Barry FitzGerald: As BHP and Twiggy put a rocket up nickel, these juniors are ready to catch a ride
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BHP originally planned to close its Nickel West unit last year after having failed to sell its collection of WA assets in 2015.
But here we are now with BHP growing its 95,000tpa nickel output, as well as signing up to supply nickel to Elon Musk’s Tesla, and diving into a $C325 takeover battle with Andrew Forrest for Ontario nickel explorer Noront.
Anyone would think BHP reckons the future for nickel is red hot.
It does, with BHP commenting in the Noront bid that demand for nickel in batteries is estimated to grow by more than 500 per cent over the next decade.
Nickel is one of the three commodities that BHP has nominated as the ones in which it wants to grow. The other two are copper and potash. The favoured three are what BHP describes as future facing commodities in that they stand to prosper from the world’s decarbonisation efforts.
The big thematic around nickel – surging demand from batteries on top of steady growth from stainless steel – is not a new one for regular readers of Garimpeiro.
But when the world’s biggest mining company starts putting in the building blocks for an even bigger presence in a commodity it tried to get out of in 2015, confidence in the thematic is strengthened.
BHP is certainly demonstrating confidence in the thematic with its bid for Noront. The Canadian company was a C16.5c stock before Dr Forrest’s privately owned Tattarang bid C31.5 a share, with BHP now offering C55c.
Noront owns the Eagle’s Nest nickel-copper-PGE project in Ontario’s James Bay lowlands. It was discovered in 2007. It is not BHP scale but is a good starting point for a regional exploration play that could turn up more deposits.
Garimpeiro is not much interested in the shoot-out between the Aussies for Noront. But he is interested in what it might mean for our ASX-listed nickel explorers. Are they being valued properly in the wake of BHP’s fancy offer for Noront?
More than likely not. So it is time for another look at the nickel explorers. And if BHP and Dr Forrest are prepared to go hunting overseas for more nickel, so too is Garimpeiro. Today he has a look at Brazilian explorer, Centaurus, and Tolga Kumova’s Ontario gold play Aston Minerals for its emerging nickel leg.
Centaurus (ASX:CTM): Trading at 92.5c. It is on its way to becoming a 20,000tpa (nickel in concentrate) producer from its Jaguar project in northern Brazil’s Carajas province from a resource base that stands at 560,000t.
A base case scooping study in March pointed to an initial 10-year operation with all-in sustaining costs of $US3.37/lb. It followed that up with a value-added scoping study in to going a step further by producing battery grade nickel sulphate.
More advanced and larger scale than Noront’s Eagle’s Nest, and given Centaurus’ market cap of $315m, it’s cheaper too.
Aston (ASX:ASO): Trading at 14.5c. Yep, it is an advanced gold explorer at its high-grade Edleston project, about 60km south of the famous gold camp of Timmins in Ontario. But Garimpeiro mentioned the stock back on May 28 on the strength of a developing nickel leg to its story.
At the time, Aston said it was about two months away from drill testing “nickel sulphide targets’’ to the south-east of Edleston. No news on that front since but the two months is up, so some action cannot be far off.
Canadian nickel miner Falconbridge – acquired by Xstrata in 2006, with Xstrata later acquired by Glencore – is known to have drilled for nickel in the area in years gone by, with the results worth following up in a 2021 context.
And besides, its location down south from Noront in Ontario is kind of neat in light of the BHP-Dr Forrest shootout in the province.