Corrects project capital costs to $942 million pre-production from $2.5 billion life of mine costs in headline, paragraphs 1 and 3

MELBOURNE, July 21 (Reuters) - BHP Group BHP.AX has opted to sell its interest in the $942 million Kabanga nickel project in Tanzania to its partner Lifezone Metals LZM.N 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 did not respond immediately to a request for comment on why it had sold its stake in the project.

The divestment comes as BHP has since 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 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.

(Reporting by Melanie Burton; Editing by Jamie Freed)

((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals; +613 9286 1421; Reuters Messaging: melanie.burton.thomsonreuters.com@reuters.net))