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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 betterâ€.
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
