Welcome to the nickel miners news for April. The past month saw nickel prices fall slightly and LME inventories at 7-year lows.
Nickel Price News
As of April 25, the nickel spot price was US$5.57/lb, slightly down from US$5.79 last month.
Nickel spot prices - 5-year chart - USD 5.57/lb
London Metals Exchange [LME] nickel 5-year inventory
The chart below shows LME nickel inventory levels declining since mid-2017, having now reached a 7-year low.
Nickel Demand vs. Supply
The chart below shows nickel is forecast to be in deficit after ~2020-2022 (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.
As a reminder the November 2017 McKinsey report stated: "if annual electric vehicle [EV] production reaches 31 million vehicles by 2025 as expected then demand for high-purity class 1 nickel is likely to increase significantly from 33 Kt in 2017 to 570 Kt in 2025." That is a 17 fold increase in just 8 years, albeit only on Class 1 nickel.
On April 12, Reuters reported:
Worried about nickel supply, China battery maker BYD welcomes JV discussions. Securing enough nickel is a major worry for electric vehicle firms, an executive from Chinese electric car and battery maker BYD Co Ltd said on Thursday, adding that the company would welcome joint ventures that help guarantee supply. "The supply of nickel going forward is a big concern in everybody's mind," said Coco Liu, procurement director at BYD, at the Fastmarkets Battery Materials conference.
Nickel Market News
A Mining Journal report from February I came across this month states:
Bank says nickel looks to have good 2019 prospects. Nickel appears to the most “bullet proof” of the base metals against a surplus appearing in 2019, according to Macquarie Bank analysts. The metal had the largest deficit between supply and demand in 2018 - at around 6% of use - with global supply growth in 2019 expected to be similar to the circa-5.5% seen last year.
On April 17, The Driven reported (quoting from a Bloomberg report):
Electric cars cheaper than petrol/diesel from 2022, as battery costs plummet. New analysis from Bloomberg New Energy Finance suggests that from 2022, the cost of electric cars will start to drop below that of internal combustion engine [ICE]) vehicles.
On April 19, Andrew Miller (Benchmark Minerals) tweeted:
Top tier cathode producers reporting capacity bottlenecks for EV orders. A critical step in the battery supply chain that is being put under big pressure from customer cost reduction targets and supplier price instability. Quality & scale = challenges to meeting 2022 targets.
On April 26, Mining.com reported:
Expect cascade of mining M&A - PwC's Braunsteiner. The aggregate valuation of all miners listed on the Toronto Stock Exchange (TSX) declined by 12.7% in 2018, to $253.9 billion, compared with a 10.8% decrease in the market capitalization of the entire TSX market, says PwC in its Canadian Mine report published Thursday. Liquidity also fell for the second year in a row, with the volume and value of TSX mining shares trading down by 21% and 20%, respectively. Performance was hampered by a downward shift in most commodity prices, following a strong showing in 2017, the report reads: Spot prices for base and precious metals decreased across the board. Zinc tumbled 25%, copper 17% and nickel 6%. Even cobalt and lithium prices, which have registered strong gains over the past five years, suffered double-digit declines in 2018.
Nickel Company News
Vale SA (NYSE:VALE)
Vale plans a US$1.7B Voisey's Bay expansion plan to boost their nickel production.
On April 3, Vale SA announced:
Vale on agreements with Minas Gerais State Government and mining Municipalities. Vale S.A. ("Vale") informs that it has signed today a series of agreements to provide financial contributions from the company to the Minas Gerais State Local Government and other mining municipalities.....Retroactive amounts may also be applied over the last five years, which would amount to R$ 550 million.
On April 9, Vale SA announced:
Vale on arbitration award related to Simandou. Vale S.A. ("Vale") announces that, on April 5, 2019, it received an award from an arbitral tribunal in London in the amount of US$1.246 billion plus costs and interest against BSG Resources Limited (“BSGR”), for fraud and breaches of warranty by BSGR in inducing Vale to enter into a joint venture to develop a concession for mining iron ore in the Simandou region of the Republic of Guinea.
On April 24, Vale SA announced:
Vale on proceeding to enforce arbitral award related to Simandou. Vale S.A. announces that on April 23, 2019, it commenced a proceeding against BSG Resources Limited (“BSGR”) in the United States District Court for the Southern District of New York to enforce Vale’s arbitral award against BSGR, totaling over US$ 1.2 billion (with interest and costs, exceeding US$ 2.0 billion), which was issued on April 4, 2019, by an arbitral tribunal under the auspices of the London Court of International Arbitration.
Norilsk Nickel [LSX: MNOD] (OTCPK:NILSY)
On March 28, Norilsk Nickel announced:
Nornickel starts development of prospective growth projects. MMC Norilsk Nickel, the world’s largest palladium and refined nickel producer has made final investment decisions on the two prospective growth projects, which include expansion and reconstruction of the Talnakh concentrator and development of the South Cluster. The combined investment into these projects will amount up to RUB 90 billion over the next four years. As a result, the Company is expecting to significantly increase the production of base and platinum group metals [PGMs].
On April 9, Norilsk Nickel announced:
Nornickel and Murmansk Region sign supplementary agreement on Kola MMC upgrade. The Murmansk Region and Nornickel entered into a supplementary agreement to the special investment contract to upgrade Kola MMC.
On April 9, Norilsk Nickel announced:
Nornickel to invest rub 6 bn in environmental projects in Monchegorsk.
On April 25, Norilsk Nickel announced:
Nornickel announces preliminary consolidated production results for 1Q 2019. In 1Q19, consolidated nickel production was up 3.4%year-on-year (y-o-y) to 56 kt. Nickel output from the Company’s own Russian feed increased 2.8%y-o-y to 55kt. The growth was mainly attributed to the higher processed volumes of nickel matte shipped from Polar division to Kola MMC as well as a higher output of metal produced from third party feed at Norilsk Nickel Harjavalta.
Investors can read my article "An Update On Norilsk Nickel."
BHP Group [ASX:BHP] (NYSE:BHP)
In 2017, BHP announced a US$43.3m investment in its Nickel West project to enable conversion to nickel sulphate.
On March 27, BHP Group announced:
BMA completes sale of Gregory Crinum Mine. BHP Mitsubishi Alliance [BMA] joint venture partners BHP and Mitsubishi Development Pty Ltd (Mitsubishi) have confirmed completion of the sale of the Gregory Crinum Mine in central Queensland, to Sojitz Corporation for A$100 million.
Jinchuan Group [HK:2362]
No news for the month.
Glencore (OTCPK:GLCNF) [LSX:GLEN]
No nickel-related news for the month.
Sumitomo Metal Mining Co [JP:5713] (OTCPK:SMMYY)
On April 1, Sumitomo Metal Mining Co announced: "FY2019 metal production plans." Highlights include:
- "Electrolytic nickel. Maximize production under the current raw material situation in FY2019, and the planned production volume will decrease by 2,300t from that of FY2018 to 62,600t.
- Ferronickel. In FY2019, we will continue to operate with two kilns and one electric furnace, the optimum production setup in terms of the current raw materials procurement environment. Planned annual production volume will increase by 900t from that of FY2018 to 13,300t."
Anglo American [LSX:AAL] (OTCPK:AAUKF)
On April 25, Anglo American announced:
Q1 2019 production report. Nickel production increased by 14% to 9.8 thousand tonnes.
On April 16, Eramet announced:
Eramet: The government of New Caledonia gives the green light to SLN's nickel ore exports. The government of New Caledonia today issued authorisations for Société Le Nickel exports for 4 million tonnes of nickel ore per year over a ten-year period. The increase in exports will be immediate with a target of1.5 million tonnes as of 2019, and 4 million tonnes from mid-2020. These requests were sent in February by Eramet as part of the rescue plan announced at end-February 2019.
On April 25, Eramet announced: "Eramet: €873m first-quarter 2019 sales, driven by new production records." Highlights include:
- "Record Q1 production for manganese and nickel ores, particularly thanks to the implemented new organisations.
- Significant progress in SLN's rescue plan, thanks to authorisation from the New Caledonian government to export 4 million tonnes of nickel ore per year and implementation of the "147-hour agreement”.
- 2019 production targets confirmed: 4.5 million tonnes of manganese ore produced and 1.5 million tonnes of nickel ore exported.
- Outlook: intrinsic growth and productivity gains expected in 2019, resulting in forecast EBITDA close to that of 2018, assuming March 2019 market conditions."
Sherritt International (OTCPK:SHERF) [TSX:S]
On April 25, Sherritt International announced: "Sherritt reports record first quarter nickel and cobalt production at Moa JV." Highlights include:
- "Sherritt’s share of finished nickel production at the Moa Joint Venture (“Moa JV”) in Q1 2019 was 4,397 tonnes, up 54% from last year, while finished cobalt was 426 tonnes, up 27%. The combined nickel and cobalt total for Q1 2019 marks the Moa JV’s highest ever first quarter production results.
- Q1 2019 Adjusted EBITDA(1) was negative $1.2 million, down from positive Adjusted EBITDA of $35.5 million in Q1 2018. The decrease was due to a number of factors, including a 70% year-over-year decline in realized cobalt prices and lower contributions from the Oil and Gas business as a result of decreased net working-interest production stemming from maturing oil fields and a lower profit share.
- Net direct cash cost [NDCC](1) at the Moa JV for Q1 2019 was US$4.53 per pound of finished nickel sold, up from US$2.06 per pound for Q1 2018. The increase reflects the negative impact that sharply declining cobalt prices had on by-product credits, including the settlement of approximately 200 tonnes of provisionally-priced cobalt sales (100% basis) from Q4 2018. The variance between Q1 2019 cobalt reference and realized prices that resulted from provisional pricing adjustments negatively impacted NDCC by approximately US$0.40 per pound.
- Sherritt ended Q1 2019 with cash, cash equivalents and short-term investments of $177.3 million, down from $207.0 million at the end of 2018. The decrease was due to the timing of capital expenditures, interest paid on outstanding debentures and changes to working capital, including lower than expected Cuban energy receipts."
Independence Group [ASX:IGO] (OTC:IIDDY)
On April 2, Independence Group announced: "Downstream nickel sulphate study update." Highlights include:
- "IGO has developed a new process (the IGO Process) to produce high-quality nickel sulphate from nickel sulphide concentrate, in respect of which IGO has lodged a patent application.
- Metal recoveries from the IGO Process are extremely high, achieving extraction rates exceeding 97% of both the nickel and cobalt metal in the Nova nickel-cobalt sulphide concentrate feed.
- Based on work completed to date, the IGO Process is low cost and well within the lowest quartile of the cost-curve for the integrated production of nickel sulphate."
On April 11, Independence Group announced: "Lake Mackay JV update: 9,600m drilling program underway & project area increased by 50%." Highlights include:
- "JV partner Independence Group NL has commenced 9,600m of RC drilling at Lake Mackay.
- Systematic drilling of targets highly prospective for Au, Ag, Cu, Pb, Zn, Co, Ni, and Mn mineralisation - including the Blaze and Grimlock Prospect.
- Significant opportunity for multiple base metals discoveries.
- Lake Mackay Project area increased by 50% to 19,202km2."
On April 24, Independence Group announced: "AMD: RC drilling commenced at Plumridge Nickel Project."
Western Areas Ltd. [ASX:WSA](OTCPK:WNARF)
No news for the month.
Panoramic Resources [ASX:PAN] (OTCPK:PANRF)
Panoramic's Savannah mine and mill has a forecast life of mine average annual production rate of 10,800 t of nickel, 6,100 t of copper and 800 t of cobalt metal contained in concentrate.
On April 4, Panoramic Resources announced: "Savannah operations update." Highlights include:
- "Production improvement initiatives showing results.
- Development rates improved by 55%, with 300m achieved for the month.
- Metal recoveries improving, nickel averaged ~80%, copper ~87% and cobalt ~84%.
- Second shipment of 6,157wmt departed Wyndham on 22 March, next shipment scheduled for 22/23 April."
On April 10, Panoramic Resources announced: "Pro-rata entitlement offer closure and notice of shortfall."
Axiom Mining [ASX:AVQ] (OTC:AXNNF)
On April 26, Axiom Mining reported: "Voluntary Suspension..... pending the release of an announcement regarding a capital raising"
Other nickel producers
Franco/Nevada [TSX:FNV], Mincor Resources [ASX:MCR], 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.
RNC Minerals [TSX:RNX] (OTCQX:RNKLF)
On March 28, RNC Minerals announced:
RNC announces strong fourth quarter 2018 results."
Note: Nickel in concentrate produced in 2018 was 320 tonnes well down on 2017's 800 tonnes as no nickel was mined in H2 2018. 2018 gold production was 73,801 ounces.
On April 18, RNC Minerals announced: "RNC Minerals closes $12 million bought deal financing."
Poseidon Nickel [ASX:POS] (OTC:PSDNF)
No news for the month.
Garibaldi Resources [TSXV:GGI] [GR:RQM] [LN:OUX6] (OTC:GGIFF)
On April 11, Garibaldi Resources announced: "Garibaldi drills 6.19% nickel and 2.06% copper from surface over 4.4 meters in central zone at nickel mountain."
Cassini Resources [ASX:CZI]
On April 11, Cassini Resources announced: "Cassini exercises Yarawindah Brook option." Highlights include:
- "Cassini acquires 80% of the Yarawindah Brook Project.
- Work performed confirms prospectivity for Ni-Cu-Co-PGE sulphide mineralisation.
- Access agreements being finalised prior to drill testing targets."
On April 12, Cassini Resources announced: "Resource confidence increases for Nebo-Babel deposits at West Musgrave."
On April 12, Cassini Resources announced: "OZ Minerals satisfies 70% earn-in requirement at West Musgrave Project."
On April 18, Cassini Resources announced: "Activities report for the quarter ended 31 March 2019." Highlights include:
Post the end of the Quarter
- "A$7.0M raised through a placement to strategic and sophisticated investors."
West Musgrave Project
- "New Nebo-Babel Mineral Resource estimate complete-greater confidence through significant infill drilling program.
- Field activities commenced - RC Infill drilling program at Nebo-Babel continues.
- Study now includes expanded options for mining and processing.
- Significant breakthrough in understanding of Succoth mineralisation.
- Exploration drilling at One Tree Hill underway targeting large off-hole conductor.
- OZ Minerals achieves Stage 2 (70%) interest in West Musgrave Project."
Yarawindah Brook (CZI to earn 80%).
- "Option to earn 80% exercised (post quarter end)."
North American Nickel [TSXV:NAN]
On April 2, North American Nickel announced:
North American nickel reports remaining results on its Maniitsoq nickel sulphide project. NAN CEO, Keith Morrison, commented: "NAN had a very productive drilling campaign during the 2018 season at Maniitsoq, completing 14,287.6m in 33 holes. The 2018 drilling confirmed the presence of melanorite at several of the priority Maniitsoq intrusions but did not demonstrate an economic mineralized system.
Amur Minerals Corp. [LSE:AMC] [GR:A7L] (OTCPK:AMMCF)
No news for the month.
Ardea Resources (OTCPK:ARRRF) [ASX:ARL], Artemis Resources (OTCQB:ARTTF) [ASV:ARV], Australian Mines (OTCQB:AMSLF) [ASX:AUZ], Cassini Resources [ASX: CZI] (OTC:CSSQF), Clean TeQ (OTCQX:CTEQF) [ASX:CLQ], Giga Metals [TSXV:GIGA] (OTCPK:HNCKF), Grid Metals Corp [TSXV:GRDM], New Age Metals (OTCQB:NMTLF) [TXV:NAM], Nickel Creek Platinum [TSX:NCP] (OTCQX:NCPCF), Pancontinental Resources Corporation (OTC:PUCCF) [TSXV:PUC], Polymet Mining (NYSEMKT:PLM) [TSX:POM], S2 Resources (ASX:S2R), St George Mining Ltd [ASX:SGO] [GR:SOG], Transition Metals (OTC:TNTMF) [TSXV:XTM], and Wall Bridge Mining [TSX:WM].
Note: Some of the above companies are covered in the Cobalt monthly news.
Nickel spot prices were slightly down in April, and LME nickel inventory falls to 7-year lows. At current low nickel prices, it appears there is little incentive for the nickel miners to increase production, and given the McKinsey report view of 17 fold increase in Class 1 nickel demand by 2025), it appears we are heading for a supply crisis in Class 1 nickel in the near future. Perhaps, Norilsk, Vale and BHP will come to the rescue.
Highlights for the month were:
- February 2019: Macquarie Bank says nickel looks to have good 2019 prospects.
- Worried about nickel supply, China battery maker BYD welcomes JV discussions.
- Bloomberg: Electric cars cheaper than petrol/diesel from 2022, as battery costs plummet.
- Vale received an award from an arbitral tribunal in London in the amount of US$1.246 billion plus costs and interest against BSG Resources Limited.
- Nornickel starts development of prospective growth projects.
- Sumitomo Metal Mining electrolytic nickel planned production volume for 2019 will decrease by 2,300t from that of FY2018 to 62,600t.
- Anglo American - Q1 2019 production report. Nickel production increased by 14% to 9.8 thousand tonnes.
- Eramet: The government of New Caledonia gives the green light to SLN's nickel ore exports. Eramet: €873m first-quarter 2019 sales, driven by new production records. Record Q1 production for manganese and nickel ores.
- Sherritt’s share of finished nickel production at the Moa Joint Venture (“Moa JV”) in Q1 2019 was 4,397 tonnes, up 54% from last year.
- Independence Group has developed a new process (the IGO Process) to produce high-quality nickel sulphate from nickel sulphide concentrate.
- Panoramic's Savannah mine - metal recoveries improving, nickel averaged ~80%, copper ~87% and cobalt ~84%.
As usual, all comments are welcome.
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Disclosure: I am/we are long NORILSK NICKEL [LSE:MNOD], GLENCORE [LSX:GLEN], RNC MINERALS [TSX:RNX], AXIOM MINING (ASX:AVQ), ARDEA RESOURCES [ASX:ARL], AUSTRALIAN MINES [ASX:AUZ], POSEIDON NICKEL [ASX:POS], SAMA RESOURCES [TSXV: SME]. 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.