High Voltage: GameStop has nothing on this nickel market #shortsqueeze
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
This is pure insanity.
“Nickel has just touched $100,000 a tonne on the LME – that’s right – double its previous all-time high,” analyst Gavin Wendt says in a tweet.
“The LME is in the grip of a massive squeeze, with substantial short positions being forced to cover at a time of low liquidity.
“Nickel is up $72,000 a tonne this week alone.”
The madness led to the LME halting trading in its nickel market late yesterday arvo for the remainder of the trading day, at least.
“The LME will give consideration to a possible multi-day closure, given the geopolitical situation [Russia’s invasion of Ukraine] which underlies recent price moves,” it says.
‘Short sellers’ borrow something — in this case nickel units — for a fee and then sell it, expecting it to fall in value.
They buy it back at some point and return it to the original owner.
If it falls in value, they pocket the difference. If it increases, they take a loss.
Depending on how much it increases, these losses can be catastrophic.
A ‘short squeeze’ happens when the price increases quickly, forcing the short sellers to buy it at a higher price to prevent even bigger losses.
This buying momentum forces prices even higher.
Melvin Capital, the hedge fund at the centre of the GameStop drama, lost 53% of its value in a month after retail traders, spearheaded by punters on r/Wallstreetbets, recognised that hedge funds like Melvin were very short GameStock and caused a ‘short squeeze’.
This is like that, but on a far larger scale.
Bloomberg reports that a unit of China Construction Bank Corp. has been given additional time by the LME to pay hundreds of millions of dollars of margin calls it missed Monday.
BOOM!!! Nickel prices surge above $100,000 a tonne on a huge metal short-squeeze. The London Metal Exchange has given a unit of China Construction Bank Corp. extra time to pay $$$$ in margin calls it missed Monday. Do follow @jfarchy for more and read this https://t.co/4lO5xbW3ph pic.twitter.com/BWaJodhiGC
— Javier Blas (@JavierBlas) March 8, 2022
Tsingshan boss and trader Xiang Guangda — an entrepreneur colloquially known as Big Shot – could also be holding a big short position on a recent bet nickel prices would come down from recent highs.
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>
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This battery metals minnow is having a decent run in 2022, up 88% year-to-date.
Last week’s run was sparked by some rock chip samples grading up 2.3% lithium and 0.7% rubidium at the ‘Mandini’ project in WA.
Hard rock lithium mines usually grade between 1-1.5% lithium, but high grade rock chips aren’t much to get excited about on their own.
They could’ve been transported to this location from elsewhere by an ancient river or earthquake, for example.
The only way to prove if there is economic mineralisation is by drilling, which is well underway, MLS says.
The 45 hole, ~3,500m drilling program is currently testing the central, high-grade, part of the ‘Foundation’ pegmatite.
Initial testing has already intersected up to 16m downhole of mineralised pegmatite in RC drillhole MNRC043.
Drilling details will be reported once results are received.
IPT identified high priority battery and strategic metals targets at its aptly-named ‘Jumbo’ joint venture project in WA.
Soil geochemistry work highlighted the project’s potential to host nickel-copper-platinum group elements, lithium-caesium-tantalum (LCT) pegmatites, rare earth elements, and rubidium.
“These soil results further confirm to us that Impact has secured a large and very prospective part of the emerging mineral province of southwest Western Australia which already contains the recent Julimar Ni-Cu-PGM discovery and the Greenbushes lithium-tantalum mine, both world-class deposits,” managing director Dr Mike Jones said.
“The region is clearly vastly under-explored and has great potential for the discovery of deposits covering a wide range of battery and strategic metals.”
Impact plans to start first pass follow-up field checking and sampling in the June quarter.
COB’s advanced Broken Hill cobalt project (BHCP) — the only large scale, non-African, greenfield primary cobalt project in the world — has received Major Project Status from the Federal Government.
CEO Joe Kaderavek says Major Project Status will “greatly assist” COB raise development cash by recognising the strategic importance given to this project by the Australian Government.
“This milestone is critically important for overseas partners and well timed in our development journey,” he says.
“COB can now boast both Made in Australia and Backed by Australia.”
From a practical POV this designation provides COB with a single ‘entry point’ for Australian Government approvals, project support and coordination with State approvals.
The 81,000t BHCP could be in production by mid to late 2025. Pre-production capex is estimated at ~$560m.
It would produce +3,500tpa cobalt metal eq over 20 years at a very low all-in sustaining cost of $US12/lb – making it profitable even at record low prices.
The cobalt price recently hit $US34/lb, and continues to rise.
In 2022, COB is planning to operate its demonstration plant — a smaller version of the real thing — and deliver large scale samples to potential offtake partners.
Project approvals and a BFS will be finalised by the end of the year, ready for a final investment decision on the project by Q1 2023.