How to play the rising Nickel market, the hot picks

by Commodity online

The rebound in nickel prices presents investment opportunities in a few key players in the industry, according to Argonaut. 31 Mar 2014 LONDON (Commodity Online): Nickel oversupply that caused prices to plummet to record lows last year may soon be history. At London Metal Exchange (LME), nickel is on course for the biggest quarterly advance since 2010. Indonesian export ban has had bullish with prices climbing 14% since the start of the year. The rebound in nickel prices presents investment opportunities in a few key players in the industry, according to Argonaut. -Independence Group, market cap $938 mn, Share prices $4.02 (long higher grade, low cost nickel producer), quality diversified company. 2 year trading range $2.18-$5.05 -Wester Areas NL, market cap $790 mn, Share price $3.49 trading range $1.935-$5.63, Highlight: relative safe-haven with low cost of production and cash flow generation down to $US6.00/lb, consistent producer of high quality concentrate -Sirius Resources, market cap $694 mn, Share price $2.65, 2 year trading range:$0.05-$5.00( Will be lowest cost Ni producer in production, no current exposure to price volatility and quarterly production fluctuations, BFS expected mid-2014. -Panoramic Resources: Market cap $176 mn, share price $0.545, 2 year trading range $0.20-$1.20, (Double barelled leverage from both Ni price accretion and additonal mine life. Savannah North discovery is the most significant find since Deacon at Lanfranchi in 2006. - Mincor Resources, market cap $125 mn, share price $0.665, 2 year trading range $0.445-$1.235, reliabel history of dividend payment, however requires additonal resources to to prolong Kambalda mine life. Mariners presents opportunity for Resource extension at depth. Nickel in London is on course for the biggest quarterly advance since 2010 after Indonesia, the biggest miner of the material used in stainless steel, started an export ban on unprocessed ores on Jan. 12. The metal climbed 14 percent since the start of the year, the biggest gain among the six major base metals on the LME. According to Argonaut, nickel has been driven to historic lows as market moves into structural oversupply. -Current rebalancing in the market should support a nickel price recovery -Nickel sulphide resources in decline, higher proportion of nickel laterite in the future -Indonesia nickel ore accounts for ~14% of global nickel supply -Threats of an export ban by Indonesia has been well flagged allowing Chinese nickel pig iron producers to build nickel inventories -Argonaut believe the Indonesian export ban will impact China’s nickel pig iron output -Nickel sulphide exploration is technically challenging and costly with few significant discoveries in recent years.

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