ASX nickel miners stand to benefit from Elon Musk's production call

Tesla electric car boss Elon Musk has sent an encouraging demand signal to nickel producers calling on them to produce more of the battery metal.

Musk reportedly issued the challenge in Tesla’s latest earnings conference call this week, when he responded to analyst questions about constraints on battery metals production.

“I’d like to re-emphasise, any mining companies out there, please mine more nickel,” Musk was quoted as saying in a transcript of the call reported by news site Electrek.

“Tesla will give you a giant contract for a long period of time, if you mine nickel efficiently and in an environmentally sensitive way.”

Spot prices for nickel have rebounded strongly, closing at $US13,460/tonne ($18,858/t) Thursday on the London Metals Exchange, up a hefty 22 per cent from their market low of $11,055/t on March 23 at the height of the COVID-19 pandemic.

Nickel demand and recycling

Tesla is building a new battery and car factory in Texas, to add to existing ones the company has in China, Europe and America. As well as adding to demand for nickel the company is doing its bit to recycle the base metal.

The American company retrieved 1,000 tons of nickel, 320 tons of copper and 110 tons of cobalt in recycling old Tesla batteries in 2019, according to a June company report.

“Tesla is currently developing a unique battery recycling system at Gigafactory Nevada that will process both battery manufacturing scrap and end-of-life batteries,” the company said.

Musk’s call for increased nickel production ties in with market analysts’ forecasts that battery production will take more of the metal in the years ahead.

“By 2030, we forecast nickel demand from the batteries sector to account for a little over 25 per cent of the total nickel market,” Roskill nickel analyst Jack Anderson told Investing News Network in a report.

Roskill reportedly forecast a 1 per cent fall in world refined nickel supply this year flowing from the COVID-19 outbreak.

ASX nickel miners

Australian nickel miners stand to benefit from higher demand from battery and electric car makers like Tesla.

Western Areas (ASX:WSA) is well positioned for future nickel demand growth as Australia’s second largest independent nickel sulphide producer at 22,000 to 25,000 tonnes each year.

The miner said Friday it had intersected 250m of nickel and copper-bearing sulphides in the first drill hole at its Sahara prospect in WA, including a hit from 34m at 0.29 per cent nickel and 0.17 per cent copper from 216m.

“The broad intervals of disseminated sulphides and narrower, but higher grade, intervals of nickel-bearing sulphides and coincident elevated cobalt intervals, demonstrate the potential for more significant accumulations of nickel sulphides to occur,” managing director Dan Lougher said.

The company swooped on Panoramic Resources (ASX: PAN) in June, taking a 19.9 per cent stake in the fellow WA nickel producer for $28.6m. Western Area’s stake is just below the 20 per cent threshold needed to trigger a takeover under ASX rules.

Panoramic shares rose 5.6 per cent in Friday trade to 7.5c, while Western Areas was trading at $2.53.

Corazon Mining (ASX:CZN) said this week it would start drilling at its Fraser Lake project in Canada’s Manitoba province where it is testing a new nickel-sulphide target.

At Stockhead, we tell it like it is. While Corazon Mining is a Stockhead advertiser, it did not sponsor this article.