Barry FitzGerald: Three nickel juniors that are bigger than their value suggests… and with a tinge of green
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No long-winded preamble from Garimpeiro this week on his chosen subject – the nickel stocks.
Stockhead readers are on top of the nickel thematic more than most. So it is straight to the point that the nickel brigade was on show during the week at Paydirt’s Australian Nickel Conference in Perth.
Garimpeiro did not make the trip west but hears it was a buoyant affair, primed as it was by the rebound in equity markets and more to the point, the relatively strong price performance of nickel in recent times.
The stainless steel ingredient with super-charged growth in demand ahead of it from batteries is currently trading at around $US9.65/lb. That’s up 15% on the 2021 average of $US8.38/lb, and we have the revenue-boosting impact of the lower US exchange rate.
Lots of good stories were told at the conference. Flipping through the presentations and asking around about which went down well, Garimpeiro covers off below on three companies that caught the eye.
If there is a common theme it is all three have big resource positions relative to their market caps, with exploration upside to boot.
There is also commonality in their resources being of the sulphide type which means lower development costs, lower operating costs, and of increasing importance, a greenness that laterite projects can’t match.
Cannon Resources (ASX:CNR): Trading around 26.5c for a market cap of $23 million. From that you would think Cannon did not have much on the go. Far from it.
Since it joined the ASX lists in August last year it has been adding nickel tonnes at a fast rate, and at an enviable low-cost.
The resource base at its flagship Fisher East project, 145km northeast of Leinster in WA’s northeastern goldfields, has grown since listing from 78,000t to 134,000t tonnes of nickel grading a handy 1.8%.
The (growing) resource base is as big as you will find in a company with a $23 million market, and its proximity to the Leinster line of nickel projects owned by BHP, IGO, and others, gives it strategic appeal.
The resource is spread across four deposits sitting in Kambalda-style komatiite channels, with the latest addition being the recent Sabre discovery. Sabre confirmed what everyone suspected, and that was Fisher East had a lot more to give as a new and emerging nickel province.
But the project had been hidden away in Rox Resources (ASX:RXL) which, quite rightly, became focussed on its Youanmi gold project near Mt Magnet where it is has outlined a 3.2 million gold resource. To give Fisher East the love and attention it deserved, it was demerged from Rox in to Cannon.
The nickel conference was told that internal studies focussed on advancing the project to production are underway. Watch out for further drilling results from Sabre where mineralisation has been tested at depths well beyond its current resource estimate.
NickelSearch (ASX:NIS): Trading around 14c for a market cap of $14.5 million. It is another junior that already has a big resource under its belt at its flagship Carlingup project, about 20km east of Ravensthorpe, down Esperance way in WA.
Some big name investors are on board with this one as it sets about drilling a big bunch of drill targets it has worked up since joining the ASX in October last year through a $10 million IPO.
It joined the lists sporting a 171,000t resource spread across a number of deposits but the average grade of 0.57% is not particularly inspiring. But the Carlingup trend has been a high-grade producer in the past (16,000t of nickel at a grade 3.45%).
Find a few more of those along the trend and it will be off to the races for the lightly capitalised NickelSearch. It is about to get busy with the drill bit across a number of greenfields targets it has worked up, and at the RAV8 deposit where the historic production came from.
Centaurus (CTM): Not really a Garimpeiro-type junior anymore with $420m market cap at 98.5c a share. It has one of the biggest nickel resource bases (730,000t) outside of the major miners and is not finished yet, with a resource update due this month.
It is working away at becoming an annual producer of 20,000t of value-added nickel-in-sulphate from 2025 and gets a mention today because its share price has fallen back below $1 a share because of minor pushback of a definitive feasibility study to mid-2023.
It is no big deal, particularly as it is all about incorporating recent advancements in process flowsheets to optimise capital and operating costs for the value-added project. Like so many others, the company could have gone down the simple concentrate production route.
But by going for the nickel-in-sulphate route that the battery end users prefer, there are billions of dollars in premium pricing to be captured. So the slightly longer wait for the DFS will be well worth it, even if the retreat to below $1 a share does not reflect that outcome.