Monsters of Rock: Much ado about nickel - why LME's Russian ban won't shift prices

Why that Russian nickel ban by the LME is much ado about nothing
NRW posts stellar financial results, reveals play to muscle in on mining services rival MACA
Aeris doubles size of Constellation copper resource

Experts say a ban on Russian nickel in the LME’s London warehouses will do little to shift the goalposts as the market looks for signs of positivity for battery metals.

Nickel fell back over 1% yesterday, one day after the LME — world’s biggest metals store of last resort and main price setter for base metals — finally moved to bar Russian product from its Hull and Liverpool warehouses.

This appears to be more lip service to British sanctions against Russian oligarch and Nornickel supremo Vladimir Potanin than anything.

Indeed, Wood Mackenzie’s nickel and stainless steel research director Sean Mulshaw tells us Hull hasn’t contained nickel at all since June 2017 (shortly after Hull City’s relegation to the English football pyramids third tier, a tough time for the club).

Liverpool contains just 198t at the moment of the exchange’s 56,000t, Mulshaw says, but Rotterdam, where Russian nickel has typically gone can accept Russian nickel unabated.

The LME has been no stranger to controversy this year, especially in its nickel business, and it has faced pressure to go harder when it comes to Russia.

It lost significant face with traders in March when it cancelled a string of trades which briefly pushed the nickel market to highs in excess of US$100,000/t, something which could have caused billions of losses for Chinese stainless steel producer Tsingshan and its boss “Big Shot” Xiang Guangda.

That was at least partly driven by market concerns that potential sanctions against Russia, supplier of 10% of the world’s nickel metal, could take a massive chunk of supply out of an already tight market.

NWH in halt after bumper results, MACA speculation

Here we go.

WA mining contractor MACA (ASX:MLD) was already in play after it accepted a $350 million cash bid from Australia’s biggest contractor Thiess a couple weeks ago.

Now The Australian is reporting NRW Holdings (ASX:NWH) fresh off a glittering set of results today, could come in over the top, as the push to consolidate the mining services sector heats up.

For years mining services players have had concerns about margin squeeze, leaving cash on the table because other mobs could come in and underbid on fixed price contracts.

As the industry gets more concentrated more of that power returns to the contractor.

MACA is interesting because it provides a ready made in for Thiess back into the WA mining market; for NRW it would be able to expand its presence in WA and elsewhere.

MACA and NRW headed into trading halts today to respond to the speculation, before NRW exited to confirm it had made an approach to complete a scheme of arrangement on August 11 for a combined package of cash and shares at $1.085/sh or $375 million.

According to NRW, MACA responded today, saying it did not consider the proposal to be superior to the $1.025/sh Thiess bid.

“We are disappointed that the board of MACA has indicated that it is not willing to entertain our compelling proposal,” NRW MD Jules Pemberton said.

“NRW believed it was uniquely positioned to offer attractive value for all MACA shareholders and, importantly, the benefits of continued exposure to MACA’s business as part of a larger and diversified provider of contract services to the resources, infrastructure and energy sectors across Australia.”

Early NRW posted some tasty earnings, lifting revenue 4.6% year on year in FY22 to $2.4 billion, with EBITDA up 30.1% to $157m and statutory NPAT rising 79.4% to $97.4m.

NRW’s declared a fully franked final dividend of 7c per share, up 40% on FY21, with total dividends of 12.5c or $56.1m (+39%).

“These are the best results NRW have reported despite the challenging conditions the business has encountered over the last 12 months,” MD Jules Pemberton said.

MACA is due to report its full year results on Monday.

NRW Holdings (ASX:NWH) and MACA (ASX:MLD) share price today:

Aeris double tonnes at Constellation copper discovery

Aeris Resources (ASX:AIS) continues to grow its Constellation copper discovery, providing a fresh lick of confidence to the long term future of its Tritton mine.

Constellation was the main driver behind a positive run on the bourse last year for Aeris, which drifted in 2022 before announcing a takeover of Washington Soul H. Pattinson’s Round Oak Minerals copper and zinc mining business earlier this year.

A new mineral resource estimate at Constellation including a maiden underground resource has added 102% to its copper tonnes, 162% in contained copper metal and 246% in contained gold metal over the maiden resource in December last year.

Constellation now comes in at 6.7Mt at 1.85% copper, 0.58g/t gold and 2.9g/t silver for 123,000t Cu, 125,000oz Au and 620,000oz Ag.

The resource extends to a depth of 450m, and has the potential to increase the grade profile of the Tritton mine, where Aeris mined at grades of 1.3% in FY22, producing 18,851t of copper at all in sustaining costs of $5.10/lb.