Mincor Resources NL (ASX: MNR) acquiring the Long nickel operations is a good indicator of the changing nickel market. This changing dynamic is a good thing.
I remember the consolidation of nickel projects in the early 2000s, which was the start of nickel prices running to the stratosphere. It probably is a bit premature to call the beginning of good times, but I think consolidation, divestments are a good thing.
Independence Group NL (ASX:IGO) have their hands full with Nova and rightly have sold to get the upside with Mincor. This sale is IGO saying, here is the project, Mincor, you do it and make us lots of money, and in return, you give me some of your shares. The sale is a significant vote of confidence for value. A cash deal would not have made sense, and I think the market prefers this deal.
Figure 1: Relationship between Long and the other projects for Mincor (source: MNR).
The all script deal (unless I have read it wrong) is very favourable. IGO has also put up money for the placement which has got to be a massive vote of confidence on the acquisition. If you digest this sale, it is becoming less of a deal and more of a partnership.
The Long nickel sulphide mine is 45 kilometres south of Kalgoorlie at Kambalda East in Western Australia. While current reserves are estimated at only three years of productions, the company is confident that it will be able to extend the reserve base given that the two primary deposits, McLeay and Moran, are open at depth. The mine currently extends 600 metres below the surface, or 1 kilometre below sea level.
Table 1 below outlines the resources that are in the Long acquisition. My thoughts are that Mincor will find more resources and the operation will allow a more dedicated exploration program to define and upgrade the current resource.
Time will tell if there are more resources in the ground, but I think a mineralised system like this has to have more legs than what is shown now (spoken by a non-shareholder).
Table 1. Independence’s JORC 2012 compliant mineral resource for Long was last disclosed in their 2018 Annual Mineral
Resource and Ore Reserves Statement released to the ASX on February 20, 2019 (source:MNR).
As readers would know that I am a nickel bull, I do think this is going to work well for Mincor. The whole EV market wants more nickel sulphides, and as the inventory of nickel sulphide projects is very low, projects such as this will increase in value.
How all this pans out, in reality, will be very interesting but I think there is sufficient evidence in the market to indicate a positive outcome. There are now even talks that the use of cobalt will decrease and the use of nickel sulphates will increase.
How Mincor goes about the business of reshaping the Kambalda nickel status will be solely based on how best to leverage the Long operations. It sounds like the infrastructure at Long will help them develop their own nearby Durkin resource. If that was the case, then the resource at McLeay and Moran will be a bonus. Future exploration results will make this a desirable proposition.
This brings me back to my first remark. Mincor making this move to buy and IGO allowing this to happen with very favourable commercial terms will create the possibility of a nickel catalyst.
This nickel catalyst could ignite the market and kick start the mineral resource sector. This kick start has been a long-awaited event, like the 'conglomerate gold rush' that set the industry buzzing in 2018. I am convinced that when this happens, the mineral exploring companies will be buying drinks at the bar again.
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