Introducing The IMJI Nickel Subsector Index

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Includes: AMMCF, AMSLF, ARRRF, AXNNF, BZLNF, COPX, FPOCF, GGIFF, GMRSF, IRMGD, IRMGF, LNZCF, MCRZF, MCRZY, NCPCF, NOSOF, NSHRF, NULTF, PANRF, PICK, PSDNF, RNKLF, SXOOF, TLOFF, VNCKD, WSCRF, XME
by: Joshua Hall

Summary

I recently launched the Industrial Minefinder™ Junior Index (IMJI™) to track junior industrial mining companies (excluding gold).

Today I launched the IMJI™ Nickel subsector index, which provides insight into the nickel-focused juniors.

Higher grade sulfide deposits with any kind of size to them are becoming increasingly scarce.

IMJI™ Nickel is down about 12% this year.

Introduction

In a previous article, I introduced the Industrial Minefinder™ Junior Index (IMJI™) that I am currently constructing and hope to complete by the end of Q2 2018. Having completed the Copper, Zinc, and Nickel subsectors, I am now more than two-thirds of the way there.

The following graphic shows what the composition of the complete IMJI™ is currently poised to look like:

(Note: Lead will be moved to the Other category.)

The criteria for the index and company selection are laid out on the IMJI™ page on my website. To my knowledge, this will be the first index devoted exclusively to industrial metals (ex-gold) junior miners.

Today I am introducing the IMJI™ Nickel subsector index, which will form the third-largest constituent component (16%) of the overall IMJI™.

The IMJI™ Nickel Subsector Index

I am launching the IMJI™ Nickel index with 8 holdings. This reflects the fact that I am targeting 50 holdings for the overall index with the nickel subsector comprising 16% of this (8 holdings).

Here is a table showing the initial 8 holdings:

Company Market Cap
($USD millions;
as of Jan 2, 2018)
Contained Nickel
in Resource
(tonnes)
Nickel
Grade
Index
Weighting
Australian Mines (OTCQB:AMSLF) $252 516,200 .58% 23.9%
Ardea Resources (OTCPK:ARRRF) $174 5,411,000 .70% 16.5%
Panoramic Resources (OTCPK:PANRF) $166 226,179 1.63% 15.7%
Noront Resources (OTCPK:NOSOF) $113 285,627 1.42% 10.8%
Jervois Mining (JRV in Australia) $106 990,020 .59% 10.1%
Horizonte Minerals (HZM in London) $102 1,536,781 1.28% 9.7%
Sama Resources (OTC:LNZCF) $73 97,534 .24% 7.0%
RNC Minerals (OTCQX:RNKLF) $66 5,846,580 .27% 6.3%
TOTALS $1,052 14,909,920 .44% 100%

These 8 junior miners focused primarily on nickel had a combined market capitalization of $1.05 billion at the beginning of 2018. Their combined resource estimates contain 14.9 million tonnes of nickel at an average grade of .44%. To put this in perspective, annual nickel mine production is currently running about 2 million tonnes, so this is about enough nickel to supply the world for 7.5 years. In reality, though, the huge capital hurdles for the very large, low-grade mines mean that only smaller high-grade portions of these resources will likely be mined first.

The higher grade resources in the list tend to represent sulfide deposits that will eventually be mined underground, whereas the lower grade resources tend to represent laterite deposits that will eventually be mined through open-pit operations. The latter are mostly found in Australia. The lower grade Canadian resources tend to represent sulfide deposits. Higher grade sulfide deposits with any kind of size to them are becoming increasingly scarce. These could demand a significant premium in the near future, especially if the demand for class 1 nickel for electric vehicle batteries accelerates. This is one reason why I recently wrote about Panoramic Resources (OTCPK:PANRF) as an acquisition candidate.

As I have explained in the comments section of previous subsector index articles, I have a "bench" for each metal which consists of potential replacements. I was surprised by how deep the nickel bench ended up becoming (17 in all). The following companies were also close contenders for index inclusion:

Investors shopping for nickel juniors may also want to take a look at these companies.

Performance

Through April 20th of this year, the IMJI™ Nickel index is down 11.9%. The following chart shows this:

With the completion of the Nickel index, I now have completed the subsector indexes for the main three base metals: copper, zinc, and nickel. Here is a chart showing how these combined subsectors performed over the first quarter of 2018:

(Note: although the title says "Total Index" it is actually on 72% completed.)

This base metals junior index was down 10% during the first quarter. This was roughly triple the decline of the iShares MSCI Global Metals & Mining Producers ETF (PICK) as shown here:

Chart PICK data by YCharts

In my previous IMJI™ article on the Copper subsector index, we saw how the copper juniors were also down about 3 times as much as the Global X Copper Miners ETF (COPX). As I accumulate more price data going forward, it will be interesting to see if the industrial metals juniors continue to trade for +/- 3x the Majors. It would be nice to be able to quantify the relationship more concretely for investors looking to include juniors as part of their broader mining exposure.

Conclusion

The IMJI™ Nickel subsector index provides a quality list of nickel juniors for investors to consider.

I will continue to post updates on the IMJI™ and its underlying subsector indexes on Seeking Alpha and my True Vine Letter blog. I am excited about this opportunity to present the junior industrial miners to a broader set of investors. I welcome your comments below.

Disclosure

I am an investment adviser and owner of True Vine Investments, a Registered Investment Advisor in the State of Pennsylvania (U.S.A.). I screen electronic communications from prospective clients in other states to ensure that I do not communicate directly with any prospect in another state where I have not met the registration requirements or do not have an applicable exemption.

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