POSCO just grabbed a slice of Ravensthorpe nickel; here’s why our juniors are smiling
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Aussie nickel juniors are bound to be happy after Korean steelmaker and battery precursor producer POSCO paid top dollar to clinch a 30 per cent stake in the Ravensthorpe nickel operations on WA’s south coast.
Nickel is an essential product in stainless steel but is increasingly valued for its requirement in the lithium-ion batteries that underpin the EVs.
Ravensthorpe – or ‘Ravy’ as the locals say – has been shut twice by FQM and previous owner BHP, and has had its struggles again since reopening in early 2020.
But the $US240 million price tag values Ravensthorpe in its entirety at $US800 million, more than double the $US340 million FQM paid the Big Australian in 2009.
That outstripped some analysts’ expectations.
For instance, BMO Capital Markets’ Jackie Przybylowski estimates Ravy has a NAV of just $US257 million on a 100 per cent basis. That would make the deal a 233 per cent premium.
This sort of mark-up signals the appetite of battery manufacturers to gain a foothold in the sector, and is sure to prick the ears of Australian nickel miners and junior explorers alike.
“I think it’s very positive for the sector, I was delighted to see it,” Poseidon Nickel (ASX: POS) managing director Peter Harold told Stockhead.
“I think it makes sense for POSCO and you’re going to see more of this occurring where downstream consumers are going to try secure mine feed or first stage feed through these kinds of joint ventures.
“There’s certainly some undeveloped projects that could come back on stream.”
POSCO has taken a long view, with an offtake arrangement for 7500t a year of nickel-cobalt hydroxide not set to begin until 2024.
The deal, which is subject to FIRB approval, also includes an MoU between POSCO and FQM to explore a strategic partnership to produce battery cathode precursor material.
“That would underpin a view of the nickel price being strong for a fair few years to come,” Harold said.
“I think you’ll see more of these sorts of deals, and I’m sure we’ll have people approaching us trying to do these sorts of deals because I see that being the way of the future.”
Poseidon was one of several companies that were forced to shut up shop when the local nickel industry hit its nadir in the mid-2010s, a period that saw resources giant BHP consider disbanding its historic Nickel West division.
It is currently focused on resource drilling at the high grade Golden Swan discovery near Kalgoorlie with an eye to a future restart.
Prices have been volatile over the past two years, with nickel’s upwards charge towards $US20,000/t stopped in its tracks in March when China’s Tsingshan unveiled plans to convert some of its Indonesian nickel pig iron into nickel matte for battery makers.
That could make its product a competitor for the lithium-ion market targeted by high grade nickel sulphide producers in Australia.
Prices have since rebounded to around $US17,500/t.