Monsters of Rock: Nickel Mines raises big $$$ for Indonickel; and will lithium prices have a crash landing?

Nickel Mines (ASX:NIC) is the latest miner in the market for big cash from investors, chasing US$225 million to bankroll a purchase of 30% of the Oracle Nickel Project in Indonesia.

The company is on the cusp of a remarkable rise from its $200 million IPO in 2018, with the development of the new Angel and Oracle projects to take it from unlisted junior to a top-10 global nickel producer in less than five years.

In fact, on current projections Nickel Mines, launched by well-known mining investor and now executive deputy chairman Norm Seckold in 2007, will produce more nickel metal than BHP (ASX:BHP) once both operations are open.

Rather than being a traditional nickel company, Nickel Mines owns several lines of rotary kiln electric furnaces developed by Tsingshan Group company and major shareholder Shanghai Decent, from which it produces nickel pig iron for the stainless steel market in China.

It has helped the company scale up in quick time. From a current production rate of ~32,000t of nickel metal the additions of Angel and Oracle will lift its nameplate capacity on an equity basis to 78,000tpa.

The raising will cover the first two instalments for 30% of the Oracle project, and will include a US$106 million placement to institutions, US$106m placement to Shanghai Decent and a US$13m SPP to existing shareholders in Australia and New Zealand.

Nickel Mines will eventually hold a 70% stake in Oracle, due to be commissioned early next year.

It comes just days after fellow battery metals play Syrah Resources raised $250 million for the construction of its Vidalia graphite active anode materials plant in the US.

Nickel Mines share price today:

“I don’t think this is going have a crash landing”: Ellison on lithium

MinRes (ASX:MIN) shareholders are licking their wounds today after the collapse in iron ore prices and rise in global freight and supply chain costs sunk their half year dividend.

But MinRes shareholders can at least hold their heads high on three fronts.

1) Iron ore prices have improved, albeit not as much for the company’s lower grade ores as the benchmark 62% price, which has swivelled from US$87/t to US$150/t over the past three months.

2) The big iron ore developments it has planned in the West Pilbara and around Port Hedland are still on the cards. These will have costs of $30-35/t against December half costs which, heavily impacted by grade discounts and shipping, were around the $100/t mark.

3) It is on the cusp of a big ramp up in lithium production – and chemical production at it and US giant Albemarle’s Kemerton plant – at a time when prices look like they will continue moving.

Lithium prices are up almost 500% over the past 12 months as EV sales have soared to record levels.

Billionaire and MinRes chairman Chris Ellison quipped when talking to media and analysts this morning about the company’s tough half.

“Quite honestly, I mean the price has moved quicker than our spreadsheet,” he said.

“So you know, in the last three months, the price has just gone from something that we thought was getting out there and we were very happy with, but it’s probably doubled.”

Could we be due for a correction? At some point the only way will be down, but don’t expect a crash landing.

“We’ve all seen commodities that go up like skyrockets. There’s probably only one way for them to go eventually. But I don’t think this is going to have a crash landing,” Ellison said.

“A couple of years ago, there was a handful of car companies making electric cars. Today, if you’re not making an electric car, you’re not going to be in business. So I think the supply-demand chain is very different to what we’ve seen.”

“I don’t think there’s any doubt that year-on-year for the next 3, 4, 5 years out the demand for lithium is going to continue to grow. You read that if it gets too high, they’ll go and try find an alternative fuel.”

“Well it’s taken probably 30 years to get to where they have with lithium and … even if lithium’s selling at US$3000 a ton for the spot, it doesn’t move the dial that much on the cost of an electric car.”

MinRes’ price realisation hasn’t been as high as Pilbara Minerals (ASX:PLS), and supply chains, Covid-19 related workforce issues and lower grades at its Mt Marion mine have seen costs rise from $457.4/t in H1 2021 to $732.4/t in H1 2022, but at $1,384.7/t MinRes’ spodumene prices roughly tripled over the past year.