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Rising EV-grade nickel demand fuels interest in risky HPAL process

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  • Henrique Ribeiro    Jacqueline Holman    Analyst Lucy Tang
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  • Energy Transition

As analysts and industry participants warn of a looming shortage of battery-grade nickel, there is an ample pipeline of projects employing high-pressure acid leach (HPAL) technology to produce nickel chemicals. But scrutiny of the process is also growing, after some facilities ran into difficulties or produced less than expected.

HPAL has its advantages, particularly given a lack of options to convert low-grade nickel laterite ore—the form that represents the larger share of the world's resources. However, several challenges—including high capital expenditure (capex) and environmental impact—may not only slow down its adoption, but also lead some projects to failure, sources said.

HPAL is the process used to recover nickel and cobalt separately from each other, from low-grade nickel oxide laterite ores. Several HPAL projects have already been unsuccessful so far in converting low-grade nickel laterite ore into premium material.

HPAL nickel recovery process flow diagram

One of the most discussed examples recently was Goro in New Caledonia, which was purchased by mining giant Vale in 2006. The original $1.5 billion capex surged to $4.5 billion to support a 60,000 mt/year nickel oxide and mixed hydroxide precipitate (MHP) operation. Nameplate capacity was hardly reached after a ramp-up that took two years longer than expected due to the complexity of the HPAL facility.

After incurring sequential yearly losses, Vale put its stake up for sale in 2017. However, as potential buyers walked away from the deal, the miner announced in September 2020 it would place the operation under care and maintenance "in preparation for a possible shutdown of the operation, should no sustainable solution be found in the coming months."

Rising nickel prices due to battery demand led to First Quantum Minerals reinstating its Ravensthorpe low-grade nickel-in-laterite mine and HPAL plant in Western Australia in March 2020, which it had placed in care and maintenance in 2017 due to low nickel prices. However, since its restart, the mine has faced two technical issues in temperature adjustment, which led FQM to downgrade its 2020 production guidance by 2,000 mt to 13,000-15,000 mt of nickel.

Sumitomo Metal Mining suspended the Ambatovy HPAL project in Madagascar in March to prevent the spread of COVID-19, although it said in late 2020 that it expected to resume operations in early 2021, with 3,000 mt of nickel expected to be produced in the first quarter. Roskill analyst Jack Anderson said last November that Roskill expects the commissioning of two other HPAL projects being developed as part of the Indonesia Morowali Industrial Park (IMIP) in Sulawesi to be delayed until 2022, due to tailing disposal method issues.

There are a few examples of successful HPAL projects currently in operation, namely Sumitomo's Coral Bay and Taganito operations in the Philippines; and Sherritt International and General Nickel Company's Moa joint venture in Cuba. Sumitomo is also planning a third HPAL operation in the Philippines, the Pomalaa project, which is planned to produce 40,000 mt/year of nickel, although the company said in a December 2020 presentation that it was taking some time to obtain the required permits due to the pandemic.

According to Trytten Consulting president Lyle Trytten, HPAL is complex to employ successfully because it requires "very large processing facilities handling hot corrosive slurries and the challenges of high pressure, multi-phase flow."

"The combination of high temperatures and pressures, high acid addition, and erosive service require extensive use of exotic materials such as titanium, tantalum, and ceramic linings, with rubber-lining typically used extensively after the high-temperature sections," he added in an article emailed to S&P Global Platts.

Advantages of HPAL

Those who overcome these challenges, however, have some important advantages in the path to convert low-grade, Class II nickel into premium material that suits lithium-ion batteries for electronic goods, electric vehicles (EV) and energy storage systems.

"The technology works well, there are fairly low operating costs, low mining costs, and it provides a good by-product value since it also recovers cobalt (another typical ingredient of batteries), which is not possible with other nickel technologies," said Trytten.

In addition, the industry doesn't have many options. Low-grade nickel laterite ore accounts for the biggest portion of the world's resources, and a significant portion of the high-grade nickel sulfide assets are already operating. This means that the anticipated boom in high-grade nickel demand for battery applications will require laterite ore to be processed.

StoneX senior metals analyst, base metals, EMEA & Asia, Natalie Scott-Gray, said in a webinar last October that, of the metals used in the lithium ion battery (LIB) cathode, nickel was expected to undergo the greatest demand across the sector, due to its responsibility for energy density.

"The end-use consumption of the nickel market is going to drastically change over the next decade with its use in LIB moving from 6% in 2020 up to 35% by 2030," Scott-Gray said.

She said key drivers would be the increased penetration of electric transport in the market, as well as the requirement to increase the driving range provided by these batteries, by increasing the percentage of nickel used in a single cell.

Platts Atlas of Energy Transition

This was being seen in the changing configuration of lithium nickel manganese cobalt (NMC) oxide batteries, she said, which had moved from a 111 ratio (meaning nickel, manganese and cobalt were used in the same proportion) to 532, and then to the latest 811 (with eight parts nickel to one part of manganese and cobalt each).

Scott-Gray added that StoneX expects Class I nickel, which is used in LIBs, to enter a tight balance over the 2021-22 period, with a marked deficit expected to occur as early as 2023.

"The health of the Class I nickel market will be reliant on new production coming online and we rely, therefore, on the success of HPAL projects coming online in Indonesia and Australia over the next few years," she said.

In Australia, there are a number of nickel HPAL projects in the pipeline, the most advanced being Clean Teq's Sunrise nickel-cobalt-scandium project in New South Wales, where a definitive feasibility study was completed in June 2018.

Other upcoming projects include MetalsX's Wingellina in Northern Territory, GME Resources' NiWest in Western Austraia (WA), Jervois Mining's Nico Young in New South Wales, Australian Mines' Sconi project in Queensland, Ardea Resources' Goongarrie project in WA and Barra Resources' Mt Thirsty in WA.

Chinese investments

China, which has led the EV race until now, is well aware of the likely future battery-grade nickel shortage. Chinese companies have been ahead of the investment in a number of new HPAL facilities that are under construction, especially in Indonesia.

"Unlike Western [investors], Chinese take a long-term view," said Martin Vydra, head of strategy at Canada-based Conic Metals, which has an 8.5% stake in the Ramu HPAL operation in Papua New Guinea. "The Chinese are able to do it because they have a lot of knowledge to transfer; they are China-backed, so financially they are not concerned," he added.

However, "even if you have the conditions, it takes at least three years [to start running an HPAL plant after construction starts]. It depends on complicated computer systems, complicated materials … they have unlimited access to capital and technical staff, so they can be successful, but I think these projects will take their time to be built, and you will see some failures too," added Vydra.

There are several Chinese-backed HPAL projects in Indonesia. Companies now are also looking to process nickel mined in Indonesia domestically after the Energy & Mineral Resources ministry announced in September 2019 that all unprocessed nickel ore exports, including material over 1.7% nickel content, would be banned from the start of 2020 to increase revenue from the processing of ore.

One is PT Halmahera Persada Lygend's 37,000 mt/year of nickel-in-mixed hydroxide product HPAL plant on the Obi Island, which is a JV between China's Lygend Resources & Technology and Indonesia's Harita Group.

The nickel smelter is expected to start up in March 2021 after being delayed six months due to pandemic-related travel restrictions. Lygend started construction again in December 2020 after a temporary suspension due to COVID-19, according to a report released by the company. The project officially started construction in March 2020.

At the end of August 2020, Lygend's subsidy Pt Halamahera Persada Lydend (HPAL) signed a contract with GEM China, a precursor and battery metals producer, to supply between 74,400 mt and 178,560 mt of nickel raw materials and between 9,296 mt and 22,320 mt of cobalt by-products.

Environmental, financial concerns

Although China has already picked HPAL as its choice to develop premier nickel supply from low-grade deposits going forward, there are still concerns about the inherent environmental bottlenecks of the technology.

Most of the existing HPAL facilities are coal-fed, and the process emits up to three times more greenhouse gases than nickel production from high-grade sulfide deposits. This raises concerns that the benefits of increasing nickel supply for "green" purposes such as batteries might not be enough to cover its environmental costs.

"There's no point chasing nickel units if they generate three or four times more carbon footprint [than currently]," Platts was told by Sam Riggall, CEO of Australia-based Clean Teq, which is developing the Sunrise HPAL project in Australia.

The company aims to use solar energy instead of coal, recover steam and heat, and generate 60% of the pressure acid leach from its internal acid plant. These would support a $1.8 billion facility that aims to go further than other plants, producing battery-grade nickel sulfate rather than stopping at intermediates such as MHP and mixed sulfide precipitate, as many HPAL facilities do.

The difficulty is that "there's no investment going to nickel supply, apart from what China is doing in Indonesia," Riggall said.

"The fundamental math of the market is very scary—you need 60,000-80,000 mt/year every year, for the next 20 years; so if EV manufacturers are going to meet their electrification goals, nickel needs to be developed somewhere," Trytten said, adding he believes both automakers and battery manufacturers will need to invest in nickel production to have this capacity added.

In December 2020, German chemical company BASF—which produces cathode active materials for batteries—and French miner Eramet announced an agreement to assess the development of an HPAL plant in Weda Bay, Indonesia. Eramet started mining nickel at Weda Bay in 2019.

Automakers, however, have remained on the sidelines so far. "I had discussions in the past with automakers, they recognize how complicated mining is; but I do see the battery companies getting more involved in the upstream," Vydra said.

Automakers "are understanding there's a problem, they just don't know how to fix it. They are waiting for the mining industry to solve it," added Riggall.