Centaurus inks Glencore deal for Jaguar nickel output 

Centaurus Metals (ASX: CTM) has moved closer to a final investment decision on its Jaguar nickel project in Brazil after Glencore (LSE: GLEN) signed a binding five-year offtake agreement that could be worth about $450 million.

Glencore has committed to buy 20,000 tonnes a year of 32% nickel concentrate, equal to roughly one-third of Jaguar’s planned 65,000-tonne annual output. The material will contain about 6,400 tonnes a year of nickel that Glencore plans to ship to its Sudbury smelter in Canada. 

Sales will be linked to the London Metal Exchange nickel price, currently about $17,200 per tonne of refined nickel (not concentrate), with the agreement also setting payment terms for copper and cobalt byproducts contained in the concentrate. 

Centaurus expects the project to produce an average of 22,600 tonnes a year of contained nickel during its first seven years.

Managing director Darren Gordon said the deal marked a major step in advancing Jaguar towards development, and that it should help de-risk the company’s ongoing debt and equity funding efforts.

“This milestone marks an important step in Jaguar’s journey from exploration concept to development since we acquired the former Vale project in 2019,” Gordon said.

First ore in 2029

Centaurus aims to make a final investment decision before the end of September and is targeting first production in early 2029. The company is in discussions with Brazil’s National Development Bank about potential debt financing and is also seeking a strategic investor interested in securing nickel sulphide concentrate supply.

The company received final regulatory approval for the project last October. The proposed 3.5-million-tonne-per-year operation is forecast to produce nickel at all-in sustaining costs of $9,764 per tonne.

Using a long-term nickel price assumption of $19,800 per tonne, Jaguar carries a post-tax net present value of  $735 million and an internal rate of return of 34%. The estimated $380-million capital cost could be repaid in about 1.8 years.

Tight market

The agreement comes as nickel markets show signs of tightening after years of depressed prices driven by a surge of cheaper metal from Indonesian laterite operations. Prices have recently rebounded above  $16,000 per tonne for the first time in more than a year after briefly nearing $19,000 during a January rally.

High-grade nickel sulphide concentrate such as Jaguar’s planned product is scarce, and a recent Macquarie report suggested the market may be shifting from oversupply towards balance, with a potential London Metal Exchange price floor between $17,000 and $18,000 per tonne.

Centaurus started the year with about A$25 million ($17.7 million) in cash after raising A$23 million last August and September. Shares, which have traded between A26¢ and A70¢ over the past year, fell almost 4% on Monday to A51¢, giving the company a market capitalization of about A$288 million.