The Battery Show

Nickel briefly popped through $22,000 (10/lb) and remains in the upper end of $20,000-$22,000 where it has been sitting for the last 6 weeks. LME inventories remain low at 37-38,000 tonnes. Sulphate prices are flat and sitting at a similar discount as last week. In contrast, ore prices and NPI prices ticked higher in China – haven’t seen a rebound in stainless prices yet.  May be driven by rumours that China SRB is stockpiling some nickel.

The big news of the week:

Saudi Arabia is investing $US3.4 billion for a 10% stake in Brazil’s Vale base metals business – good to see the Middle East $$ in the sector.

Australia going to include nickel in the critical minerals list.

Potential for Russian nickel to be subject to sanctions in UK/Europe in the upcoming year – think a lot of people choosing not to use it, but if implemented, a little more challenging given that nearly ½ of Russian nickel used to end up in Europe.

Magna Metals PEA on Crean Hill/Denison project picked up earlier in the year from Sibanye – unfortunately share price was off by about 15% (but had popped up 10% in the week before). 
Metrics on IRR and NPV are both good at $C200 million and 22% IRR with a 15-year mine life mining 1.5-2 Mtpa of ore for a few years with an open pit and then 1.25 Mtpa underground operation with roughly 10ktpa of nickel production.  However, the market reacted negatively for a couple of reasons with capital cost being the primary one:

- Total of CAD$129 million including $48 million of “advanced exploration” costs, $24 million in open pit costs, and $57 million in underground capital. Think the market was expecting was going to be open pit restart and then underground so was a little surprised at the total amount.
- They had some pretty splashy high-grade intervals but the life of mine grades are 0.6% nickel, 0.6% copper and over 1g/t PGMs so some investors were probably expecting some more grades to pop out.
- The third reason was valuation – at $0.75/share has a market cap of $120 million versus the value for the project at $C200 million (and they also have Shakespeare) – which is a pretty healthy P/NAV in the industry sector that is struggling.

A good example of challenges with high grade – can be narrower, less continuous = more drilling capital, particularly if has to be done underground.

Widgie Nickel had nice step-out results and infill drilling
100-metre step out Eastern Limb MEDD069 29.0m @ 1.66% Ni from 79m Incl. 5.0m @ 3.23% Ni from 88m.  Widgie Townsite MEDD061 30.85m @ 1.59% Ni from 435m Incl. 13.43m @ 2.74% Ni from 449.7m And 3.36m @ 3.27% Ni from 471.3m.

Our Timmins neighbour had updated resources from their W4 higher grade deposit:

Measured + Indicated Resources of 31.3M pounds at 0.98% Ni (2.1x the 2010 historical estimate) and Inferred Resources of 12.1M pounds at 0.98% Ni (3.6x the 2010 historical estimate) – about 40% of that in open pit and balance underground resource.

Recording date: 24th July 2023

Nickel continues rangebound in $20,500-$21,500 range with LME inventories remaining low at 37-38,000 tonnes

After nickel price move off the $20,000 range about 10 days ago, sulphate prices actually softened a little as the big surge in June ores for NMC cathodes in China hasn’t continued through yet for July /August  - so sulphate discounts retraced some of the narrowing we’ve seen in last few weeks. On NPI front, NPI prices surprisingly actually ticked up about 2%.  Thought we would see sulphate discounts narrow pretty fully before NPI started moving higher but good to see  

Not lots of news, but couple of key pieces of news

Nickel refining capacity - The London Metal Exchange has approved nickel produced by China’s Zhejiang Huayou Cobalt Co. for delivery under its new fast track registration system for its new refinery in China.  Huayou, GEM, CNGR all building refineries in Indo/China and will follow down a similar path.

This is key piece in “great convergence” which will allow market clearing mechanism to move from NPI/matte discounts back to LME price.   Should see ~200ktpa of capacity come online by end 2024 and nearly 100ktpa of LME deliverable nickel produced in 2023.

This scale of numbers given that given current annualized surplus is estimated by INSG in 100-200kt range which in  May fell by 1/4 to 144kt annualized form ~200ktpa annualized.  I still believe that these figures are overstated as don’t see large inventories in market and wouldn’t see discounts reducing if these inventories available to market.

Poseidon Nickel – comment from subscriber online that wanted thoughts on this announcement.  Last week mentioned their exploration at success at other past producing mine – Emily Ann/Maggie Hays

Poseidon was restarting Black Swan/Silver Swan operations – one of few nickel mills in Western Australia and mine operated for short period of time in 2008-2009 – now announced last week deferring restart until 2024 for following reasons: 

Western Power has advised grid power will be available from late 2024 · Additional metallurgical testwork will be conducted to confirm recovery assumptions for the disseminated serpentinite ore · Decision made to defer the restart of Black Swan due to project related factors and external market conditions

From release quote: “These project related factors together with the continuing tightness in the WA labour market, the lack of the availability of Kalgoorlie FIFO accommodation ….”

Highlights 4 key issues:

Availability of infrastructure– no grid power until end 2024, (could use generators, but much more expensive

Availability of people and ability to support them – talks about fly in fly out – most of Western Australia with a few exceptions is massive fly in, fly out operation.  Is expensive, and highly competitive 

Importance of nickel concentrate grades - Release talks about certain ore feed producing only 5-6% nickel concentrate with high mgO content – big plus of deposits like Crawford is ability to produce much higher grade nickel concentrate.  Most nickel concentrates are only 10-15% nickel 

Parallel project design – need to integrate resource/mine design/mineralogy/metallurgical testing so always understand how feed will perform. Is good they found out now rather than in operation, but would have been better if found before putting FS out last year.

Recording date: 12th July 2023

Nickel prices hanging in similar $20,500 - $21,000 range.  LME Inventories after bump up showing decline again at very low levels - 40,000 tonnes

Indonesia Investment Minister Bahlil Lahadalia on Friday gave the latest updates on Indonesia’s proposal for a global nickel cartel, saying that it has had intense talks with some unnamed countries. Resource-rich Indonesia has been proposing a group of nickel-producing countries that operates in a similar manner to the Organization of the Petroleum Exporting Countries (Opec). The Opec says it aims to coordinate the petroleum policies of its member states and keep the oil markets stable. And Indonesia wants to see a similar group for nickel, which is a key ingredient for electric vehicle (EV) batteries. "There are three countries whom we already have been intensely communicating with," Bahlil told reporters in Jakarta on Friday, commenting on the progress of the Opec-style nickel group. The minister, however, refused to disclose the name of the said countries. When asked about their initial response to the plan, Bahlil said: "[they thought] it was a great idea, but we still need to work on the details of the proposal." The Corruption Eradication Commission (KPK) recently revealed that about 5.3 million tonnes of nickel ore from Indonesia were sent illegally to China from January 2020 to June 2022.

Big couple of weeks for Ardea Resources

Non-binding MOU signed with a Japanese Consortium consisting of Sumitomo Metal Mining, Mitsubishi Corporation and Mitsui & Co. to develop the Kalgoorlie Nickel Project - Goongarrie Hub.  SMM strength is HPAL processing so logical partner for this project and best positioned for success outside of Indonesia

Ardea Resources Kalgoorlie Nickel Project global Mineral Resource Estimate (using a 0.5% Ni cut-off grade) now stands at 854Mt at 0.71% Ni and 0.045% Co for 6.1Mt of contained nickel and 386kt of contained cobalt.  Total resource contains over 6 million tonnes of nickel. This is Australian laterite different than what you see in tropical areas like Indonesia.

Mining optimisation studies have projected production of approximately 30,000t of nickel and 2,000t of cobalt per year for more than 40 years.  Capital cost is A$3.1 billion.  The project generates Post-tax NPV7 of A$4,980M and IRR of 23%,  Average Annual EBITA of A$800M, Project pay back within 3.1 years Direct cash cost after Co by products of US$5,763/t Ni in MHP over life of mine. Metal Prices were $US25,000 for nickel, $60,000 for cobalt. Nice to see but a little on high side – cobalt will be challenged by all of the HPAL capacity coming online before nickel as ratio of production (roughly 10:1 is less than half total supply of  c.20:1

A well-known former Sudbury mining executive is back in the news and is taking on a new role as chair of the newly formed Energy Transition Metals Board with Vale Base Metals, which calls itself one of the world's largest producers of responsibly-sourced nickel, copper, cobalt and platinum group metals. Mark Cutifani was previously chief operating officer (COO) at CVRD Inco, but he left Sudbury in 2007 to become chief executive officer (CEO) of AngloGold Ashanti, and then became CEO of mining giant Anglo American, one of the largest mining companies on the planet.  
Poseidon Nickel – focus has been at Silver Swan / Black Swan – now on its way.  They also had past producing mines at another location Emily Ann / Maggie Hays.  

New target At Maggie Hays West, Nickel has been intersected at the base of the WUU. 

Best results include:
PLJA075 28m @ 0.66% Ni, 187 ppm Cu from 20m including 4m @ 1.32% Ni, 134ppm Cu from 40m
PLJA076 8m @ 1.18% Ni, 143 ppm Cu from 40m
PLJA078 24m @ 0.88% Ni, 220 ppm Cu from 12m including 12m @ 1.16% Ni, 256ppm Cu from 20m
PLJA080 4m @ 0.52% Ni, 744 ppm Cu from 36m
PLJA081 7m @ 0.70% Ni, 588 ppm Cu from 40m (EOH).

Hayden Locke, CEO of Marimaca Copper, joins Merlin Marr-Johnson for a discussion on how long it takes to build a copper mine post-discovery. Chapeau to Ivanhoe Mines and the great Kamoa-Kakula developed in a mere 14 years, with longer timelines much more common. Factors such as capex, infrastructure, complexity, and margin are covered. Hayden touches on the differences between how a major or a mid-tier company might approach a development decision.

Matt & Mark discuss the changing dynamics in the nickel market, particularly influenced by the actions of Russia and China. They mention the recent inflation data and the impact of US interest rates on nickel prices. There is a mention of Russian nickel shipments arriving in China and its effect on market conditions. Matt & Mark also highlight the compression of LME prices for NPI and sulfate, along with the normalization of discounts. They emphasize the national security concerns associated with Russia and China's collaboration in the commodities market, underscoring the need to diversify supply chains. Overall, their discussion sheds light on the current state of the nickel market and its geopolitical implications.

Nickel continues trading either side $21,000 as LME inventories continue to creep lower towards 37,000 tonnes despite talk of large surpluses.  China saw inflow of Russian cathode – 7,000-8,000 tonnes – will be see how this flows through Chinese market or ends up overhanging Chinese market.

Debt deal helped put bounce back in copper and floor under nickel prices.  Given global slowdown, still think test of $20,000 possible before we trend higher by year-end. 

Battery restocking – lithium prices up 13% week-over-week as seeing restock well underway.  As I’ve said before, collapse in lithium caused destocking and drop in battery demand through first half and that we’ll see an aggressive restocking which looks like is now well underway.

“Great convergence” continues – discounts narrowed again with nickel prices lower and sulphate prices higher – sulphate discounts now less than half of what they were 6 weeks ago.  NPI discounts also narrowed slightly.

Indonesia – part of conference and series of site visits

Key takeaways:

Nickel price index – government not going to put export tax on NPI, but establish Indonesia reference price – think this is the way government will extract additional value for Indonesia. Important as no floor price for limonite (HPAL) unlike saprolite (NPI) – part of reason building MHP capacity. There will be ONEC – way for Indonesia capture

Focus on growing battery supply chain volumes starting with HPAL/MHP, matte.  No further talk of more stainlesss capacity – good for US/European stainless producers who have healthy price premiums. Taking advantage of limonite being mined to get to saprolite

Lots of capacity coming – 4 million tonnes approved through 2030 (we’ll need all of it as no western supply growth coming yet).  But will need 500 million tonnes – presenter from Indonesia government bureau doubtful that can supply that much. 

Ore grades definitely the risk – some of plants we went already using 1.5%, most using 1.6-1.65%.  Was 1.8% 2 years ago – don’t think people factoring in derating of plant.  33 MW furnace used to 8ktpa, at 1.6% is 7ktpa

Lots of open property – don’t seem to be rushing to reclaim – not good for runoff

Brimob – Indonesia special forces at each facility