Nickel briefly popped through $22,000 (10/lb) and remains in the upper end of $20,000-$22,000 where it has been sitting for the last 6 weeks. LME inventories remain low at 37-38,000 tonnes. Sulphate prices are flat and sitting at a similar discount as last week. In contrast, ore prices and NPI prices ticked higher in China – haven’t seen a rebound in stainless prices yet. May be driven by rumours that China SRB is stockpiling some nickel.
The big news of the week:
Saudi Arabia is investing $US3.4 billion for a 10% stake in Brazil’s Vale base metals business – good to see the Middle East $$ in the sector.
Australia going to include nickel in the critical minerals list.
Potential for Russian nickel to be subject to sanctions in UK/Europe in the upcoming year – think a lot of people choosing not to use it, but if implemented, a little more challenging given that nearly ½ of Russian nickel used to end up in Europe.
Magna Metals PEA on Crean Hill/Denison project picked up earlier in the year from Sibanye – unfortunately share price was off by about 15% (but had popped up 10% in the week before).
Metrics on IRR and NPV are both good at $C200 million and 22% IRR with a 15-year mine life mining 1.5-2 Mtpa of ore for a few years with an open pit and then 1.25 Mtpa underground operation with roughly 10ktpa of nickel production. However, the market reacted negatively for a couple of reasons with capital cost being the primary one:
- Total of CAD$129 million including $48 million of “advanced exploration” costs, $24 million in open pit costs, and $57 million in underground capital. Think the market was expecting was going to be open pit restart and then underground so was a little surprised at the total amount.
- They had some pretty splashy high-grade intervals but the life of mine grades are 0.6% nickel, 0.6% copper and over 1g/t PGMs so some investors were probably expecting some more grades to pop out.
- The third reason was valuation – at $0.75/share has a market cap of $120 million versus the value for the project at $C200 million (and they also have Shakespeare) – which is a pretty healthy P/NAV in the industry sector that is struggling.
A good example of challenges with high grade – can be narrower, less continuous = more drilling capital, particularly if has to be done underground.
Widgie Nickel had nice step-out results and infill drilling
100-metre step out Eastern Limb MEDD069 29.0m @ 1.66% Ni from 79m Incl. 5.0m @ 3.23% Ni from 88m. Widgie Townsite MEDD061 30.85m @ 1.59% Ni from 435m Incl. 13.43m @ 2.74% Ni from 449.7m And 3.36m @ 3.27% Ni from 471.3m.
Our Timmins neighbour had updated resources from their W4 higher grade deposit:
Measured + Indicated Resources of 31.3M pounds at 0.98% Ni (2.1x the 2010 historical estimate) and Inferred Resources of 12.1M pounds at 0.98% Ni (3.6x the 2010 historical estimate) – about 40% of that in open pit and balance underground resource.
