Monsters of Rock: How could crazy $100kt nickel prices be bad for Nickel Mines?
Link copied to
Australian Indonickel producer Nickel Mines (ASX:NIC) has avoided a major sell-off after addressing concerns about its ties with under fire Chinese nickel giant Tsingshan.
It seems strange to think nickel’s doubling of all time highs to US$100,000/t would be a bad thing for Nickel Mines, which produced 32,328 tonnes of the stuff last year.
But reports from Bloomberg and the Wall Street Journal about the potential multi-billion dollar trading loss facing Tsingshan after it emerged as the probable victim of the short squeeze that broke the nickel market yesterday were hardly positive for NIC.
Tsingshan is the offtake partner and a minority owner in Nickel Mines’ Indonesia nickel pig iron plants, as well as the owner of 18.7% of $3 billion NIC’s ASX-listed stock.
That connection sent Nickel Mines shares tumbling by 22.7% this morning before it called a trading halt.
Thegood news for Nickel Mines investors is those losses were trimmed to just 4% this arvo after it came out with a strong response to a price query from the ASX, insisting its business and relationship with Tsingshan remained on solid footing.
It spent yesterday in discussions with Tsingshan and Shanghai Decent, saying “the Company’s operations at the Hengjaya Nickel and Ranger Nickel projects are unaffected, as is commissioning at the Angel Nickel project and construction at the Oracle Nickel project.”
“Tsingshan have firmly assured the Company that they have no intention of selling any shares that it holds in the Company,” Nickel Mines said in its response.
It said there were no changes in Tsingshan’s commitment to take all the offtake from its existing projects and take Nickel Mines shares in a placement to part-fund its purchase of 70% of the Oracle nickel project.
“Tsingshan remains the world’s largest stainless steel and nickel producer with its operations generating revenues of 352B RMB (US$~$56B) in 2021,” the company said.
“Tsingshan’s operations remain robust and unaffected with the Group having strong confidence in its ability to manage its current market position.”
Trading of nickel on the LME is currently suspended after the LME moved to shut down the volatility and cancelled all trades yesterday, resetting the three-month contract quote to US$48,063/t.
But it was gold, lithium and uranium stocks that ran hardest among the big miners as the ASX materials index rose 0.53%.
Gold prices were just shy of all time highs at US$2057/oz according to Kitco, with Gold Road Resources (ASX:GOR) up 7.74%.
Chalice Mining (ASX:CHN) whose Julimar discovery near Perth contains both nickel and another metal hitting all time highs on the Russian invasion, palladium, was also up ~7%.