Nickel's Perfect Storm: Western Supply Crunch Will Drive Gains

[Music] Mr Mark Selby how are we sir very good Mr Matthew Gordon I am glad to hear it glad to hear it um we had a good session last week in London um and uh how do you think the conference went actually because that's what you were there for oh yeah no no was uh I mean a was excellently timed b nickel crossed to $220,000 a ton and then conference wise you know I think the a couple things one you know the fireworks we've been seen in the copper market and then the broad move across the base medals in general and then the BHP Ango takeover news you know we probably had our best one toone conference I would say since since Canada nickel and even going back uh you know into RNC uh uh you know RNC minerals days uh the you know we had we had a handful of generalists come out so you know again that's that's the sign you know and that's what's really going to you know get us into a bull market you know in mining which we have not had for for quite a while here and so cautiously optimistic that you know the BHP angle deal once one deal happens you're going to have a whole plethora of of m&a activity and so um you know hopefully that you know again pulls more interest in in the fact that we've seen a bunch of stocks move you're going to see funds have a good March quarter they still have another great June quarter and you know hopefully start to see some net inflows into these funds you know which which again I think are setting the stage for a pretty interesting fault you know what it's interesting I I I was talking to a couple of guys yesterday and they they were in London for conference but they were talking to a pre metal space pre metal funds uh not too many of them in in in London um and there're s still seeing that outflows despite the kind of high high uh gold price environment so people just need a sustained period of um positive movement um I think across the board before we could sort of see the equity starting to benefit from it it feels like but in the meantime I'll take the high price commodity Metals environment talking of which um we saw it break through 20,000 last week where are we this week yeah so um in between where you know when we talked a week ago and today nickel uh kep kept the momentum going um got almost all the way up to $22,000 a ton um and then has now fallen back to about the same level that we talked about about a week ago again still tremendous news H you know I had been calling for $20,000 a ton uh by the end of the year and so the fact we've hit it already is is great news again underscores you know our thesis that that the nickel Market is is far tighter than a bunch of the analysts uh have been talking about you know I think from this point you know I think we consolidate in this 192,000 ton range um but but again I think once we head of the fall uh if Indonesian Supply which again the Indonesian government you know we talked about seems to be you know keeping keeping their hand on the TAPS in terms of how much ore is coming out and uh demand you know demand has been been been looking good and we haven't seen we set inventories tick up a little bit this past week but you know nothing excessive I think you know we're sitting you know we're we're sitting at you know in terms of just days of inventory on the LM so you know no massive overhang to to Really worry about and then wonder what do you um expect to see with because I think people would react if it kind of rips back down again it starts to become or look a little bit erratic expectations over how price will kind of pan out for the rest of the year what are you feeling yeah no I think um as I said you know four month you know four months ago I thought you know getting to 20K would be good move with the risk of of it getting higher I think you know from here I think we consolidate in this 19 20,000 range I mean we've made we've moved 30% in just over a couple months and so we know we need we need to consolidate those gains but yeah you know at this point in time given weing um yeah I think you know another leg higher in the fall maybe up towards the $22,000 ton level you know is is is definitely possible and and again given given the way we think you know demand and Supply is likely going to unfold as the year goes on before we kind of get in this company news I think I just want to S talk talk around I guess um perception of you know some like say some of some of the funds some of the OM that you you guys are talking to in in the nickel space we're seeing the same kind of conversations happening in in in Copper and OB see precious metals both both um gold and silver kind of ripping it you know it's like 32 bucks yet I think it's they both come off a little bit today but still 20 350 and and 31 bucks is is good news um the sentiment in the marketplace is is good it seems to be to us to be off the back of a something daing realization that when you CEOs have for the last sort 20 years told me that Supply demand fundamentals are not there and we're going to run out of that stuff it's never felt real it's felt like a marketing conversation now it kind of feels a little bit real because we're seeing companies well explorers struggling to actually get the permissions that they need to actually do do the drilling we seeing you Nos and and and and and social license you know come heavily into fores naist type um activity as well we're seeing difficulty of getting money to um fund exploration seeing difficulty getting money to fund development um the costs seem to have been blown out of the water in terms of the the the the realization it's a little bit more expensive now than it ever was to get the stuff out of the ground and heaven forbid you actually get to point where you can actually start to build this thing you got to find companies who are experienced in doing that because they're they're thin on the ground and even when you're in production there's still um barriers that can be put up so not a lot of people get over the Finishing Line and I think the market is sensing that right yeah there there's there's been a bunch of longterm Trends here that are kind of all kind of converging at once and I think you know some of the things we're seeing right now you know are some very clear Market signals that these long-term trends have come to roost I think you know you know first off in terms of you know Western World you know mine Supply you know to a large extent since China showed up in in the in the 1990s you know through till a few years ago you know we were like the really you know lazy person line in bed all day it's like I you know I can't be bothered to even get up and make make dinner and then but it's okay because anytime I want food you know some person knocks at the door and gives me whatever food I need and as much as I want and and actually oh it's cheaper than it was the week before and that was really what Chinese mineral Supply was for several decades and so you know we've kind of fallen out of of the Mind building business you know in the west number one I think number two you know this whole BHP Anglo takeover it's like you know again the all of the big what we just came through I think people haven't realized is probably you know for the first time like literally in 5,000 years of people like you know tossing rocks into fire and making metal um is we saw prices go up you know in the prior cycle and really didn't see a big Supply the typical Supply response uh they would normally see because the big mining companies controlled most of the best assets they had done such a crappy job a decade earlier Building Supply that their shareholders said don't do that and and they didn't do that um and and we haven't seen that Supply response so you know as a result you know we have we you touched on it last week is you know you know copper hit $5 us a pound but normally you know we're when we hit those kind of highs the commodity currencies are at cyclical highs as opposed to right now where they're at cyclical lows so you know in Aussie dollar terms copper price is 750 a pound you know in Canadian dollar terms it's I don't know 670 680 a pound which is again 30 or 40% Beyond where the prior high was and and there were some comments today the Aussie resources Minister responding you know to BHP saying you know please you know we're a charity case you know can you give us some Cuts so we can save our nickel business they kind of slapped them on the wrist and said well you know part of your cost issu is the fact you haven't really invested much um in this in this in this nickel business over the last decade and uh again one of the other key assets in West Australia was a aluminum alumina Refinery um that's been there for decades and and again got shut down you know because I don't think it's been invested in to keep Pace with the kind of scale uh you know again West Aro has some serious cost structure issues um you know but there's stuff that's not the government's not going to fix uh tomorrow so so you know I think the you know commodity currency prices are telling you you know that's there the big mining companies are saying oh I'd rather rather buy than you know really build uh at this point in time and and somebody's got to make these critical minerals other than China because we've all decided you know we don't like depending on Supply from China anymore so you know I think you know we're going to see a pretty interesting few years here you know maybe that we haven't seen for a couple decades yeah no that that's actually I mean well well said I mean so I'm so smiling at the thought of a of a of a company going to government saying um would you mind bailing us out that with any danger of getting into politics here that seems to the mentality of most people here in the UK which is I'm entitled please give me some money because I can't be bothered doing anything myself um yeah so I don't feel that much sympathy for BHP either it's the you know we're seeing it here with some of the water utility companies where they've had years of private Equity uh companies sucking money underinvestment and now guess what Joe public gets to bail them out with 70% increases to their water prices so there we go um right but back to Nickel to nickel case you know I'd love to do you know you know the uh was the guys from the mop two old men grumpy about everything but it seems to be every conversation I have with a CEO at the moment is that we've reached that age where we're looking around it wasn't like the in my day um that's for real maybe we should let's think about it guys get on it um right um just back back back to um uh the kind of nickel Price's component of it in terms of um and I know just went on briefly but in China what how did that translate in China with with nickel prices rising yeah so generally whenever you see that kind of sharp move that we've seen the last few weeks it takes a while for the actual consumers to decide whether or not they they want to you know start to pay those prices and and take a look around so so the big move up in in ex exchange prices you know haven't been followed through yet um by by prices uh of the underlying products and the in the self in the battery market and the stainless steel market so you know it'll take a few you know you know we've come down a little bit so see whether the prices come up and again that'll that'll be sort of a good indicator in terms of where those fundamental supply and demand so you know just something we'll you know we'll keep an eye on uh for the next few weeks uh one good thing was you know nickel study group bulletin came out again that's the you know un designated body that keeps track of things um and they came out with their March um you know they're a couple months behind always so they just had their March numbers come out uh this past week um and for the only second time in two years we've had a deficit um deficit month so demand's up uh 9% um and year-to dat Supply is only up 7% so again the thesis that the the market as a whole is not nearly as as as sloppy as a lot of uh analysts would have you believe you know we're basically running right now uh the first quarter is running at about a annualized 880,000 ton Surplus which is about two just over 2% of the market and again we're just starting the year right where we're getting into this restocking on the battery side so expect to see the the demand numbers creep up uh as the year goes on and then you know we'll just we'll see end up we'll see how much Supply ends up showing up uh in the end right okay and and I think um I know we talked about this last week but in terms of um I can't remember if you talked about said I think you have I would remember macron's name but new calonia we still rising or things come down no things are still still unsettled and again for nickel you know new calonia is the you know third largest minded uh mind or producer most of it stays in new Cal right now but it does provide some amount of exports and you know the French have managed to completely you know detonate um the underlying um issues with with the local community um and so uh you know there's there's been unrest there I think the mines have been basically shut down or you know running at very low levels um and so he's flying into try and calm things down and again this just going to help tighten up you know what was you know already a market that was looking a lot tighter um than many had expected so we'll keep an eye on it I mean newcal politics are very very tough you know it's an island where the nickel industry poured in over $20 billion that is between Goro and Connie ambo and has shown a big zero Fort and and again the local political structures a lot of the underlying Community issues you know a big reason that 20 billion has turned into a zero so right okay so energy cost labor cost a lot higher uh than Indonesia so problematic and I'm going to put a link here from one of our listeners who who I think emails you and me uh I'm going to ask his name Ken kenz um he's a regular uh contributor um in terms of content information um I'll put a link there to something he sent through um for us right well let's let's let's get on to company needs because that's always the fun bit so we're going to three highgrade intervals it's like three highr intervals we like high grade we like all nickel go on who we gonna start with yeah so Talon um you know uh uh what they're calling the cgo East waterfall uh again with nickel deposits to make something that's high grade you need basically you know some sort of trap um where those that nickel material can get uh concentrated and again the heavier denser nickel sulfides massive sulfides condense out to the bottom so you're always when you're when you're drilling for high grades you got to try and see where you can find these traps and so yeah they have one structure on one side of the resource that sort of plunges down um and seem to be a filled up with with higher grade sulfides and they now have seem to find find another structure uh at the other end of it so you know anytime you can drill a, a ton value Rock uh it's a good day and so kudos to them you know just under five meters at just almost 5% nickel 4% copper you know and and more than half an ounce uh of of pgms there so uh you know and again that was uh adjacent to a a bigger disseminated interval of about 79 M so you know the could you know the thing here now is to try and see you know you know H what how extensive um and how thick that structure is but you know that's a great start and uh you know good to see those kinds of grades showing up um you know here in North America absolutely now two we got two more who nice yeah so next one uh I I'm I might be calling a garabaldi here um so explain what that means yeah so gab baly was a uh a company that had some again when I talk about it's good to get a high-grade interval but it's even more challenging to put together something that ends up into to a high-grade resource so G Baldi was a big hype about five years ago in fact Derek Sprout you put some money in the nickel business the stock popped up to about $250 million um and you know when you started to look at the the drilling and and I think it's probably still posted there's a website called The Angry geologist I don't know if they're continuing to update their stuff but they ended up doing basically modeling out in detail which I had suspected is they're basically drilling the same little lens from about four different directions and when you actually modeled what the size of the lenses you know they probably extracted about 8% of the nickel that was there via the diamond drilling that so so so if you guys you know if this isn't the case please put out some some stuff that really shows that you're you're really extending this but um they just put out another Hole uh again 20 M 2.8% copper 2% nickel um but you know it looks like they're everything's in the same kind of 50x 50 meter envelope and so you know we need to start extending it you know Andor looking for analogs along strike uh again we we need we need more nickel but it's not not helpful if it's if it's you know if if it's you're you're just uh you know mining by The Diamond Drill um which is plus say I thing like some said basically it's like it's like you know drilling it like a a pin cushion you're just you going after going after the same stuff you're not actually learning anything not stepping out you're not showing scale yeah we we've seen companies do this before and obviously I you know I want small companies to they've got to try and do things the right way as opposed to for the headlines because they've got other issues such as market cap lack of ability to raise Capital uh or indeed or cash strapped in some way um this this is it may seem like the solution But ultimately it is going to lead to um I guess some difficult conversation down the line and then we better skip on to power Lynch is doing team doing well so you know another good Hole uh I mean it's now the structure that they're drilling uh is is more copper PGM the nickel still got a little bit of nickel in there but uh again another gang Buster you know 5% copper over half and it it's a pgms you know over 15 meters so again they they've done a decent job sort of delineating lens here um so what they need to do now is just to see sort of you know what what you know how extensive you know along Striker at depth this thing is going to turn out and whether there's you know again analoges along the same set of structures that they can start to test so um they I think this is the end these are the end of the results from their most recent campaign and then they're gearing up again to you know to go back in the field I'm not sure exactly when but uh you know it'll be good to see you know how how the next uh next set of uh things progress so again nice to see you know good good nice green fields Discovery um uh in Canada so uh we'll we'll definitely be keeping an eye on that one as as we move forward good goodly we C up last week about Canada and I go it's it's a it's a big year for you guys and even bigger one next year so um uh things still well you're off you're going up to count next week aren't you going off to are you going up to Timmons uh to uh next no next week is actually sbur so there there's a battery EV conference um that most of the uh Canadian um you central Canada players are going to be there so looks like it's it's a great lineup then the week got that I'm up in Timmons for the Timmons mining Expo which is a go basically mini version of pdac um but but again given that you know just it's a great example of the scale of what happens in Timmons you could literally you know outfit your and whatever you need to build and operate a mine you know at that mining Expo there's probably five or 6,000 people were there so no it's a it's a right i' done that thing which I'm very good at doing is not knowing what day of the week it was I literally thought next week was Jin it's not I'm not wishing my life away uh certainly not that moment it's it's too much on metal prices you know going going on a a good old Gallup uh Mike thanks very much for uh checking in with us uh hopefully we'll try and catch up with you from subre next week um if we can uh if not uh see you soon sounds good

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Id: YvxBtmYCA0Q

Length: 20min 3sec (1203 seconds)

Published: Sat May 25 2024