Nickel producers are maintaining their bullish outlook on prices, pointing to Chinese demand for stainless steel and a global shortage of nickel production as drivers of continuing robust prices.
Nickel producers are maintaining their bullish outlook on prices, pointing to Chinese demand for stainless steel and a global shortage of nickel production as drivers of continuing robust prices.
Nickel prices have been highly volatile this year, climbing to $US54,000 a tonne in mid-May before falling to $US25,000/t two months later. It is currently sitting around $US31,000 a tonne, substantially higher than historical levels.
Jubilee Mines NL executive chairman Kerry Harmanis believes worldwide production will have trouble keeping up with the growth in demand from China, as an estimated 30 million Chinese are urbanised each year over the next 10 years.
He believes the nickel market is entering a new phase, making it harder to predict where the price will go.
Mr Harmanis told an Australian Institute of Company Directors nickel forum this week rising production costs could set a new baseline of between $8 and $12 a pound, or roughly $17,500 to $26,500/t.
Worldwide stock levels, currently at an all-time low, will also be a key determinant of price as the supply and demand differential widens.
Just meeting Chinese demand during the next 10 to 15 years will require about 100,000t of new supply coming online each year, Mr Harmanis said.
“Even the twinkle-in-the-eye stuff, I cannot see those in discoveries around the world,” he told the forum
In response to the growing demand, the state’s biggest nickel player, BHP Billiton, has upped its nickel exploration budget to $US120 million over the next three years, targeting brownfield opportunities near existing sites as well as greenfield sites.
The mining giant posted a record EBIT of $3.6 billion in 2007, boosted by higher prices and a record annual nickel production of 103,000t of contained nickel in matte.
BHP Billiton Nickel West president Marcelo Bastos said the company had accelerated its exploration focus to find new resources.
Currently in the pipeline for Nickel West is the development of two brownfield satellite operations at Leinster – Rocky’s Reward, a 6.4 million tonne mineral reserve at 1.4 per cent nickel, where mining has already commenced; and Perseverance Deeps, the larger 12mt mineral reserve at 2.2 per cent nickel.
Also pegged for Leinster is the $US139 million Cliffs Nickel Project, a smaller, high-grade deposit, with an initial production target date of the second half of 2008.
A Mt Keith, two asset life extension projects – the Stage H expansion and the deferred Yakabindie resource – are expected to take the operation out past 2025.
Jubilee Mines, which this week posted a record after-tax profit of $173 million, has boosted exploration expenditure to $40 million in this calendar year.
Sally Malay Mining Ltd, which declared its maiden dividend of 12 cents fully franked this year, has increased its exploration budget in 2008-09 to $10 million.
Fellow WA nickel miner and explorer Western Areas NL is also looking to increase its exploration budget, from $2 million a month to about $3 million a month, with a target of $20 million for the 2008 financial year.
