Nickel demand will triple on back of energy revolution, says BHP boss
BHP’s nickel chief paints very bullish outlook for his metal while Mincor tells Diggers & Dealers why it’s perfectly placed to cash-in on this forecast boom and Centaurus also aiming to help meet demand. Plus, Alkane and SolGold.
16th October 2020
Diggers & Dealers was always going to be dominated by gold stories. But the nickel brigade, led by BHP’s boss of Nickel West, Eddy Haegel, made a good fist of diverting some of the attention of the 1900 delegates at the COVID-delayed conference.
“You’ve heard me say this before - we are at the beginning of a revolution that will transform our world and materially increase demand for nickel. Nickel is a standout winner from a decarbonising world,” Haegel said.
“It secures this position because no matter what metals (or combination of metals) are tested in lithium-ion batteries, nickel produces the highest energy density of any battery. This is a powerful insight for why nickel has a positive future.
“It is the workhorse of the lithium-ion battery, making car (and later truck) electrification possible. Not surprisingly, we expect nickel-in-battery demand to surge from around the mid to late 2020s.”
BHP’s “central” view is that cumulative demand over the next 30 years will be 250% that of the past 30 years, or as much as 350% should the world get serious about its response to global warming.
Nickel West is busy transforming itself from a 50-year-old supplier to the stainless steel industry into a leading nickel supplier to the battery sector from its powerful 6.3 million tonne resource base, not including the recent acquisition of Honeymoon Well.
Haegel would not be drawn on BHP’s nickel price expectations. “Our internal price protocols are top secret and are not to be shared,” he said.
But he did offer up the range of public forecasts from high teens, up to $US30/lb. Nickel is currently $US6.93/lb.
“So, there’s quite a range of views at the present time but I think you can appreciate they (prices) are ultimately going to be higher than they are,’’ Haegel said.
There was no mention by Haegel of the speculation around Nickel West becoming a preferred supplier to Elon Musk’s Tesla, the EV company whose ambitions seem to only be limited by the size of the solar system.
David Southam, the boss of nickel developer Mincor, tapped into the conference’s craving for discussion on something other than gold.
“We can all get a little bit bored hearing about gold, gold and more gold. Well, nickel is the new gold, we’re the happy metal, we’re the metal of the future, and we’re the metal that shows the world is actually becoming a better place,” Southam proclaimed.
While BHP’s nickel business is Tier 1, the leverage to be had for the unfolding nickel thematic rests with the juniors like Mincor. Its performance since last year’s D & D reflects that. Its market cap has quadrupled since to what Southam described as an “undervalued” $377m, or 88c a share.
Central to Mincor’s return as a nickel producer has been the Cassini discovery. Operating cash costs from Cassini have been put at $A2.70/lb. That compares with the current price of $A9.70/lb.
With the (funded) development underway to become a producer of 16,000tpa of nickel in concentrate across its Kambalda operation from FY2023, Mincor is stepping up exploration again, taking advantage of underground locations as they open up.
There is plenty of excitement around the recent shallow hit at Cassini North (2.5m at 6.6% nickel in the first hole) which as its name suggests, is not far from the Cassini development. Success there would mean the value lift for Mincor since D & D last year could be just the start of the story.
As Mincor’s ore will be going off to Nickel West, Southam couldn’t help but mention the Nickel West-Tesla speculation.
“I don’t know whether that’s true but for those who plan to buy a Tesla, there will (potentially) be a little bit of Mincor in everyone’s Tesla,” he said.
Centaurus has not looked back since picking up the non-JORC Jaguar nickel deposit from Vale in Brazil’s Carajas around D & D time last year.
It is now a $207m company at 62c a share after confirming an ASX-compliant 517,500t near surface nickel resource grading a handy 1.08% nickel. It’s got a high-grade core to it, and there is lots of exploration upside.
No wonder then that Centuarus boss Darren Gordon, who is a tall guy, was walking even taller at D & D this year. Like the others in the nickel brigade, Gordon talked up the growth in demand for nickel from the batteries sector.
Nickel demand from batteries has already been growing strongly (four times in the six years to 2018) but it is still only 145,000tpa ,or 6%, of the stainless steel dominant market.
Depending on which scenario you pick, nickel volumes needed to meet the EV-driven demand surge could be as high as 750,000tpa to 2mtpa. Lots of projects like Jaguar – Centaurus has an aspirational target to become a 20,000tpa producer – are going to be needed, that’s for sure.
Sprott’s equity desk has a 90c price target on the stock.
Alkane & ASM:
One of the most anticipated events at D & D did not happen – the release by Alkane (ALK) of latest drill results from its Boda gold-copper porphyry discovery in the northern Molong volcanic belt of NSW’s Macquarie Arc.
Weary delegates dragged themselves to a company presentation by MD Nic Earner - the second last on the final day of the 3-day conference – in the hope that the long-awaited results would see the light of day.
Earner explained that he had actually hoped to get results from the first phase of infill drilling at Boda from the ongoing 30,000m program out by the end of September. But here we are with a COVID-delayed D & D having come and gone, and still no cigar.
Assay labs around the country are struggling to keep up with the boom in exploration, so the delays in reporting results from one of the most exciting discoveries out there comes as no surprise. The good news is that the wait is almost over.
Earner said to watch out for the results next week – or the week after.
The infill program is aimed at determining whether Alkane has a Cadia-scale project on its hands, a reference to Newcrest’s (NCM) gold-copper mining wonder some 110km to the south.
“We would hope that we could grow to something like that,” Earner said at D & D.
Alkane was a 38c stock when it announced the Boda discovery in September last year. It got a mention here in June this year when it was $1.24 a share, and it has since motored on to $1.38 this week.
In addition to that gain, Alkane also created another 81c-a-share value for shareholders from the recent spin-off on a 1-5 basis of Australian Strategic Materials (ASM) as a stand-alone ASX listed company. ASM is advancing the Dubbo critical metals project (rare earths, niobium, zirconium and others) in NSW.
So, with ASM shooting out the lights by trading at $4.03 a share, the value “package’’ for Alkane shareholders now stands at $2.19 a share.
Earner noted at D & D that ASM boss David Woodall was heading to Korea on the weekend where ASM and its local partner are having amazing success in producing a full range of strategic metals from Dubbo ore samples.
Woodall himself later confirmed he was heading back there to “continue advancing discussions for a potential partner in the metal business”.
The Dubbo project has been around for decades but it looks as if it is closer than ever to having its day in the sun, thanks to both the metallisation breakthrough and the need for “Korea Inc” to secure a non-Chinese supply source for its critical metal needs.
Nick Mather’s over-time presentation on his Brisbane-based and London/Toronto-listed SolGold was kind of forgiven at D & D on the basis that he had lots to talk about, like the 10 million tonnes of copper and 22m ounces of gold at SolGold’s 85% owned Alpala discovery in Ecuador.
As mentioned late last month when it was trading at 25p in London, BHP and Newcrest have positioned themselves to possibly make Alpala their own by taking up strategic equity positions in SolGold of 13.64% and 13.57% respectively.
SolGold has long said Alpala would be but one of many big copper-gold porphyries to be found in the Ecuador’s section of the copper-rich Andes. Its recent Porvenir discovery (890m of visual copper mineralisation starting from 16m, with assays pending) has proved the point.
SolGold shares have since moved up to 37.3p, a gain of close to 50%. And there is a whole bunch of other prospects to be tested in SolGold’s “shock and ore” drilling approach to unlocking Ecuador’s copper riches.
The Porvenir success makes SolGold one slippery and more expensive target, should BHP and Newcrest eventually move on the company, with BHP free to do so next following the expiration of a standstill agreement.
Today’s interest though is another Mather company, ASX-listed DGR Global. It owns 9.85% of SolGold, with the 204.23m shares worth about $A138m. That’s interesting given DGR – which has a bunch of other interests on the go - is trading at 9.1c for a $70m market cap.
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