To some, the nickel boom of the last year or so is reminiscent of the Poseidon nickel boom of 1969. Then, the nickel price rise was driven by the Vietnam war and a strike at the world’s largest producer, Inco.

Poseidon rose from $0.80 to a high of $280, a rise of 35,000%. This dramatic rise attracted investors, mostly inexperienced, into the resource sector. Many other companies such as Tasminex and Queensland Mines, also exploded higher. However, the end was nigh. One month later, in January 1970, the market collapsed. Read Trevor Sykes’ “The Money Miners” for an excellent summary of this story of greed.

Today the focus is on the use of nickel in lithium ion batteries in electric cars. Many companies, including BHP, are presuming a huge demand for electric vehicles will drive a huge spike in the nickel price. Perhaps.

Meanwhile a quick look at some of the more spectacular price gains over the past year or so.

 

Blackstone Minerals Ltd – ASX: BSX

Price (c) 52 Week Low 52 Week High Shares (M) MCAP (M) Low to High
43 7.9 54 318 137 684%

The company’s main project is the Ta Khoa nickel PGE project in northwest Vietnam. This previously operating mine is on care and maintenance, due to both operational and revenue reasons. It hosts an indicated resource of 44.3Mt @ 0.52% Ni and an inferred resource of 14.3Mt @ 0.35% Ni.

A scoping study has been completed which shows a positive NPV and IRR, with a payback of 2.5 years. The price started moving in April when the company signed a share purchase agreement with EcoPro, a large producer of nickel cathode material. Worth watching, but risk remains in the cost of mining and processing. Against that the deal with EcoPro is a significant positive.

 

Azure Minerals Ltd – ASX: AZS

Price (c) 52 Week Low 52 Week High Shares (M) MCAP (M) Low to High
42 4.8 44 242 102 916%

Originally a minerals explorer in Mexico, indeed only Mexican projects are listed on the company’s website. In July AZS acquired gold and nickel projects in the Pilbara from Mark Creasy. This saw the share price rise from around $0.10 to around $0.18.

The price continued to show modest gains until nickel and copper sulphides were reported from the first drill hole at the Andover project. The price rocketed to $0.44 before pulling back to $0.35. Sulphides were intersected from 81.8 to 119.0 downhole. There are no assays yet, but previous holes did intersect mineralisation, such as 7m @ 2.62% Ni & 0.65% Co.

This remains an exploration play but is worth watching for assay results for the first and next holes.

 

 Centaurus Metals Ltd – ASX – CTM

Price (c) 52 Week Low 52 Week High Shares (M) MCAP (M) Low to High
63.5 7.5 73.5 325 207 980%

 Holds the 48Mt @ 1.08% Ni Jaguar Nickel Sulphide deposit in Carajas province, Brazil. This is one of the most heavily mineralised areas in the world, hosting multiple nickel, copper, gold and iron deposits. Jaguar is well served by infrastructure and is primarily a near-surface resource.

A scoping study is underway, due next quarter, so it is premature to discuss economics. However, the size, grade and near surface location suggest a positive outcome.

 

Estrella Resources Ltd – ASX: ESR

Price (c) 52 Week Low 52 Week High Shares (M) MCAP (M) Low to High
10.5 0.5 10.5 755 80 2100%

The company has two nickel projects in WA: Spargoville and Carr Boyd, the latter being the main focus. The company’s share price had drifted for a long time until release of results from Carr Boyd on 8 October. Three diamond holes had been completed with one intersecting sulphides. This hole intersected 15m of weak to massive sulphides from a depth of 430.5m downhole.

There are no assays available from current drilling but there are modest historic results. Nonetheless, the share price rocketed from $0.014 to $0.094 in a couple of days. Again, this is an early stage exploration play and deep at that. Watch for results to come in and for proof the mineralisation extends up dip.

 

Chalice Gold Mines Ltd – ASX :CHN

Price (c) 52 Week Low 52 Week High Shares (M) MCAP (M) Low to High
308 14.5 355 309 944 2448%

In March the company made a spectacular discovery of palladium, platinum, gold, nickel and copper at the Julimar project in WA, near Perth. The discovery hole was 19m @ 8.4g/t Pd, 2.65% Ni and 1% Cu. There are many other equally spectacular results, such as 17.6m @ 5.3g/t Pd, 1.0g/t Pt, 1.3%Ni, 0.6% Cu. Gold and cobalt also occur in the system.

There is little doubt that there are many good results from this project, but it seems rather risky given the market cap of around $1B. Some of the potential issues are land access, what will the first resource look like, mining costs, sales value of concentrates, capex and other issues.

Nonetheless this is a high-quality team that is worth following, but be cautious of the risk profile, this is a 24 bagger after all.

Conclusion

Some extraordinary gains, but not a touch on Poseidon. However, in some cases there is limited data to justify the price increase.  Nonetheless all five are worth watching as there is potential upside in all cases.

15 October 2020 Commodities, Markets Tags: ,