Nickel kicker

Metal’s high could add ex­tra fat to plat­inum rev­enues

Finweek English Edition - - Companies & markets - DAVID MCKAY

THE IM­PROVE­MENT in the nickel price so far this year has pro­vided an in­ter­est­ing boost to the for­tunes of South Africa’s plat­inum com­pa­nies, which pro­duce the metal as part of the plat­inum group met­als (PGM) fam­ily.

Other PGM met­als have also been con­tribut­ing. For ex­am­ple, rhodium com­prises about 19% of An­glo Plat­inum’s 2006 rev­enue profile and gained 84% over the past year. Af­ter trad­ing at a record US$6 300/oz on 23 May 2006, the metal is cur­rently at $5 775/oz.

Over­all, 2006 was ex­tremely kind to SA’s plat­inum pro­duc­tion – and now SA’s high­est earn­ing min­eral ex­port. And there’s more to come (see box).

The nickel price rock­eted to a record high of nearly $36 000/t on 18 Jan­uary af­ter in­ven­to­ries on the Lon­don Metal Ex­change fell 82% over the past 12 months, Bloomberg News re­ported. Stock­piles were at 62 300t, equal to less than two days’ global con­sump­tion.

Peter Breese, COO at LionOre In­ter­na­tional, which last year pro­duced 34 000t of nickel, reck­ons the price im­prove­ments are re­lated to the mas­sive bar­ri­ers to en­try. About 70% of the world’s nickel re­serves are held in a dif­fi­cult-to-ex­tract la­t­erite form. “We’ve seen the cap­i­tal cost of some projects dou­ble and time­lines stretch out,” Breese says.

LionOre owns half of the Nko­mati Nickel project, with the bal­ance owned by African Rain­bow Min­er­als. The part­ners cur­rently pro­duce just 5 000t/year from the mine but hope to build that to 22 000t/year from 2010, fol­low­ing two ex­pan­sion pro­grammes.

There­fore LionOre in­tends to pro­duce as much nickel as quickly as it can. Pro­vid­ing mar­ket guid­ance to share­hold­ers, it said re­cently that pro­duc­tion could in­crease to around 45 000t/year. “We’ve got an op­por­tu­nity at all our op­er­a­tions to pro­duce more metal by bring­ing it on quicker than ex­pected and (by in­creas­ing) lift­ing ca­pac­ity,” Breese says.

How­ever, one ques­tion is whether nickel’s run will last. Its price im­prove­ment is re­lated to de­mand for stain­less steel. Bri­tish bro­ker Nu­mis Cor­po­ra­tion says there’s scope for a sharp cor­rec­tion, though much de­pends on how much stain­less steel China uses. “Our fore­cast price for this year is around $22 000/t, fol­lowed by $19 000/t in 2008,” John Meyer said in a re­cent re­search note. Nickel av­er­aged $23 214/t last year.

Cathie Markus, a di­rec­tor at Im­pala Plat­inum, says prices at such lev­els make nickel the sec­ond most im­por­tant rev­enue gen­er­a­tor af­ter plat­inum.

And as­sum­ing the nickel price were to be main­tained at its (high) cur­rent level, a fur­ther 6% would be added to An­glo Plat­inum’s earn­ings.

Nickel’s the sec­ond most im­por­tant rev­enue gen­er­a­tor af­ter plat­inum. Cathie Markus

NICKEL... ROCK­ET­ING TO A RECORD HIGH

Source: I-Net Bridge

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