AGORACOM Small-cap Investor Relations Blog

SPONSOR: Tartisan Nickel (TN:CSE)  Kenbridge Property has a measured and indicated resource of 7.14 million tonnes at 0.62% nickel, 0.33% copper. Tartisan also has interests in Peru, including a 20 percent equity stake in Eloro Resources and 2 percent NSR in their La Victoria property. Click her for more information

EV’s will make nickel a once-in-a-generation investment opportunity, says BHP

• More EVs and more nickel in each of them will drive nickel demand through the roof, says the head of BHP’s Nickel West arm.
• His forecast is great news for those juniors with large nickel deposits awaiting development, such as the Jaguar project just acquired by Centaurus from Brazilian giant Vale.

By: Barry FitzGerald

The display of oomph at last week’s Diggers & Dealers conference in Kalgoorlie was not restricted to the gold stocks.

The nickel stocks made sure of that, with none other than BHP leading the charge in a presentation by its Nickel West president, Eddy Haegel.

Nickel West is the formerly unloved BHP unit that has come into its own in response to what Haegel described as a once-in-a-generation opportunity presented by the gathering nickel-rich battery boom.

Haegel said that in addition to the rapid growth in electric vehicles sales, BHP expects nickel-in-vehicle demand to surge, driven by three factors.

The first is batteries are becoming bigger to improve vehicle range and performance. Next, nickel-based cathodes are taking market share from non-nickel cathodes because they’re “simply better”.

And finally, increasing nickel in battery chemistries increases energy density, delivering better performance and lower costs.

“It is important to understand that a 60kwh NMC811 battery needs 9kg of cobalt, 11kg of lithium and a massive 70kg of nickel,” Haegel said.

While stainless steel still accounts for about 70% of nickel consumption, batteries is the fast growing subset, to the point where EV’s alone could account for all of the current production in the late 2020s.

Haegel sounded a note of caution about the here and now. While BHP thinks there is going to be a significant increase in global nickel demand, it is a case of not just yet.

“We do not expect to see a meaningful impact on the nickel market from batteries until the mid – late 2020s. Only then, do we expect to see serious industry investment by Class 1 nickel producers,’’ Haegel said.

“However, we will not rest waiting for that day to arrive. We are actively developing options to position ourselves for this once-in-a-generation opportunity.’’

It is against that backdrop that the nickel price has been a strong performer of late. The current price of $US7.17/lb compares with the 2018 (calendar) average of $US5.95/lb, and the 2017 average $US4.72/lb.

CENTAURUS METALS:

Talking about once-in-a-generation opportunities, Centaurus Metals (CTM, trading at 0.9c for a market cap of $24m) has just seized one which gives it a ticket to the battery-led nickel party discussed above.

In what was probably the most significant announcement by a junior at D&D, Centaurus made everyone sit up and take notice when it revealed it had struck an option deal to acquire the Jaguar nickel sulphide project in Brazil from Vale, no less.

Jaguar comes with a foreign resource estimate of a near-surface 40.4mt grading 0.78% nickel for a total of 315,000t of contained metal across a cluster of deposits, with lots of exploration upside to boot.

It is a lot of nickel for a company with a $24m market, particularly, as was mentioned here on May 31 when Centaurus was trading at 0.8c, its market value is pretty much covered by its Jambreiro iron ore project in Minas Gerais state.

Assume long-term-term iron ore prices of $US60-$80/t, Jambreiro could be good for $A20-$A25m in pre-tax operating cashflow. But it is not in production and it has to be said its importance to Centaurus has been overwhelmed by Jaguar.

Jaguar sits in the western portion of the Carajas mineral province and covers 30sqkm of land containing the known foreign resource estimate (based on 55km of diamond drilling by Vale) and at least four exploration targets.

To complete the acquisition, Centaurus is up for a $US250,000 upfront cash payment, the transfer of its Salobo West copper-gold exploration tenements to Vale, two deferred payments totalling $US6.75m and a production royalty of 0.75%.

Vale will have offtake rights (its Onca-Puma nickel mine is in the region) and importantly, preliminary metallurgical testwork by Vale has indicated a high-grade and quality nickel concentrate can be produced from Jaguar’s sulphide mineralisation.

It is not a deal that would have been available to others as it reflects both Centaurus’ long-term commitment to Brazil and Vale’s interest in Salobo West, which is near its Salobo mine, its biggest copper operation.

Centaurus hits the Eastern States next week to promote the Jaguar deal and assuming a good reception, raising some funds to get cracking on Jaguar’s near-term potential as an open-cut producer from higher grade sections of its resource base will a key talking point.

VENTUREX:

Venturex boss AJ Saverimutto had a good reason to be wearing a sharp suit at an investor lunch at the Palace Hotel on the opening day of the D & D conference.

AJ had just announced Venturex (VXR, trading at 18c for a market cap of $54m) had locked away a $100m senior debt funding package with commodities trader Trafigura for its Sulphur Springs copper-zinc project in the Pilbara, 145km south of Port Hedland.

The debt deal means that Sulphur Springs is pretty much on its way – once the equity component of the $169m capex project is locked away – to becoming Australia’s next base metals producer in an ASX market where leveraged investment opportunities for copper in particular are thin on the ground.

As much as nickel is needed for batteries in the electric vehicle and the storage of renewable energy revolution, copper is even more so. About 80kg of the red metal is required for an EV alone, a fact that underwrites expectations that the world will be short about 4mpta of copper come 2025.

Sulphur Springs’ high-grades – it nets out at about 3.3% copper equivalent – from five years of open cut mining, followed by five years of underground mining as the starting point, makes it a development for the times.

Based on realistic metal price assumptions, the 1.2mtpa operation (easily expandable to 2mtpa on the conversion of exploration upside to additional resources/reserves) will generate revenue of about $209/t and a before-tax margin of $65/t.

Multiply that out and Sulphur Springs is good for about $80m in average annual free cashflow, or $800m over the initial 10 year mine life. That’s why Venturex has been able to lock away the $100m in debt funding in a market where debt funding for projects held by juniors is virtually non-existent.

Northern Star has been a supporter of the story since 2012 and is Venturex’s biggest shareholder with a 19.8% stake.

AJ said a number of equity options would be looked at to complete the financing, including the possible introduction of a strategic partner who would be happy with Trafigura’s 100% offtake for the first 11 years, 50% thereafter.

Broker valuations of the stock which pre-date the debt component of Sulphur Springs, a major de-risking event if there ever was one, were multiples of the current price.    

Source: https://www.livewiremarkets.com/wires/ev-s-will-make-nickel-a-once-in-a-generation-investment-opportunity-says-bhp

SPONSOR: Tartisan Nickel (TN:CSE)  Kenbridge Property has a measured and indicated resource of 7.14 million tonnes at 0.62% nickel, 0.33% copper. Tartisan also has interests in Peru, including a 20 percent equity stake in Eloro Resources and 2 percent NSR in their La Victoria property. Click her for more information

Gold Is Hot But Nickel Is Hotter As Demand Grows For Batteries In Electric Vehicles

• Gold is hot but there’s another metal which is hotter, nickel.

• Up 30% over the past two months nickel has delivered more than double the performance of gold which is up 13% over the same time, and the gap could get a lot wider as the supply of nickel stagnates and demand accelerates.

Tim Treadgold Contributor

The driving force behind the recent awakening of gold is well-understood and can be summed up as a flight to safety as the China v U.S. trade war slows global growth and values of conventional, or fiat currencies, are debased by governments resorting to quantitative easing or other forms of creating money.

Bags filled with nickel briquette and nickel powder sit in a warehouse at the BHP Group Ltd. Kwinana Nickel Refinery in Kwinana, Western Australia, Australia, on Friday, Aug. 2, 2019. The world’s biggest miners, including BHP Group and Glencore Plc, are finally firm believers in the electric vehicle battery revolution — what they don’t agree on is which metals will deliver the best long-term exposure to the developing global market. Photographer: Philip Gostelow/Bloomberg

Nickel’s drivers are different and far easier to understand and boil down to a simple case of supply exceeding demand which, in past nickel booms, was essentially a case of mines failing to keep up with the requirements of steel mills making stainless steel, a material which has traditional consumed close to 80% of the world’s nickel.

Demand Growing For Nickel In Batteries

Stainless steel remains the primary market for nickel but there’s a faster-growing market which until a few years ago was insignificant; lithium-ion batteries.A standard source of power in small appliances such as cell-phones with their nickel-cadmium (NiCd) batteries, or nickel-metal hydride (NiMh) rechargeable batteries the big game today is in the battery packs which power electric cars such as the Tesla, Prius and Leaf.

From being a metal easily described as a one-trick pony thanks to its dominant end-use in stainless steel, nickel has suddenly become a two-trick pony, and if electric cars take off as predicted then a shortage in future years is possible.

What caused nickel to run from around $5.40 a pound two months ago to $7.09/lb at the end of last week (and a high on Friday of $7.22/lb) was a combination of strong demand from Chinese stainless steel mills and speculation that a major source of the metal could be cut off sooner than expected.

The source under threat is unprocessed nickel ore from Indonesia which is shipped to China for use in steel mills as a material called Nickel Pig Iron (NPI). Indonesia, and other countries which produce NPI dislike the material because it does not require any value-adding in the home market.

Previous bans on NPI have crimped the industry only for it to return. But the next ban is expected to be permanent and while Indonesia has said it will not be applied until the year 2022 it could happen sooner, just as battery makers seek supplies of nickel to meet electric-car demand.

A crystalliser, used in the process of manufacturing nickel sulphate hexahydrate, stands at the BHP Group Ltd. Kwinana Nickel Refinery in Kwinana, Western Australia, Australia. Photographer: Philip Gostelow/Bloomberg © 2019 Bloomberg Finance LP

ANZ, an Australian bank, warned two weeks ago that falling stockpiles of nickel metal were a warning of a squeeze developing. Stockpiles in warehouses managed by the London Metal Exchange (LME) have been falling for the past four years, with an accelerating decline over the past two, a time when reserve inventories dropped by 43% from around 250,000 tons to 142,000t.

“Nickel inventories have declined steadily since early 2018, as the persistent market deficit takes a toll,” ANZ said.

“Some analysts suggest stockpiling by electric vehicle manufacturers is behind the depletion. Whether this is the case or not, we see the tight market meaning further inventory drawdowns are likely.

Talk Of Panic Buying

“Current LME stockpiles would meet less than two months of supply — so panic buying is a likely outcome.”

It is highly unusual for a bank like ANZ to use an expression as emotive as panic buying but it was used largely because of concern that speculators had become active in the nickel market ahead of Indonesia’s reintroduction of a ban on NPI.

Pure-play Australian nickel mining companies are enjoying sharp share price rises as the nickel price moves up. Western Areas has risen by 25% over the past month and Mincor, which has just re-signed a supply agreement with BHP, a major producer of the nickel sulphate which battery makers prefer, is up 28%.

If there is a squeeze developing on nickel supplies as a major new market develops for the metal the price could go much higher than its current $7.09/lb.

Back in 2011 when a supply shortage developed the nickel price hit $22/lb, before falling rapidly as steel mills found substitutes for nickel in their stainless steel, including manganese.

No-one is talking about a nickel boom as powerful as that in 2011 but nickel has a long track record of extreme moves, up and down.

Source: https://www.forbes.com/sites/timtreadgold/2019/08/11/gold-is-hot-but-nickel-is-hotter-as-demand-grows-for-batteries-in-electric-vehicles/#634a95f93610

SPONSOR: Tartisan Nickel (TN:CSE)  Kenbridge Property has a measured and indicated resource of 7.14 million tonnes at 0.62% nickel, 0.33% copper. Tartisan also has interests in Peru, including a 20 percent equity stake in Eloro Resources and 2 percent NSR in their La Victoria property. Click her for more information

The Top Miners Are Split on How to Chase the EV Battery Boom

Bloomberg

• The world’s biggest miners, including BHP Group and Glencore Plc, are finally firm believers in the electric vehicle battery revolution — what they don’t agree on is which metals will deliver the best long-term exposure to the developing global market
• “We’ll always say they are a lithium battery, but actually the weight is in the nickel — that’s the biggest volume of material,’’ said Wood Mackenzie’s Durrant.

BHP has revived a declining nickel unit in Western Australia to target the sector, while Rio Tinto Group is accelerating work to enter the lithium market. Glencore is focusing on cobalt and copper and Anglo American Plc is examining prospects for platinum and palladium to be deployed in future battery technologies.

“We did a review of all the battery input materials — nickel, cobalt, lithium,” said Eduard Haegel, asset president at the BHP’s Nickel West unit. “We think that in the medium-to-longer term there will be a margin that will be sticky for nickel — we think it’s an attractive commodity.”

BHP, the biggest miner, this year reversed long-term efforts to seek a buyer for the division, opting to retain Nickel West to benefit from forecast growth in lithium-ion batteries and a scarcity of high-quality nickel supply. From the second quarter of 2020, the unit will begin production of bright-turquoise colored nickel sulphate — a premium raw material for the battery supply chain — from a nickel refinery south of Perth, with plans to potentially carry out the industry’s largest expansion.

The outlook for battery materials is firming as governments set targets on phasing out combustion engine vehicles, and as automakers commit to expanding line-ups of electric models, according to Angela Durrant, a Sydney-based principal analyst at Wood Mackenzie Ltd. “The demand profile is certainly becoming more clear,’’ she said.

Deployment of more than 140 million electric vehicles by 2030 will require 3 million tons more copper a year, 1.3 million tons of nickel and about 263,000 tons of cobalt, according to Glencore Plc’s forecasts. By 2040, almost 60 percent of new vehicle sales and about a third of cars on the road will be electric, BloombergNEF said in a May report.

BHP sees an abundant global supply of lithium, and regards cobalt as at risk of substitution, reducing the attractiveness of both commodities, Chief Financial Officer Peter Beaven said in a May speech. Rio also remains wary over cobalt, while Glencore CEO Ivan Glasenberg said in 2017 the company has “zero interest’’ in lithium, in part because of a lack of arbitrage opportunities.

Picking winners hasn’t been helped by price gyrations. Key battery metals have faltered in the past year after dramatic gains. That’s chiefly been on concern that incumbents and new producers have added too much volume too quickly, as well as on short-term worries over a slower pace of growth in China’s electric vehicle market, the world’s largest.

Lithium prices tripled between mid-2015 and May last year on fears of shortages and have since slumped more than a third as new mines started up. Cobalt in London quadrupled in the two years to March 2018 before tumbling by almost three-quarters.

Even as they warm to the battery theme, major mining companies aren’t yet prepared to move beyond familiar commodities and remain cautious on acquisitions, said Robert Baylis, managing director at Roskill Information Services Ltd. “They don’t want to stray too far from the nest,’’ he said. “Some miners have instead concentrated on developing their own existing projects.’’

Base metals are more traditional ground for the largest producers, and nickel is increasingly in focus. Vale SA’s Indonesian unit and partners have outlined plans to invest about $5bn on nickel projects, in part aimed at the battery market, while Rio has expanded exploration work to find new deposits in nations including Uganda and Finland.

BHP’s sales to the battery sector of nickel products now account for more than 75 percent of the unit’s total production, up from less than 5 percent in 2016, according to Haegel.

“It makes sense that these companies are primarily focused on copper and nickel,” said Sophie Lu, Sydney-based head of mining and metals for BNEF. The companies typically already have producing assets and both metals “display significant growth potential in the future from batteries,” she said.

Nickel has jumped about a third this year as global inventories decline amid better demand in traditional stainless steel markets and expectations for longer-term battery growth. Battery-grade nickel may face a deficit by 2024 as demand rises, according to BNEF.

“We’ll always say they are a lithium battery, but actually the weight is in the nickel — that’s the biggest volume of material,’’ said Wood Mackenzie’s Durrant.

Source: https://www.supplychainbrain.com/articles/30090-the-top-miners-are-split-on-how-to-chase-the-ev-battery-boom