Hi All
I have attached a 1 November announcement from IGO which gives a good insight into the nickel market, IGO and resultant opportunity for St George.
Key take outs for me:
- Increased premiums from selling nickel concentrate to 3rd parties through Offtake agreements rather than invest in a new processing plant – much higher immediate profits to the bottom line and much lower risk.
- Tightening supply in market giving mineral sellers more power to command higher premiums.
- Still appears to be lots of capacity and scope to outsource processing to 3rd parties.
- Limited mine life at Nova so there is real potential IGO is looking for acquisitions.
This is excellent news for St George and its shareholders given Argonaut’s estimated 50,000 to 100,000 tones of nickel sulphide and other materials at shallow depths at this point in time (albeit predominantly scattered across Investigators, Stricklands and Cathedrals) as it demonstrates St George can start a very profitable operation now without building a mutli-million dollar processing plant as processors are paying a premium for minerals supplies.
I personally think there is a real opportunity now for St George to develop a very profitable and sustainable "Dig & Transport Only" business model based on selling Offtake minerals locally (the infrastucture is there now) and / or globally to the big mining and battery players that need Class 1 nickel sulphide. If a process plant is needed much further down the track then someone else can worry about it and take the build risk (ie who ever wants to acquire a profitable St George) or if St George is not sold it can partner with its new neighbours to share the cost to build a JV processing plant for all to use (makes it more feasible as it lowers cost, ensures capacity utilisation, and high profits for all parties).
I would also say that it will not be long before IGO potentially looks to acquire St George if they haven't already started.
As many of us have said it is a great time to own St George shares.
All in my opinion.
Happy Days to All
SandyC
IGO maximises value of Nova through new offtake agreements1 Nov 2019.pdf
(20min delay)