Seems that the Marlborough low-grade laterite deposit gets another run around to the the punters.
There are three laterite nickel operations in Australia. The two most recent by Anaconda and Bulong continued a tradition of giving the original backers a severe haircut.
The first started with the Metals Ex plant at Gladstone now called the Queensland Nickel Industries’ Yabulu nickel laterite refinery. Alan Bond played with this one and the backers lost heavily.
With most of the capital written off the laterite plants can operate on a cash basis and turn a profit with above average nickel prices.
The problem is that new capital is rather difficult to attract when all the precvious capital has been lost on this type of venture.
BHP has the balance sheet to support the new laterite WA plant but it still has some technical risk.
Another problem is that the forward 2 - 3 year Ni prices are a large discount to cash/3 months prices so the revenue risk cannot be effectively hedged.
Laterite is a strategic risk to sulphide Ni producers but it was this exact threat posed by Anaconda that stifled sulphide development in the 90s and led to the current supply side constraints.
Not many laterite plants are confirmed - they have a 3-4 year development period - so perhaps in 2010 there may be a supply side pressure.
In the meantime I would be more interested in substitution from austentic to ferritic steel.
JBM Price at posting:
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