Ground Breakers: Gold and silver continue upward climb and Wyloo/IGO choose Kwinana for battery nickel factory

Gold inches toward all time high as US economy wobbles
Silver looking pretty decent too, up more than 20% over the past month
Wyloo and IGO secure site in Kwinana for integrated nickel sulphate and PCAM facility in major step up battery supply chain

Gold and silver, where rich folk go to shelter from poor peoples’ misery, are looking more attractive by the day with a weakening US economy sending prices flying.

In gold’s case, a LBMA PM price of US$2048/oz has passed highs seen in the wake of the invasion of Ukraine by Russia last year of US$2039/oz after a more than 1% gain overnight.

Gold prices hit levels of around US$2075/oz in August 2020 before post-Covid fears subsided and gave way to strong economic growth powered by inflationary stimulus policies across the world.

But an aggressive rate hike cycle kicked off by the US Fed, which initially chilled gold prices last year, looks to be doing its job.

US jobless claims rose 11,000 to 239,000 this week, with producer prices down 0.5% in March, though still up 2.7% year on year.

Analysts expect the next US Fed rate rise to come in at 25bps, down from previous aggressive 50bps and 75bps hikes amid a crisis in small American banks.

“That’s an underlying positive environment for gold where the Fed is done with their interest rate hike cycle, yet inflation overall remains higher than they would like,” director of metals trading at High Ridge Futures David Meger told Reuters.

That means we’re steadily inching towards all time highs. ALL TIME HIGHS.

Silver closed on the LBMA at a nearly 12-month high of US$25.62/oz, and are up 21.4% over the past month.

The All Ords gold sub index was up 2.71% this morning, taking its year to date rise beyond 30%.

It all jags with predictions from fundies that gold, unloved for much of the past year, is a market to watch in 2023.

READ: MoneyTalks: Gold is back in vogue and Argonaut’s David Franklyn says these miners are going cheap

ASX gold miners share prices today:

Andrew Forrest and IGO cement nickel plans with plant site

A long held dream for IGO (ASX:IGO) to turn from a nickel miner supplying the likes of BHP (ASX:BHP) to an integrated producer with direct links to the battery supply chain is closer to fruition, with the company’s JV with Andrew Forrest’s privately owned Wyloo Metals securing a site in Kwinana for a proposed nickel sulphate plant and battery PCAM production facility.

The plant would take WA, one of the world’s great battery metals hubs as a producer of half of the world’s lithium and a sizeable portion of class 1 sulphide nickel, further down the lithium ion battery production chain than it’s ever been.

The plant is the outcome of a deal struck by Wyloo and IGO which ensured Wyloo’s support for the latter’s $1.3 billion acquisition of WA nickel miner Western Areas last year after Forrest’s privately owned explorer built a blocking stake in the deal.

A feasibility study is due in mid-2024, with IGO and Wyloo also looking to engage a partner with previous experience in PCAM (precursor cathode active material), given the project would be the first in Australia to head that far up the value chain at a commercial level.

Located next to IGO and Tianqi’s 24,000tpa lithium hydroxide plant, which reached commercial production at the end of 2022, it signals the area as a strategic battery metals hub of global significance.

It is also located close to BHP’s Kwinana refinery, where a new nickel sulphate plant opened in 2021 became the first in Australia to produce the key battery grade nickel product.

“Australia is already playing an important role in the global supply of critical minerals required as the world transitions to clean energy,” IGO acting CEO Matt Dusci said.

“We need to continue to expand our participation throughout the battery supply chain, beyond just the mining of key raw minerals, in order to capture a greater share of the value. We believe the area where Australia can be most competitive is in midstream battery chemical processing.

“We are excited about securing this site at Kwinana – a pivotal step in our ambitions to be better integrated into the battery supply chain.

“We strongly believe that by bringing the right partners together, we will deliver a fully optimised nickel supply chain delivering low-cost, low-carbon, responsibly produced battery chemicals for the global battery and electric vehicle industry, to be delivered through an integrated battery material facility here in Western Australia.

“The Kwinana-Rockingham Strategic Industrial Area is rapidly emerging as a globally significant battery material hub with existing lithium hydroxide production, established infrastructure and a skilled residential workforce. I would like to acknowledge the support of the Western Australian State Government as we work together with a combined ambition of continued growth of the local battery chemical industry.”

Wyloo continues to build Mincor stake

The timing of the announcement dovetails with a bid from Wyloo to buy out BHP supplier Mincor Resources.

Mincor sells nickel to BHP’s Kambalda concentrator, but amid a $760m takeover offer from Forrest’s Wyloo at $1.40 per share, revealed that it could not maintain its FY2023 guidance of 8000-10,000tpa due to impurities in some of its ore that did not meet BHP’s specifications.

Mincor’s board endorsed the on-market takeover bid this month, described by the Forrest camp as best and final after the guidance note, which has seen Wyloo lift its holding from a touch under 20% before the offer to 40.81% according to ASX filings today.

IGO already owns the ~27,000tpa Nova project in WA’s Fraser Range, a region where it holds a dominant land position, as well as the old Western Areas Flying Fox and Spotted Quoll assets at Forrestania and its under construction Odysseus mine at the Cosmos nickel complex near Leinster.

Mincor’s offtake deal with BHP is due to expire by the end of 2025 at the latest, meaning its Cassini and northern Kambalda mines could be a source of nickel ore for the Forrest/IGO operations in Kwinana once constructed.

Wyloo also pipped BHP in a takeover tussle across 2021 and early 2022 for Canadian nickel and chrome explorer Noront Resources, which Wyloo renamed Ring of Fire Metals for its dominant position in the remote Ontario mineral district.