Why now’s a great time to be in nickel
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Special Report: When the world’s second largest miner is accelerating its efforts in the nickel market, you know there must be good times ahead.
Once upon a time BHP (ASX:BHP) was doing everything in its power to get rid of its underperforming Nickel West operation, but now the heavyweight is stepping up its efforts to grow the business and lock in as much nickel supply as possible.
And that is because of the rapidly growing demand for nickel in batteries because it improves battery performance and lowers costs.
For example, the Chinese government is now demanding that EVs manufactured in the country have a range of more than 400km.
To get the 400km, you need a lithium-ion battery with great power and heft, and that means a battery with greater nickel content.
Battery makers have found batteries with a greater nickel mix have a higher energy density, so manufacturers have started to put more and more nickel into their batteries.
Nickel West president Eddy Haegel has labelled it a “once-in-a-generation opportunity”.
“It is important to understand that a 60kwh NMC811 battery needs 9kg of cobalt, 11kg of lithium and a massive 70kg of nickel,” he said at the recent Diggers & Dealers conference.
And while a “meaningful impact” on the nickel market from batteries is not expected to occur until the mid to late 2020s, Haegel reckons BHP isn’t wasting time waiting for the boom to hit.
“We are actively developing options to position ourselves for this once-in-a-generation opportunity,” he said.
While demand for nickel in batteries is climbing, stockpiles of nickel have been declining, which is pushing prices higher.
Since the start of this year, the LME nickel price has spiked over 53 per cent to $US15,985 ($23,540) per tonne.
An extended period of low prices has meant that new mines are not being developed and so global stockpiles are dwindling.
All while stainless-steel markets – accounting for ~70 per cent of today’s consumption – are growing and long-term demand estimates from the battery sector become more real by the day.
Experienced forecasters like Wood Mackenzie are predicting a pretty substantial supply crunch in the mid-2020s.
“Although the battery sector share of nickel demand is much smaller than other metals, getting the quantity of nickel that EVs will need by the mid-2020s will be a challenge,” Gavin Montgomery, Wood Mackenzie research director, said in late July.
“A low nickel price has hindered any project development and with lead times often up to 10 years, investment needs to happen now.”
Blackstone Minerals (ASX:BSX)has given itself a head start to becoming an early producer of battery grade nickel with an option to buy an already permitted and established mine.
The company picked up an option to acquire a 90 per cent stake in the Ta Khoa nickel project in Vietnam— its reasoning being that Asia is expected to become an electric battery powerhouse.
The Ta Khoa project includes the Ban Phuc nickel mine, which successfully operated as a mechanised underground mine from 2013 to 2016 and is currently on care and maintenance.
The previous owners spent over $US136m on building the infrastructure, including the underground mine and 450,000-tonne-per-annum concentrator.
So Blackstone effectively only has to sink modest capital into the project and undertake some exploration to build out the resource and it could restart the mine just in time to capitalise on the looming nickel boom.
“We believe we will be one of the first junior companies on the ASX to deliver what will be a nickel product for the battery industry, and the reason we’re able to do that is because it’s a sulphide and we’ve got the existing infrastructure,” managing director Scott Williamson said.
Sulphides are much cheaper and easier to turn into battery grade nickel sulphate than nickel laterites and fetch a higher price.
Blackstone has already started drilling in Vietnam and has hit some good grades(up to 3.4 per cent nickel) in the first round.
The exploration front is important for Blackstone, as it has 25 targets to follow up on within a 150sqkm area.