Twiggy vs BHP a giant buy signal for ASX nickel sector
Nickel starred again this week as Australia’s richest man and Australia’s biggest mining company locked horns in a Canadian takeover battle which has already delivered a 200 per cent gain for some investors in just four months.
2nd September 2021
The clash, which has pitted iron ore billionaire Andrew Forrest against BHP, has driven the price of Toronto-listed Noront Resources from C24 cents in late May to C75c.
But the more important point about the fight for Noront is that it is likely to be replicated in the Australian nickel sector, and if that isn’t a sector-wide buy signal I don’t know what is.
The backstory with nickel should be well understood. It’s a metal which has graduated from being primarily used in the production of stainless steel into the technical metal space as a key ingredient in batteries.
That new-found use is combining with relative scarcity and a lack of investment in new mines to drive the price sharply higher, up 150% over the past five years to be knocking on the door of a 10-year high at $US19,400 a tonne, and perhaps setting its sights on the all-time high of $US50,000/t set in early 2007.
Despite the Canadian takeover tussle, which will almost certainly end in a win for Forrest because he doesn’t have to answer to outside shareholders if he overbids, Australian nickel stocks barely moved this week.
Very modest rises were recorded by Lunnon Metals, which added 2c to 59c after reporting further encouraging indications from drilling at its Kambalda Nickel Project in WA. Centaurus rose by 2c to 99c, but Mincor and Western Areas slipped a few cents lower, perhaps as profit takers took some money off the table after strong gains over the past six months.
Forrest’s nickel interests were not the only reason he headlines this week with analyst and investor interest in his latest attempt to convince that market that his Fortescue Metals Group “is not an iron ore company”, perhaps one of the most bizarre things he has said in the past 30 years.
The claim about not being an iron ore company, which it so obviously is, can be seen as part of Forrest’s attempt to ride the energy transition and climate change express by investing 10% of Fortescue’s profits in “future facing” industries – exactly what BHP is doing, but without a ring master shouting to the crowd.
The jury of investor opinion on Forrest’s “this is not an iron ore company” claim about Fortescue is out, with the company’s share price sagging to $20.50 after a spirited run up to $21.35 on Monday.
Most other iron ore stocks also eased back as the price of the steel-making material took a fresh dive back to $US151 a tonne followed by fresh warnings from investment banks such as Morgan Stanley that the price will continue to ease back as demand plateaus and supply rises.
Iron ore has been relegated by Morgan Stanley to the bottom of its 17-strong list of commodities it tracks with an ominous note reading “Robust second half shipments will drive the slow normalisation of prices”, and by normalisation the bank means less than $US100/t.
Energy transition, easily the dominant investment theme in the resources world today (and perhaps for the next 30 years as oil fades) is proving a winner for an overlooked zero-carbon metal, uranium, which moved up to $US35.65 a pound this week, more than double where it was five years ago and on track to reach a seven year high of $US40/lb sooner rather than later.
Uranium explorers have been among the top performers in the year to date, aided in part because they had been significantly sold down over the past 10 years. Biggest winners this week included Paladin, up 16c to 65c, taking its rise since January to 39c (148%) and Deep Yellow, up 16c to 85c, taking its rise for the year to 32c (64%). Other strong U-moves this week included: Boss Energy, up 3c to 19c, Bannerman, up 5c to 20c, and Lotus, up 5c to 23c.
Gold clung to a price above $US1800 an ounce which was good enough to push most share prices higher, especially with the prospect of more to come as the Covid pandemic weighs on economic activity and delays interest rates rises.
Best performer in the gold sector was Great Boulder Resources, which shot 8c (90%) higher to 17c after reporting high grade assays from drilling at its Mulga Bill prospect in WA. Best hits included 14 metres at 36.12 grams a tonne with a 3m core that assayed a bonanza grade of 149.89g/t.
Other gold moves driven by news flow included:
- Lefroy Exploration, up 6c to 47c as a fresh round of drilling starts at its Coogee South prospect in WA.
- The rarely mentioned Aurumin, up 6c at 23c after reporting its best ever drill results from the Mt Dimer project near Southern Cross in WA with a best intersection of 4m at 48.7g/t with a 1m core at 153.5g/t.
- Kin, up 1.5c to 13c thanks to continued exploration success at its Cardinia project in WA with a best hit of 17m at 3.78g/t.
- Red 5, up 2c to 22c after the company reported a sold pre-tax profit of $11.7 million in the year to June 30, and
- De Grey, up 3c to $1.19 after reporting more encouragement from drilling at the Diucon prospect in the great Hemi project.
Gold news without share price moves, yet, included Bellevue Gold which went into a trading halt before reporting a vastly improved feasibility for its namesake mine which is now fully funded for construction.
The new study is based on the production of 200,000oz a year (up 25%) at an all-in sustaining cost of $A922/oz, potentially making it one of the most profitable gold mines in the world when production starts in mid-2023.
At the top end of the market, the most interesting news was the effect China’s great environmental clean-up is having on the price of aluminium, which rose during the week to a 10-year high of $US2727 a tonne, with the lightweight metal likely to become a key differentiator between Rio Tinto, which has retained its aluminum operations, and BHP, which is quit the industry.
Other market moves and news events during the week included:
- Firebird Metals rising by 14c to 60c after reporting significant manganese intersections from drilling at its Oakover project in WA with a best hit of 29.3m at 10.1% manganese starting at a depth of 16m.
- Sandfire Resources adding 59c to $6.77 after reporting a strong profit which will go a long way towards funding the company’s next copper project in Botswana.
- Anax Metals reporting positive results from a scoping study into its Whim Creek copper redevelopment project in WA. On the market the stock put on 3c to 12c.
- Little-known PanAsia Metals rocketed 35c to 51c after reporting work on a geothermal lithium project in Thailand, similar in concept to the Vulcan project in Germany. The stock entered a voluntary trading suspension on Thursday pending an announcement.
- Highfield Resources slipped 1.5c to 52c despite announcing a deal with the port of Bilbao to handle potash from its Muga project in Spain, and
- Hillgrove Resources edged 0.9c higher to 5.8c after announcing a thick (166.3m) intersection of 0.9% copper from a depth of 322m at its historic Kanmantoo mine near Adelaide in South Australia.
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