Nickel Monthly News For The Month Of January 2019

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Includes: AAUKF, AXNNF, BHP, ERMAY, FQVLF, GGIFF, GLCNF, HLPCF, IIDDY, LNZCF, NIKAY, NILSY, PANRF, PSDNF, RNKLF, SHERF, SMMYY, VALE, WNARF
by: Matt Bohlsen
Summary

Nickel spot prices were up slightly in January, and the LME inventory was slightly lower again.

Nickel market news - Depressed nickel prices leave nickel miners ripe for takeover.

Nickel company news - Cobalt27 makes a friendly takeover offer for Highlands Pacific.

Welcome to the nickel miners news for January. The past month we have finally seen some nickel price recovery, albeit very slight.

Nickel Price News

As of January 24, the nickel spot price was US$5.23/lb, up from US$4.90 last month. The London Metals Exchange [LME] inventory fell yet again for the month (see LME graph below).

It is worthwhile noting almost half of the current nickel producers are not profitable at nickel prices below USD 5/lb, which is about where we sit today at USD 5.23/lb. Investors can draw their own conclusions on what will happen next.

Nickel spot prices - 5-year chart - USD 5.23/lb

5 Year Nickel Prices - Nickel Price Chart

Source: InfoMine.com

LME nickel 5-year inventory

The chart below shows nickel inventory levels have declined and are now below to 2014 levels when the nickel price was above ~USD 6lb.

5 Year Nickel LME Warehouse Levels - Nickel Levels Chart

Source: InfoMine.com

Nickel Demand vs. Supply

The chart below shows nickel is forecast to be in deficit after ~2022 (or at least require new supply to come online).

Source: Wood Mackenzie

Note: Some others such as BMI have been forecasting a nickel surplus by 2020 due to increased Indonesian production and reduced Asian demand.

Nickel Market News

No big nickel market news this month; however, last month I covered several nickel articles discussing the outlook for 2019 which you can read here.

One that I missed last month was on December 20 when Investing News reported: "Nickel trends 2018: Becoming a battery metal." The chart below summed up nickel prices in 2018 very well - H1 2018 nickel prices rose by 14%, then trade war/China slowdown fears saw H2 2018 nickel prices fall 25%.

Source: Investing News

Nickel Company News

Producers

Vale SA (NYSE:VALE)

Vale plans a US$1.7B Voisey's Bay expansion plan to boost their nickel production.

On January 25, Mining.com reported: "Hundreds still missing following Vale's dam break in Brazil."

Norilsk Nickel [LSX: MNOD] (OTCPK:NILSY)

No news for the month.

Investors can read my article "An Update On Norilsk Nickel."

BHP Group [ASX:BHP] (BHP)

In 2017, BHP announced a US$43.3m investment in its Nickel West project to enable conversion to nickel sulphate.

On January 22, BHP Group announced:

BHP operational review for the half year ended 31 December 2018. Nickel West production decreased by 15 per cent to 40kt as operations were suspended following a fire at the Kalgoorlie smelter in September 2018. The smelter returned to operation on 1 October 2018, with full repairs now expected to be completed in the March 2019 quarter. Planned maintenance at the Kwinana refinery was brought forward to align with the smelter outage and, as a result, production guidance for the 2019 financial year remains unchanged and is expected to be broadly in line with the 2018 financial year.

Jinchuan Group [HK:2362]

No nickel-related news, but the company had copper news this month, which you can read here.

Glencore (OTCPK:GLCNF) [LSX:GLEN]

On January 24, 4-traders reported:

Glencore: Horizonte Minerals Plc-issue of equity to Glencore. Horizonte Minerals Plc, the nickel development company focused in Brazil, announces the settlement of contingent consideration due to Glencore plc following the filing of the Araguaia NI 43-101 Feasibility Study ('FS') on SEDAR on 12 December.

Sumitomo Metal Mining Co [JP:5713] (OTCPK:SMMYY)

No significant news for the month.

Anglo American [LSX:AAL] (OTCPK:AAUKF)

On January 24, Anglo American announced: "Q4 2018 production report." Nickel production for Q4 2018 was 11.4kt, no increase on Q3.

Eramet (OTCPK:ERMAY)

No news for the month.

Sherritt International (OTCPK:SHERF)[TSX:S]

No nickel-related news for the month.

Independence Group [ASX:IGO] (OTC:IIDDY)

No nickel related news for the month.

Western Areas Ltd. [ASX:WSA](OTCPK:WNARF)

On January 9, Western Areas Ltd. announced:

Odysseus project update-Post DFS works on plan and budget. "Odysseus is an important growth asset for Western Areas and should be one of the few new global nickel sulphide operations scheduled to come online as the forecast uplift in nickel demand for electric vehicles impacts the market in the 2022 timeframe. To realise this potential, our focus now turns to the next phase of activity related to establishing the underground mine infrastructure," Mr Lougher said.

On January 23, Western Areas Ltd. announced: "Quarterly activities report. FY19 guidance metrics on track, Odysseus Project early works progressing on time and budget." Highlights include:

  • "Mine production of 5,851 nickel tonnes and 11,719 nickel tonnes for the half year.
  • Mill production 5,415 nickel tonnes and 10,794 nickel tonnes for the half year.
  • Unit cash cost of nickel in concentrate of A$3.15/lb and A$3.07 for the half year, well within guidance.
  • Operating cash flow of A$18.2m and closing cash at bank of A$134.3m.
  • Final fully franked FY18 dividend of A$5.5m paid (2 cents per share).
  • Mill Recovery Enhancement Project (MREP) in ramp up mode with spot product sales initiated prior to full tender.
  • Substantial progress on Odysseus early works and post feasibility study [DFS] activities."

Highlands Pacific [ASX:HIG] (OTC:HLPCF)

On January 2, Highlands Pacific announced:

Highlands executes Scheme Implementation Agreement with Cobalt 27. Highlands Pacific Limited has entered into a Scheme Implementation Agreement ("SIA") with Cobalt 27 Capital Corp. under which Cobalt 27 has agreed to acquire all of the shares in Highlands which it does not already own by way of a Scheme of Arrangement ("Scheme") under the PNG Companies Act. Cobalt 27 is currently the largest holder of Highlands shares, holding an interest of approximately 13%. Under the terms of the Scheme, Highlands shareholders will be entitled to receive A10.5 cents cash per share, subject to all applicable conditions being satisfied or waived and the Scheme being implemented. The consideration represents a premium of 43.8% over the closing price of Highlands shares on 24 December 2018 of A7.3 cents and implies an equity value for Highlands of approximately A$115 million.

Other nickel producers

Franco/Nevada [TSX:FNV], Mincor Resources, MMG [HK:1208], South32 [ASX:S32], Lundin Mining [TSX:LUN], Nickel Asia Corporation [PSE:NIKL] (OTC:NIKAY).

Note: First Quantum Minerals halted their nickel production from their Ravensthorpe mine in 2017 due to low nickel prices.

Axiom Mining [ASX:AVQ] (OTC:AXNNF)

No nickel-related news for the month. However, they did call an extraordinary general meeting to vote on directors remuneration.

RNC Minerals [TSX:RNX] (OTCQX:RNKLF)

On January 16, RNC Minerals announced: "RNC Minerals closes $9 million bought deal & concurrent private placement financing."

On January 22, RNC Minerals announced: "RNC Minerals provides update on resource extension and infill drilling at Beta Hunt, reports high grade gold intersections including first coarse gold at Western Flanks." Highlights include:

  • "First drilling at Western Flanks to test sediment layer further illustrates potential of sediment to generate high grade coarse gold - intersected 1,017 g/t over 2.00 metres (true width) including 7,621 g/t over 0.27 metres (true width) in hole WFN-029.
  • A Zone drilling targeting sediment layer and shear near Father's Day Vein intersected 119.37 g/t over 6.4 metres (true width) including 1,406 g/t over 0.50 metres (true width) in hole AZ15-013 located just 7 metres below Father's Day Vein.
  • Resource extension and infill drilling at A Zone and Western Flanks has yielded encouraging results."

Panoramic Resources [ASX:PAN] (OTCPK:PANRF)

On January 15, Panoramic Resources announced: "Savannah recommissioning update 1st concentrate shipment scheduled for early February 2019." Highlights include:

  • "Mining-ramp up to full production continues.
  • Processing-process plant achieved plus 2,000tpd throughput in early January.
  • Wyndham-trucking of concentrate to the port has commenced.
  • Tailings-3m wall lift on storage facility completed.
  • Ventilation-pilot hole for the 900m raise-bore completed.
  • Recruiting-onboarding of site personnel well advanced in a challenging market.
  • Project Financing - $40 million project loan drawn down to $28.5 million.
  • Revenue - First ship scheduled for early February 2019."

Poseidon Nickel [ASX:POS] (OTC:PSDNF)

No news for the month.

Garibaldi Resources [TSXV:GGI] [GR:RQM] [LN:OUX6] (OTC:GGIFF)

No news for the month.

Cassini Resources [ASX:CZI]

No news for the month.

North American Nickel [TSXV:NAN]

No news for the month.

Other Juniors

Ardea Resources [ASX:ARL], Artemis Resources [ASV:ARV], Australian Mines [ASX:AUZ], CleanTeQ [ASX:CLQ], Giga Metals [TSXV:GIGA], Mustang Minerals [TSXV:MUM], New Age Metals [TXV:NAM], Pancontinental Resources Corporation [TSXV:PUC], Polymet Mining [TSX:POM], S2 Resources (ASX:S2R), St George Mining Ltd [ASX:SGO] [GR:SOG], Transition Metals [TSXV:XTM], and Wall Bridge Mining [TSX:WM].

Note: Some of the above companies are covered in the Cobalt monthly news.

Conclusion

Nickel spot prices were slightly up in January, and inventories fell again. Due to the depressed nickel price, many nickel miners are currently valued very low and ripe for takeover, as we saw this month with Cobalt27's friendly offer for Highlands Pacific.

Highlights for the month were:

  • Vale's dam breaks in Brazil.
  • BHP - Nickel West production decreased by 15 per cent to 40kt.
  • Anglo American - Nickel production for Q4 2018 was 11.4kt, no increase on Q3.
  • Western Areas - Mine production of 5,851 nickel tonnes and 11,719 nickel tonnes for the half year.
  • Highlands Pacific executes Scheme Implementation Agreement with Cobalt 27.
  • RNC Minerals drills more super high grade gold at Beta Hunt. RNC reports first coarse gold at Western Flanks - 1,017 g/t over 2.00 metres (true width) including 7,621 g/t over 0.27 metres.
  • Panoramic Resources - Savannah recommissioning update 1st concentrate shipment scheduled for early February 2019.

As usual, all comments are welcome.

Disclosure: I am/we are long NORILSK NICKEL [LSE:MNOD], GLENCORE [LSX:GLEN], RNC MINERALS [TSX:RNX], POSEIDON NICKEL [ASX:POS], SAMA RESOURCES [TSXV: SME], AXIOM MINING (ASX:AVQ), ARDEA RESOURCES [ASX:ARL], AUSTRALIAN MINES [ASX:AUZ]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.