a name to the face.

It was a quiet Wednesday night with a few locals drinking at a bar once known as the Swinging Arms. It earned the name because a lot of punches were thrown over the years in what may be the roughest and toughest pub in Western Australia.

Publican Steve Cole wasn’t on deck, but got a call from one of his staff saying they thought “someone famous” had called in for a beer.

Andrew Forrest in the Nickel Bar of the Kambalda Hotel with Stanley Hedland, left, and hotel owner Steve Cole.

Forrest stood out in his white shirt and cream jacket and because of his small entourage. Cole, a former Fortescue Metals Group employee, recognised him instantly once he arrived on the scene.

That was back in May as Forrest, through his privately owned Wyloo Metals, inched closer to a $760 million takeover of nickel producer Mincor Resources which was nailed down this week.

He spent the night at the accommodation village attached to Mincor’s Cassini mine, and shared with the workforce his vision for the company to become a launching pad for even grander plans to champion nickel as a key battery ingredient.

The next day, he was underground for the first time in 15 years, where he jumped on a drilling jumbo and received a crash course in an operator’s job that would ordinarily pay nearly $180,000 a year, according to Seek.

Forrest visited both the new Cassini mine and old Long mine, picking up what he called money rocks and looking for the telltale green flecks that indicate high-grade nickel sulphide.

Forrest is betting big on nickel for the second time in his corporate career, and has declared he’s willing to invest whatever it takes to become a globally significant supplier to battery and car makers.

The move comes 22 years after the Anaconda Nickel debacle almost broke him, and more than 55 years after nickel put Kambalda, about 600 kilometres east of Perth on the edge of a giant salt lake, on the map.

Cole, who bought the Kambalda pub a couple of years ago and is president of the local footy club, says the town is ready for a new boom in changing times marked by nickel’s resurgence and paralleling the rise of lithium.

The Mincor ground covering the Kambalda and Widgiemooltha nickel domes is adjacent to Essential Metals’ Pioneer Dome lithium project, and lithium shows up in Mincor’s drill cores.

The Mt Marion lithium mine, owned by Chris Ellison’s Mineral Resources and China’s Ganfeng, the Bald Hill lithium mine, and Liontown’s Buldania lithium project are within 100 kilometres of Pioneer Dome.

And there’s still life in gold discovered around Kambalda back in the 1890s.

Cole says that all stacks up well for Kambalda and his pub, built four years after Western Mining Corporation started mining nickel in the region in 1966.

“From 1970 to the time I bought it, it was very well known as the Swinging Arms,” Cole says.

“I’ve got a zero tolerance to violence, and I’ve changed the name from the Kambalda Hotel/Swinging Arms to the Kambalda Hotel/Nickel Bar, which reflects Kambalda being founded on nickel.

“It had a very chequered past. It wasn’t uncommon to come over here and there’d be 200-300 people punching on back in the heyday. It was a fairly Wild West situation even back in the ’80s and ’90s.”

Cole says the hotel’s 33 rooms are booked solid by mining companies and explorers. He’s about to add 22 rooms and likely to apply to the local council to build nearly 300 more rooms with backing from a mining company.

“This mineral boom hasn’t really taken off yet. We’ve got another level of boom times here,” he says.

“With the way the world’s going, you don’t have to be Einstein to realise that lithium and nickel are the way of the future. You’ve got to have nickel and lithium for batteries, and we’re sitting on probably one of the biggest [nickel] deposits in the world here, so it’s only a matter of time.”

Wyloo started investing in Mincor in 2019 when it was a $40 million company, viewing it as a vehicle to put back together the Kambalda nickel precinct broken up by Western Mining in the 1990s to help pay for Olympic Dam.

Wyloo came on to the register around the same time in 2019 that Mincor acquired the Long mine from IGO Limited.

It was the same year that BHP took its Nickel West business off the chopping block, deciding it offered exposure to the battery boom. The call came after a BHP review of battery minerals where nickel came out on top of lithium and cobalt.

BHP, Mincor/Wyloo and IGO are now all intertwined in nickel.

Mincor and IGO, which acquired another nickel producer in Western Areas for $1.3 billion in a contentious 2022 deal, are major suppliers to BHP. Mincor’s offtake deal with BHP is set to expire in 2025 and, as the new owner, Wyloo will need to sort out quality issues related to arsenic content in the Cassini ore that have earned a red light from BHP.

Under a partnership spawned out of the Western Areas takeover, where Forrest had leverage via a 9.8 per cent stake, Wyloo and IGO are considering building a processing plant at Kwinana, south of Perth, that would mix nickel, cobalt and manganese to make a precursor material for battery cathodes known as pCAM.

The plant would be the first of its kind in Australia and take the nation a step closer to producing batteries onshore. It is slated for a site next door to where IGO and China’s Tianqi produce lithium hydroxide and close to where Wesfarmers and its partner, SQM, have started work on their lithium hydroxide plant.

A Wyloo-IGO precursor plant would have consequences for BHP – which highlights nickel in advertising about its move into “future facing” commodities – as it considers a big ticket upgrade of its ageing smelter at Kalgoorlie and weighs up building a 1000-bed accommodation village.

The Mincor operations rely on using the BHP-owned nickel concentrator at Kambalda, but nickel smelting is not required as part of the Wyloo-IGO process to make precursor material.

BHP has nickel mines of its own not too far from Kambalda and picked up the $1.7 billion West Musgrave project near the South Australian border as part of its acquisition of OZ Minerals.

Wyloo chief executive Luca Giacovazzi says it makes a lot of sense to produce pCAM at Kwinana rather than moving around nickel concentrate (about 12 per cent metal) or nickel sulphate (about 20 per cent metal).

“It is a great product to move around because it is 100 per cent pure in terms of nickel units, and you bypass smelting as a greener way of making a nickel product,” he says.

“We think the optimal point [in the battery supply chain] today is pCAM, but it’s great to think WA has all the metals needed so we can go further downstream.

“First you have to bridge the gap and be the first to take the step [into pCAM] that opens up a world of possibilities.”

Meanwhile, Giacovazzi has traders pleading with him not to go downstream and to let them price nickel concentrate produced by Wyloo through the Mincor operations and potentially mines in Canada.

“Traders are in the best position to see where the shortages are, and it is very apparent that the world is short nickel sulphide concentrate,” he says.

Lithium-ion batteries with nickel, manganese and cobalt were fitted into about 60 per cent of the electric vehicles sold around the world in 2022, and it is accepted they store more energy and provide longer range than rival cathode chemistries.

Every company is coming to us asking if they can do an offtake deal.

— Luca Giacovazzi, Wyloo Metals

“Not many people appreciate there is more nickel in a battery than there is lithium. In another world, it would be called a nickel-ion battery, not a lithium-ion battery,” says Giacovazzi.

One big difference is that lithium production started from near zero when demand for EVs started to accelerate whereas nickel could be appropriated from long-established stainless steel supply chains.

“When you think about the world, there is a lot of lithium out there. Every second day someone has found or made some lithium,” says Giacovazzi.

“When you think about nickel, how many times in your day job do you hear of people making high-grade nickel discoveries? They are few and far between.

“It feels like at some point nickel will have its lithium moment when there is just not enough of it. We get to see it first-hand because we talk to car companies a lot. Every company is coming to us asking if they can do an offtake deal.

“The OEMs [original equipment manufacturers] think they have dealt with the issues in lithium and are now turning their attention to nickel. They are looking at the nickel universe and going, ‘my options are BHP and Vale’, whose offtake is all gone, and Glencore, whose offtake is all gone, or to Indonesia or to us.”

Wyloo has a presence in what it considers the three best nickel sulphide belts in the world outside Russia – Kambalda, the Ring of Fire region in northern Ontario and the Cape Smith belt in Quebec – and a long pipeline of projects that will soon require a lot of capital.

On the exploration front, Wyloo believes there is much more nickel and perhaps even the main ore body still to be found around Kambalda.

In Ontario, it is aiming to have the Eagle’s Nest nickel project – a prize won after a bidding war with BHP – in production before the end of the decade.

Wyloo also wants to build a precursor plant in Canada, develop its Blackbird chrome project in the Ring of Fire precinct, and continue exploration work at Cape Smith.

Giacovazzi sees plenty more to come but is pleased the nickel price had more than doubled from about $US4 a pound when he started pitching a return to the sector to Forrest about four-and-a-half years ago.

He’s surprised the Albanese government didn’t add nickel to an updated critical minerals list when it was released last month.

“I know it is something the government is looking at very closely, so I don’t think it stays off the list for long,” he says.

Forrest says his team has done a lot of work to understand that nickel sulphides are the “greenest and cheapest” path to a battery, despite all the Chinese-backed nickel laterite projects springing up in Indonesia.

The Albanese government and the WA government both signed off on critical minerals agreements with Indonesian President Joko Widodo this week in moves that raised eyebrows in the Australian nickel sector and in the Forrest camp.

Indonesia brings little to the critical minerals table except nickel laterite projects that it insists make at least pig iron onshore. The projects carry with them big environmental question marks and are largely wholly or part-owned by China.

Forrest clearly had the Indonesian producers in mind this week in promising to give the world a choice between clean and dirty nickel.

Wyloo estimates a laterite operation in Indonesia has six times the carbon footprint of a similar scale sulphide operation.

Forrest says he wants nothing to do with tropical laterite operations which involve deforestation and where tailings inevitably end up in the ocean, and tips the market will eventually feel the same way.

“People were prepared to turn a blind eye yesterday but tomorrow they may not be,” he says.

However, there’s a non-tropical nickel laterite mine about 300 kilometres north of Kambalda you get the impression he wouldn’t mind owning as part of some unfinished business.

The Glencore-owned Murrin Murrin mine was the scene of his Anaconda downfall, but since then, has churned out a lot of nickel.

Forrest bristles at any suggestion people in the wider Goldfields region, taking in Kambalda, Kalgoorlie and Leonora, and in the nickel sector, might still harbour hard feelings toward him over Anaconda.

Forrest was booted as chief executive in 2001 after falling out with backers Glencore and Anglo American over production delays and processing plant misfires he still blames on the engineering firm then known as Fluor Daniel.

“Under my leadership no one wasn’t made whole, every bill got paid,” he says. “I’m really proud of that record.

“Glencore got hold of it and cut a deal with bond holders and tried to get the company for nothing. I do know that someone stopped them doing that and didn’t get a great deal, but got a hell of a lot better deal than Glencore had on the table for every other shareholder. And that was me.”

Forrest says he never lost interest in nickel even after going on to make his fortune in iron ore.

“I started my corporate leadership in nickel because I believe it is the most recyclable metal in the world and has a huge future,” he says.

“It is not something I’ve ever felt I’ve been away from. I’ve just been waiting for the right opportunity and leadership team to go back in.”

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