MELBOURNE, July 21 (Reuters) - BHP Group ( BHP ) has

opted to sell its interest in the $942 million Kabanga nickel

project in Tanzania to its partner Lifezone Metals ( LZM ) for

as much as $83 million, Lifezone said.

The NYSE-listed company will acquire BHP's 17% equity

interest in Kabanga Nickel Limited (KNL), the majority owner of

the Kabanga Nickel Project in northwestern Tanzania, Lifezone

said in a filing late on Friday.

The company issued a report on Friday that put

pre-production capital costs for the project at $942 million and

life of mine costs at $2.49 billion. It is expected to produce

around 50,000 metric tons of nickel annually once fully ramped

up, a process that will take six years including construction. A

final investment decision on the project is due next year.

BHP had agreed in 2022 to make an investment of as much as

$100 million in the nickel mine and processing facilities if

certain conditions were met.

BHP still considers Kabanga to be one of the world's

best undeveloped nickel sulphide projects, said a source with

knowledge of the matter, but the uncertain nickel market outlook

and the miner's capital allocation framework have made

investments in greenfield nickel projects challenging.

A BHP spokesperson declined to comment.

BHP has shifted its view on nickel on the back of a boom in

output from Indonesia in recent years. It put its Australian

Nickel West operations on care and maintenance last year due to

a poor outlook for nickel prices, and a decision on the future

of those operations is due by early 2027.

As a result of the transaction, Lifezone now owns 100% of

KNL, which in turn holds an 84% interest in Tembo Nickel

Corporation Limited (TNCL), the Tanzanian operating company for

the Kabanga Nickel Project.

The remaining 16% of TNCL is held by Tanzania's government.

All existing agreements with BHP have been terminated and

Lifezone has also assumed full control of 100% of the offtake

from the Kabanga Nickel Project, it said.