Five nickel stocks to watch as the ‘go-to’ metal surges ahead
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Nickel is the go-to metal for mining investors in the new financial year according to a raft of commodity price updates by investment banks.
ASX explorers and developers are set to benefit most from the bullish outlook on the basis that the nickel producers are already fully priced.
The metal’s top billing reflects forecast supply pressures caused by surging demand from the lithium-ion battery powered clean energy revolution which spans electric vehicles and renewable energy storage.
The battery thematic for nickel – it basically represents a whole new growth market for the metal best known for its use in stainless steel – has recently gained new momentum on the realisation that unlike the “thrifting’’ challenge for cobalt, nickel use in individual batteries is stable to rising depending on the battery technology.
And besides, predictions that more than 15 per cent of the global car fleet could be EVs (eletric vehicles) by 2025 means a whole lot more nickel will be needed.
It is against that backdrop that nickel prices began to recover last year.
The metal averaged $US4.73/lb in calendar 2017 and has since marched to $US6.61/lb, an increase of 43 per cent on last year’s average:
The metal’s recovery — it averaged $US10.36/lb in 2011 — is set to continue according to investment bank forecasts, albeit at a slower pace.
UBS said last Friday said it expects nickel to climb to $US7.75/lb in 2020 while Morgan Stanley expects it will take until 2021 for nickel to have a second leg up to get to $US7.51/lb.
The reality is that the investment banks are really only catching up with what has already occurred in the nickel price, with their prices for 2018 and 2019 either at below the current price.
The impact of that is ASX-listed nickel producers are considered pretty much fully priced.
It is a different story for the explorers and developers.
For the explorers, there is the opportunity for a super-charged response to good exploration results while for the developers, there is the likelihood of a re-rating on becoming a producer.
Barry FitzGerald’s Garimpeiro column has had a look across the sector and has come up with some names to watch in both categories:
Legend Mining (ASX:LEG) Trading at 4.8c. Legend’s Rockford project in Western Australia’s Fraser Range is shaping up as the best chance yet for the “next’’ Nova to be uncovered in the remote region by a junior listed explorer.
Nova was discovered by Sirius Resources in 2012 and is now a nickel-copper-cobalt mine. It is owned by Independence Group (ASX:IGO) after it acquired Sirius in 2015 for $1 billion. Legend hasn’t got an orebody yet but there has been plenty of smoke recently.
Great Boulder (ASX:GBR) Trading at 45.5c. A strong performer in recent months on the strength of what it might uncover when a drilling program starts next week at its Eastern Mafic prospect, 7km from its Mt Venn prospect near Laverton in WA where extensive copper-nickel-cobalt mineralisation has already been encountered.
St George Mining (SGQ): Trading at 12.5c. Its Mt Alexander project near Laverton ranks as Australia’s newest nickel-copper discovery. High grade hits at shallow depths – 17m at 3% nickel and 1.3% copper with platinum group metals from 37.4m at the Stricklands prospect – are worthy of follow up work to determine the extent of discovery. The same goes for high-grade hits at the Cathedrals and MAD60 prospects.
Panoramic (PAN): Trading at 63.5c. Not strictly a developer as it is working towards a restart of its Savannah nickel-copper-cobalt project in the East Kimberley region of WA. Shuttered in 2016 when nickel prices tanked, the operation will have a payback of less than two years on the $36m restart cost.
Cassini (CZI): Trading at 7.2c. It is the junior partner in a joint venture with OZ Minerals in the potential $800m West Musgrave nickel-copper-cobalt project in WA. It’s responsible for on-going exploration to add to the story, and has just had a good hit at one of the regional prospects.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.