Nickel goes for a ride in a Mercedes … or on stainless steel … or both

8th March 2018
Tim Treadgold

Daimler, the German company which makes Mercedes Benz cars, gave investors in nickel stocks cause to smile this week even if the news of what its head of research said at the Geneva motor show has been slow to filter through to the Australian mining industry.

Ola Kaellenius, the Daimler board member responsible for research, said battery design for electric cars was changing to incorporate more nickel because the price of cobalt had risen too far.

Daimler is highly unlikely to be alone in seeking a solution to the problem being caused by cobalt rising four-fold over the past year to an eye-watering $US80,000 a tonne. Other car makers will also be looking for a way to dodge the cobalt bullet.

What Kaellenius told the Reuters news agency should be music to the ears of management at Australian nickel stocks such as Western Areas and Independence Group, as well as being just what Panoramic needs as it moves forward with plans to re-open the mothballed Savannah mine.

The man from Daimler said that its small but growing range of electric cars, which include the Smart range of micro-vehicles, started with a 1-1-1- mix of NMC – one-part nickel, one-part manganese and one-part cobalt.

That cobalt-heavy recipe then changed to 6-2-2-, six-parts nickel, two-parts manganese and two-parts cobalt.

But, according to Kaellenius. there are battery suppliers experimenting with a recipe of 9-0.5-0.5 – nine-parts nickel to half-a-part of manganese and half-a-part of cobalt.

That change, along with increased demand for nickel from the stainless-steel industry, is starting to be seen in the price of the metal, which has risen by 50% over the past 12-months from around $US4 a pound to more than $US6/lb.

Not everyone agrees that nickel is going for a ride in the back of a Mercedes. Macquarie Bank, in a research report released yesterday, said the nickel price rise was the result of traditional stainless-steel demand, falling stockpiles and not enough new production.

“We definitely see the mania surrounding electric vehicles as a factor in pushing (nickel) prices higher in the short run, but don’t necessarily see it as the major driver,” Macquarie said.

Whatever the reason, nickel has been one of the stars of the Australian mining market and if Daimler wants batteries with a higher nickel content it can only be good for the market.

Nickel observations were not the only important development for commodities this week, with perhaps the most significant being advice circulated by Pimco, a division of Germany’s Allianz group and one of the world’s biggest investors, that the “Commodities Outlook for 2018 is still bright”.

“Our latest asset allocation outlook suggests overweight to real assets, including commodities,” Pimco said.

That optimistic view of the California-based Pimco (formerly the Pacific Investment Management Company) was reflected in another solid week for mining stocks on the Australian market.

Gold stocks, perhaps propelled by a desire among investors to seek a safe haven as the debate heats about the chances of an economically-damaging trade war, were among the best performers, followed by battery metals and copper stocks.

Significant price moves, up and down, included:

  • Clean TeQ Holdings slipping 11c lower to $1.23, but that was largely the result of a big underwritten share issue priced at $1.15 which will raise $150 million for the company’s Sunrise nickel, cobalt and scandium project in NSW.
  • Northern Star leading the way in the gold sector with a rise of 31c to $6.72 after announcing the $80 million acquisition of the South Kalgoorlie gold assets from Westgold Resources. At one stage yesterday, Northern Star hit a record high of $6.74.
  • Regis Resources and Evolution Mining set fresh 12-month highs. Regis reaching $4.62 on Wednesday before easing to $4.48 for a rise of 13c over the week. Evolution touched $3 on Wednesday before easing to $2.93 for a 3c gain over the week.
  • Mayur Resources, a low-profile miner with a range of industrial and precious metal assets in Papua New Guinea, added 4c to 89c, but was added to the buy list of the broking firm Bell Potter, which reckons its heading for $1.12.
  • Boadicea Resources added 5c to 18c after announcing the next stage of exploration at its Bell Ringer nickel and copper project in the Fraser Range of WA where it is looking for structures similar to the rich Nova Bollinger project of Independence Group.
  • Frontier Diamonds put on 2c to 17c after reporting the recovery of first gems from its Bellsbank kimberlite pipe project in the Northern Cape district of South Africa.
  • Rimfire Pacific released a set of historic cobalt and nickel assay results from its Avondale project near Fifield in NSW, including 5 metres at 0.12% cobalt from a depth of 12m, and 11m at 1.46% nickel from 13m. Despite the data being old, it was good enough to lift Rimfire’s share price by 0.4c to 2.5c.
  • Cardinal Resources added 4.5c to 58.5c after reporting an upgraded indicated resource of 6.5 million ounces of gold at its Namdini project in Ghana.
  • Havilah Resources said it had outlined 23,200 tonnes of cobalt metal in its Kalkaroo project near Broken Hill in NSW, comprising 193.3 million tonnes of material assaying 120 parts per million. On the market, Havilah added 2c to 28c.
  • Technology Metals said it had expanded the vanadium resource at its Gabanintha exploration project in WA to 119.9 million tonnes grading 0.8% vanadium, with a high-grade core of 55 million tonnes at 1.1% vanadium, good enough to boost the stock by 2c to 35c – but well short of Wednesday’s peak price of 42.5c.
  • MOD Resources slipped by a marginal one-tenth of a cent to 4.8c after announcing an $18 million capital raising priced at 4.7c with the funds to be used to accelerate exploration at the company’s African copper prospects, and
  • Blackham Resources continued its recovery with a price ride of 3c to 8.1c after reporting record gold production of 6713 ounces during February at its Matilda-Wiluna project. The all-in sustaining cost dropped from $A1158 an ounce in January to $A912/oz.

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