Investing in Nickel: A Comprehensive Guide for ASX Investors

Nickel... the 28th element

Nickel (Ni) is a shiny, silvery-white metal with a slight golden tinge.

It’s the fifth most common element on earth and our planet’s magnetic field is a direct result of the nickel and iron contained in its core.

When mixed with other metals, nickel helps to form metal alloys (a combination of two or more metallic elements to provide greater strength or corrosion resistance). Nickel alloys are strong, rust-resistant, able to withstand high or low temperatures, and malleable enough to create anything from wires to flat sheets.

Source: iStock

History

Nickel has been found in artefacts dating back to 3,500 BC.

As the metal is easily mistaken for ores of silver and copper, its use in ancient relics was likely unintentional and it wasn’t for another 5,000 years before the metal was given a name.

In the 15th century, German miners discovered a brown-red ore they believed to contain copper and were disappointed when no copper could be extracted from the ore. Frustrated at the result, they named the metal “Kupfernickel” which loosely translates to “Devil’s Copper”.

The nickel element “Ni” was first identified and isolated in 1751 by a Swedish chemist, and in 1857 the USA started using nickel alloy (nickel mixed with copper) in their coins.

By the early 1900s, the boom in stainless steel had cemented nickel’s use in alloys as an excellent way to prevent corrosion.

Properties

Source: Nickel Institute

Nickel’s Uses

Nickel’s high melting-point, rust-resistance, and ductile nature makes it an essential metal for a modern society.

More than 80% of nickel is used in alloys and over 3,000 nickel alloys have been created ¹. Everything from surgical equipment, aircraft engines and washing machines contain a nickel alloy.

Stainless Steel

Stainless steel has been used for over 100 years, and the addition of nickel provides corrosion resistance, improved weldability, increased toughness, durability, and greater strength at high temperatures.

Coins

Australian $1 and $2 coins contain 2% nickel (with 92% copper and 6% aluminium). The 5c, 10c, 20c and 50c coins contains 25% nickel (with 75% copper) and the reason they’re more a silver-white colour than the $1 and $2 coins is due to the amounts of nickel in the coin.

Source: Royal Australian Mint

Batteries

Approximately 11% of nickel’s production goes towards electronics applications ².

Notably, Nickel plays a critical role as a major cathode material in lithium-ion batteries, which are vital to electric vehicles, energy storage, hydro power, wind power, and photovoltaics (solar power).

“Our [Lithium-ion battery] cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide,” says Tesla CEO Elon Musk. “[There’s] a little bit of lithium in there, but it’s like the salt on the salad.” ³.

Nickel can also be easily recycled. Currently, about 68% of all nickel from consumer products is recycled and repurposed ⁴.

Mining and Production

Nickel comes in two main types of ore:

1. Lateritic ore: constitutes ~60% of the world’s nickel reserves ⁵

   and is typically found in very large tonnage, low-grade deposits located close to the surface. It’s generally mined via open cut mining.

2. Sulfidic ore: constitutes ~40% of the world’s nickel reserves ⁵ and is typically found deeper underground than laterites. It’s generally extracted via underground mining.

Lateritic deposits usually contain just 1-2% nickel, so a metallurgical extraction process is used to extract the nickel from the deposit. The most common methods are:

Caron Process - reduction, roast, ammonia leach

• The ore is crushed to less than 1 inch to increase the surface area

• Dried to less than <3% moisture

• Heated in a furnace to reduce the oxide to a metal

• After it has cooled, it is sent for ammonia leaching, where metallic nickel is oxidized, dissolved, and extracted ⁶

PAL (or HPAL) - high-pressure sulphuric acid leach

• The ore is crushed to a fine material and mixed with water until it becomes a slurry

• The slurry is added to a “pressure-cooker” with acid

• At the end of the process, the slurry is washed, and nickel can be separated ⁷

EPAL Process - enhanced pressure acid leach

• Similar to the HPAL process but includes an additional atmospheric tank.

BHP’s Nickel West mine in WA

With Sulfidic ore, a series of mechanical, chemical, and magnetic separators (some nickel-bearing sulfides are magnetic) are used to extract the nickel, followed by roasting in an oven or leaching through chemicals to further refine the final product ⁸.

Both Lateritic and Sulfidic-based nickel can then be further refined to produce a high-purity product.

Investing in Nickel

Nickel is one of those frustrating metals that doesn’t trade on an open market with a live spot price like oil, gold and copper.

Nickel futures on the London Metals Exchange (LME) is widely regarded as the industry benchmark. Futures contracts are an agreement to buy or sell a fixed amount of metal for delivery on a fixed future date at an agreed price today.

Nickel futures on the LME:

• Trade under the symbol "NI"

• A single futures contract represents 6 tonnes of nickel at 99.80% purity (minimum)

• Contracts are priced in US dollars, but clearable currencies include the US Dollar, Yen, Pound and Euro.

• LME's publicly available price is USD per tonne and generally 1-2 day delayed

An alternative way to track nickel prices is via the US-listed iPath Bloomberg Nickel Subindex Total Return ETN (Exchange Traded Note), a product that tracks an index of nickel futures.

The ETN’s price does not reflect a tonne of nickel but its performance is intended to reflect its underlying performance.

Nickel's price movements

Approximately 70% of global nickel consumption is used to make stainless steel. This makes the price of nickel rather sensitive to the ebbs and flows in global industrial activity.

Like most commodities, nickel prices spiked following the Russian invasion of Ukraine. The upward move was further exacerbated by a short-squeeze, which triggered prices to drastically spike from ~US$25,000 in late February to a peak of US$101,375 in early March.

The energy crisis in Europe, ongoing covid lockdowns in China and global central bank tightening has weighed on global industrial output. After the March spike, nickel has been in a downward trend, with LME prices closing at US$21,107 a tonne in September.

Nickel Outlook

NEAR-TERM: A potential LME ban on Russian nickel

The LME recently commenced formal discussion on a potential ban on new Russian metal deliveries to its warehouses. As of 14 October 2022, Russia contributed to approximately 15% of LME-deliverable class 1 nickel. More broadly speaking, Russian nickel exports make up roughly 5.3% of global output, according to JP Morgan. 

S&P Global Platts warns that “there is a risk that banning Russian nickel from its sheds could see a repeat of events in 2018 when the LME suspended deliveries of metal made by major primary aluminium producer United Co. RUSAL International PJSC and aluminium prices consequently spiked.”

SHORT-TERM: Supply to outpace demand

An aggressive ramp up in Indonesian supply coupled with soft economic conditions is expected to create a drag on nickel prices, according to the Australian Government's commodity forecaster, the Office of the Chief Economist (OCE).

The OCE's latest quarterly report forecasts nickel demand to increase 3.3% year-on-year in 2022 to 2.9 million tonnes. Consumption is expected to continue to trend higher, up 5.3% in 2023 and 4.2% in 2024, where demand will be 3.0 million tonnes and 3.1 million tonnes respectively.

Still, the supply side is expected to outpace demand, forecast to reach 3.0 million tonnes in 2022 and accelerate to 3.4 million tonnes in 2024. Indonesia, the world's largest nickel producer and the country with the biggest nickel reserves, is expected to do most of the heavy lifting on the supply side.

Indonesian supply increased approximately 30% in 2021 to 1.0 million tonnes and that trajectory has only accelerated, up 40% year-on-year in the first-half of 2022.

Nickel prices are forecast to average US$21,250 a tonne in 2023 and ease to US$20,250 in 2024, according to the OCE's September quarterly report.

Source: Office of the Chief Economist (Australia)

LONG-TERM: Battery for days

"The big picture here is that the electrification of transport mega–trend is a major stimulant for nickel any way you cut the data," said BHP in its FY22 results outlook.

Jess Farrell, BHP's asset president of Nickel West anticipates "demand for nickel in the next 30 years will be 200% to 300% of the demand in the previous 30 years."

Approximately 85% of the nickel sulphate produced at the Nickel West refinery in Western Australia is for the battery sector, up from 10% six years ago ⁹.

A separate study by Benchmark Minerals Intelligence estimates that at least 72 new nickel mines are required to meet the demand for electric vehicle and energy storage batteries, based on average mine sizes in each industry.

Source: Benchmark Minerals Intelligence

"The data highlights the height of the raw material challenge facing global automakers as they look to scale up production of electric vehicles this decade. Demand for lithium ion batteries is set to grow six-fold by 2032," said Benchmark.

To add some perspective, China sold 3.5 million EV units in 2021, which required approximately 95,000 tonnes of nickel. The China Passenger Car Association forecasts EV sales to reach 6 million in 2022.

Australian Nickel Companies and Activity

Western Australia holds 96% of Australia’s nickel resources ¹.

The image below shows Australia’s major nickel deposits and operating mines on 31 December 2019.

Source: Geoscience Australia

Market Index reached out to 11 ASX nickel explorers for an update on their activities (a full list of ASX-listed nickel companies can be found on our Nickel page).

Despite the current head winds confronting the nickel sector, all ASX-listed explorers contacted by Market Index echoed strong underlying confidence in the long-term upside for nickel as markets normalise and the global transition to clean energy narrative gets back on track.

In short, all explorers believe it’s a question of ‘when’ demand will again exceed supply - not ‘if’. 

Adavale Resources (ASX: ADD)

Adavale Resources is a minerals explorer focusing on nickel at its flagship nickel sulphide project in Tanzania, Kabanga Jirani. The acreage sits adjacent to acreage hosting a nickel project that has garnered the financial interest of BHP, located in the East African Nickel Belt.

Market Cap: $14.79M *

Main Project: Kabanga Jirani Nickel Project

Update from David Riekie, Executive Director:

• The last month has been quite defining for us. We completed the heli EM program which was the last piece of information we needed to secure in our own mind where the most prospective drill targets are located over all our licences.

• October has been dedicated to commencing the RC and Diamond Drilling program which is 6,000-8,000m which will take us into next year and hopefully a lot longer based on the successes that we’ve got.

• We think that the sulphides are hiding in the targets we’ve identified and that keeps us busy for the next three months and hopefully beyond that if we get some good intercepts.

• I think that the investment in our neighbour by BHP is critically important for us, and I think people have started to realise we’re sitting in a dominant position in Tanzania in the East African Nickel Belt.

Learn more about Advale Resources

Ardea Resources (ASX: ARL) 

Ardea Resources is a nickel explorer and developer focussed on the  infrastructure rich Kalgoorlie region of WA, considered the best resources operating jurisdiction in the world 

Market Cap: $142.58M *

Main Project: 100% owned Kalgoorlie Nickel Project 

Update from Andrew Penkethman, Managing Director and CEO:

• From our perspective, it’s all about advancing the Kalgoorlie Nickel Project towards production and ultimately becoming one of the largest nickel cobalt producers in the world supplying sustainable and ethical battery mineral supply. We’re undertaking a PFS at the moment due for completion in the March quarter of 2023 and that will update the Ore Reserve and financial metrics for our 3.5Mtpa base case processing facility located only 70km northwest of the City of Kalgoorlie-Boulder.

• That will build upon our PFS and expansion study completed in 2018. The whole reason we’ve continued to increase the project scale is due to the rapidly escalating demand for nickel, primarily related to the EV industry and the rapid expansion of lithium-ion batteries, as well as strong demand out of traditional uses like stainless steel. We’ve also continued to enhance our flow sheet, using technology successfully in use at existing operations.

• In terms of upcoming deliverables, we will have an announcement soon on metallurgical testwork enhancement, PFS updates, continuing to build our owners team and assay results from Emu Lake nickel sulphide exploration. We are undertaking a Strategic Partner process and working with Federal Government agencies, such as  Austrade,  the Critical Minerals Office and Export Finance Australia and will provide updates on these ongoing engagements, as well.

Learn more about Ardea Resources

Azure Minerals (ASX: AZS)

Azure Minerals is a nickel copper explorer and project developer operating in WA. 

Market Cap: $97.88M *

Main Project: The Andover development located in the Western Pilbara of WA. Company management believes the Andover play has led to the identification of a new nickel province in the state. 

Update from Tony Rovira, Managing Director:

• We’ve been busy drilling our nickel and copper sulphide deposits we’ve identified on the Andover project in the West Pilbara region of WA 30km east of Karratha. We’ve been drilling there continuously for the last two years and we’ve identified, or drilled out, two deposits, and two other prospects are looking very promising.

• The first prospect is also called Andover and has a resource of 4.6Mt at 1.4% nickel equivalent, which is nickel plus copper plus cobalt, for about 75,000 tonnes of combined contained metal.

• The second deposit, Ridgeline, we’ve just finished drilling out and the resource should be published in the first quarter of the next year. The other two prospects we’re currently drilling out are called Seaview and Pipeline.

• In parallel, we’ve also got a scoping study in progress nearing completion with that to be announced publicly in the first quarter of next year.

• This is the first identification of significant copper and nickel sulphide mineralisation in the West Pilbara. We are beginning to believe we have identified a new nickel province in WA at Andover.

Learn more about Azure Minerals

Bayrock Resources (ASX: BAY)

Bayrock Resources is a nickel and cobalt explorer intending to list on the ASX in December 2022, focusing on its 100% owned acreage prospective for nickel-cobalt sulphide deposits located in Northern Sweden within the established mining district of Skellefteå.

Market Cap: listing on ASX in Dec 2022

Main Project: The Lainejaur Nickel Mine with a JORC-2012 inferred resource of 460,00t of nickel. It will be redeveloped alongside the nearby Vuostok Project. 

Update from Dr Ian Pringle, Managing Director:

• We’re progressing an IPO which we hope to complete at the end of November. When we close that off we intend to be diving straight into a drilling program to extend Lainejaur and Vuostok. We expect to be on the ASX in December and drill rigs turning in January.

• Bayrock is developing some very high-grade nickel-cobalt deposits in Northern Sweden within the EU and only a stone’s throw from hungry Li-ion battery gigafactories. We have a high-grade cobalt-nickel resource with copper, palladium and gold credits and we’ll be fast-tracking through development and into production in order to take advantage of the close EU market and the increasing demand for electric metals.

• We are the first to recognise this nickel-cobalt terrain and as the first mover we’re excited to have picked up six exceptional tenements with numerous historic high-grade nickel outcrops and many drill intersections that have been overlooked by previous explorers who were mostly focussed on copper, zinc and gold.

Caspin Resources (ASX: CPN)

Caspin Resources is a minerals explorer operating in WA with two projects prospective for nickel sulphides; Mount Squires in the West Musgrave region, and Yarawindah Brook nearby New Norcia.

Market Cap: $49.33M *

Main Projects: Mount Squires & Yarawindah Brook.

Update from Greg Miles, Chief Executive Officer:

• Currently our drilling activities are focused on our Mount Squires project in the West Musgrave region of WA. We’re along strike from OZ Minerals’ (ASX: OZL) Nebo Babel deposit; they just gave the greenlight for development in September. 

• When OZ Minerals builds that mine, it will be Australia’s largest nickel sulphide development for a long, long time Nearby we’re doing early-stage exploration and we’ve got some interesting targets from a nickel perspective.

• The most interesting thing is the extension of that nickel-copper sulphide belt into our project area, which extends over about 25km.

• We’re hoping to shift a rig onto that nickel trend in early November, that program will probably finish up in mid-November, and transition seamlessly into drilling at our Yarawindah Brook project, our flagship project, and that’s where we’ve had some really interesting PGE-nickel-copper hits akin to what Chalice are finding at Julimar.

Learn more about Caspin Resources

Impact Minerals (ASX: IPT)

Impact Minerals is a poly-metals explorer with a predominant focus on nickel- copper at its flagship Arkun project 150 km south-east of Perth WA. The Arkun acreage is located in a relatively underexplored area of WA and the company  believes it has the potential to champion a new nickel province. 

Market Cap: $14.89M *

Main Project: The Arkun project in southern WA. 

Update from Dr Mike Jones, Managing Director:

• For the past 18 months Impact has been increasing focus on its significant tenement holdings in the southwest of WA, an emerging mineral province driven by the discovery of the Julimar nickel-copper PGE deposit.

• That discovery has put the emphasis on nickel copper exploration in that part of the state which is almost completely unexplored. The south west region has been the poor cousin of the Yilgarn craton where elsewhere lithium, nickel and gold exploration has taken off. 

• We’ve already generated some significant nickel-copper anomalies at our flagship Arkun project and we hope to be drilling there early 2023.

Learn more about Impact Minerals

Legend Mining (ASX: LEG) 

Legend Mining has been actively exploring WA’s Fraser Range for the last seven years with its JV partners IGO Limited (ASX: IGO) and privately held Creasy Group, owned by renowned prospector Mark Creasy. The Rockford project is in the same geological belt as IGO’s prolific Nova mine. 

Market Cap: $101.94M *

Main Project: The nickel-copper Rockford Project in WA. 

Update from Mark Wilson, Managing Director:

• We’ve been exploring in the Fraser Range for 7 years, so we’re a stayer where not many people are.

• We’ve got a great belief the area is prospective for multiple commercial discoveries of nickel copper sulphide. The upside for us is that the last company who made a discovery went from $20m to $2bn in three years.

Learn more about Legend Mining

NickelSearch (ASX: NIS)

NickelSearch is a pure play nickel sulphide explorer operating in WA. Its flagship project is the Carlingup nickel sulphide project in WA’s south. The project boasts an existing resource of 171Kt contained nickel and is nearby IGO’s  Forrestania nickel mining complex, as well as Canada’s First Quantum Minerals’ Ravensthorpe operations. 

Market Cap: $14.05M

Main Project: Carlingup nickel sulphide project.

Update from Nicole Duncan, Managing Director:

• We listed on the ASX in October 2021 and we have 108 square kilometres of tenements in the same greenstone corridor as IGO’s Forrestania nickel sulphide complex some 100km to the north.

• In the last month we have started drilling at our Carlingup project near Ravensthorpe. We are a nickel sulphide explorer and have been doing a lot of work to identify the best greenfield nickel sulphide targets across our tenements. This week we mobilised an RC rig to site and started drilling.

• We are looking to drill across three of our targets there; we’ve got over thirty greenfield targets across the tenements at this point.

• Over the last month we’ve commenced mapping with boots on the ground, mapping the outcropping across our tenements looking for signs of what structures underneath might hold for us.

Learn more about NickelSearch

Pacific Nickel Mines (ASX: PNM)

Pacific Nickel Mines is a nickel project developer active on Isabel Island, part of the Solomon Islands. Pacific is currently aiming to begin shipping ore to sales by third quarter 2023 from its first project. A DFS is pending for release before the end of the year and the company enjoys Glencore as a prospective partner interested in partially financing the project. 

Ultimately, Pacific is seeking to mine nickel ore and ship it directly to the Chinese market. 

Market Cap: $25.80M *

Main Projects: The Jejevo and Kolosori Nickel Projects located on Isabel Island in the Solomons. 

Update from Geoff Hiller, CEO:

• We’re a low capital operation, getting the project running is only around US$20m. 

• Glencore is a partner subject to finalising. The key for us, short-term, is we’re about to release a Definitive Feasibility Study (DFS) in the next month or so, we’ve got Glencore keen to get involved and provide the capital subject to their approval.

• We’re in the middle of pre-construction on our own and looking to direct ship ore in Q3 next year. The key things for us are building a wharf, and a haul road up to the deposit. Then we dig it up, put it onto barges, and barge it out to an ocean-going ship destined to China.

Learn more about Pacific Nickel Mines

Sabre Resources (ASX: SBR) 

Sabre Resources is a gold and nickel explorer with its flagship nickel project being the Sherlock Bay Project in the coastal Pilbara region. Notably, Sabre boasts an existing nickel resource of 100,000 tonnes of Nickel, putting it ahead of smallcap competitors in the same area. 

Drilling remains ongoing through 2022 at Sherlock Bay where the company is targeting high-grade nickel discoveries. At current nickel prices, management asserts the project is already economically viable. 

Market Cap: $11.66M *

Main Project: The Sherlock Bay Nickel Project in the Pilbara region of northwest WA. 

Update from Jon Dugdale, CEO:

• We’ve got a major project in Sherlock Bay in the northwest Pilbara of WA and that’s where most of our activity is going on at the moment. 

• We’ve already got 100,000 tonnes of nickel in resource, meaning Sherlock Bay is economic at the current price.

• The real key to it is either an increase in the nickel price or to find more high grade at Sherlock Bay…we’ve identified potential for massive sulphides below the existing resources and recent downhole electromagnetics have identified a very strong conductor which indicates there could be more massive sulphides.

• The Company recently announced (26/10/22) the intersection of a “40m sulphide zone including 15m of massive, matrix and stringer sulphides in the down-hole EM conductor position". 

Learn more about Sabre Resources

St George Mining (ASX: SGQ)

St George Mining has uncovered high grade nickel-copper results close to surface in previous exploration activities. The play is also prospective for commercial quantities of lithium pegmatites, backed up by high-grade lithium hits uncovered in October 2022.

Market Cap: $52.50M *

Main Project: The Mt. Alexander development in the Western Australian goldfields region. 

Update from John Prineas, Executive Chairman:

• The exciting thing about our nickel project at the moment is that we have new targets to go and drill which were put together by our new nickel expert Julian Hanna, who’s a bit of a legend in the industry who has made several nickel discoveries over the years, so that is a very exciting thing for us. 

• Julian Hanna is the former manager of Western Areas, which developed the Flying Fox nickel mine in WA, one of Australia’s most high-value nickel mines. In late 2021, IGO later bought Western Areas for over $1bn.

Learn more about St George Mining

* Market Cap values noted in the article were at time of writing (07/11/2022)

References

1. Geoscience Australia

2. Nickel Institute

3. Benchmark Mineral Intelligence

4. Nickel Institute - recycling

5. US Geological Survey - Nickel

6. Total Materia

7. Caldera Engineering

8. Britannica

9. Mining.com