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Nickel price holds strong with demand set to rise across steel and EV sectors

Australian nickel players are well-placed to benefit from the continued rise in the nickel price and forecast increased demand over the next 15 years.

Nickel price holds strong with demand set to rise across steel and EV sectors
The metal is a critical component for steel production and is used in EV batteries

Nickel is sitting above US$17,000/tonne and continues its steady climb as analysts forecast high demand in the coming years of post-COVID-19 recovery.

The price has risen almost 60% since hitting US$11,000/tonne in mid-March, 2020, partly due to increased demand from China for nickel in stainless steel – for which around 68% of the world’s supply is used.

Prices of Chinese iron ore futures have also risen, putting further upward pressure on prices and nickel stocks held in Shanghai Futures Exchange warehouses have fallen to 18,361 tonnes - the lowest since mid-2019.

Conversely, stocks in LME-registered warehouses are over 240,000 tonnes, the highest since mid-2018.

Vital for energy transition

Demand is also growing from the electric vehicle market, which is expected to hit A$1.1 billion by 2027, with nickel being one of the key components of batteries.

According to Wood Mackenzie vice chairman of metals and mining Julian Kettle, the energy transition starts and ends with metals.

He said: “If you want to generate, transmit or store low/no-carbon energy you need aluminium, cobalt, copper, nickel and lithium.”

For renewable energy generation and storage and electric vehicles and associated infrastructure, the world will require an additional 50 million tonnes of aluminium, 23 million tonnes of copper, 500,000 tonnes of cobalt, 3.5 million tonnes of lithium and 3.1 million tonnes of nickel.

Kettle said: “These heady growth scenarios will double the aluminium, copper and nickel market over the next 20 years.

“One can argue about both the pace and scale of the energy transition but the criticality of metals to its realisation is without question.”

EV uptake growing steadily

Wood Mackenzie principal analyst transportation and mobility Ram Chandrasekaran predicts that worldwide electric vehicle sales will be close to 4 million, (up 74% from 2020) this year due to the stimulus programs in many countries including EV support in plans to offset the economic impact of the pandemic.

Notably, China extended its subsidy policies to 2022 and several EU countries have increased subsidies for EVs, as well as more stringent emissions targets.

Chandrasekaran said: “The new US administration has also pledged to support EVs and is expected to drop the Federal Government’s opposition to California’s more stringent fuel economy and vehicle emissions standards.”

“Those trends all point to a year of rapid growth in 2021, although EVs will still be only about 5% of total worldwide vehicle sales.”

The nickel price is currently above US$17,000/tonne.

Australian nickel players

The strong price and forecast demand bodes well for ASX-listed nickel hopefuls, including Auroch Minerals Ltd (ASX:AOU) (FRA:T59), Chalice Mining Ltd (ASX:CHN) (OTCMKTS:CGMLF), Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) and Legend Mining Limited (ASX:LEG).

Auroch Minerals

Auroch will commence RC drilling next week at the high-grade Nepean Nickel Project in WA and is well-positioned to leverage the strong nickel price.

Managing director Aidan Platel said: “With the nickel price already well over US$17,000/t and forecast to continue to rise significantly over the next few years, 2021 will be a transformational year for Auroch as we consolidate our existing highgrade nickel sulphide resources and move towards scoping studies, whilst at the same time continue to aggressively explore for new nickel discoveries.”

Chalice Mining

Chalice saw its shares skyrocket in the back of a globally significant, high-grade PGE-nickel-copper-cobalt discovery at its Julimar project in Western Australia last year and recently received a key access approval to additional exploration areas at the project.

Managing director Alex Dorsch said: “This access approval has been eagerly anticipated and is highly significant, as it allows us to finally start to understand the true scale of the Julimar discovery.”

The company is fully funded going forwards with around $120 million in cash to continue its 6-rig resource definition drill program and reconnaissance exploration activities at Julimar.

Blackstone Minerals

Blackstone is developing the Ta Khoa project in Northern Vietnam and has started drilling the high priority nickel-copper-PGE target at the King Snake prospect.

Nine active drill rigs are currently continuing activity at KCZ, Ban Chang, Ta Cuong and Ban Khoa.

A maiden resource at the Ban Chang target is being targeted for the first quarter of 2021 and the company has also started metallurgical testing on the Ban Phuc DSS deposit with an aim to develop a flow sheet for a product suitable for the lithium-ion battery industry.

Legend Mining

Legend has had substantial exploration success at the nickel-copper Rockford project in Western Australia’s prolific Fraser Range, announcing in December that it identified new nickel-copper targets in the area’s northwest.

The company is encouraged by the definition of three new target areas on wide-spaced aircore drilling and considers this validation of its exploration approach in identifying key areas across the Rockford project and defining new drill targets.

Legend will now follow-up with reverse circulation and diamond drilling at the Hurley prospect and will design a 2021 regional aircore drilling program targeting aeromagnetic and gravity targets across the project.

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