To add to my last post regarding the effects of Indonesia ramp up on the Nickel price.
'Indonesian nickel pig iron and matte producer Nickel Industries (ASX:NIC) ran at cash costs of between US$9500-11,400/t for its four rotary kiln electric furnace sites in the September quarter.That’s around $6.60-7.95/lb compared to PAN’s last reported cash cost of $10.15/lb.' - Stock head
Now lets compare that to recent PFS/BFS from Large scale low grade Nickel mining operations in Canada.
Giga metals PFS 2023 - $4.65/lb Ni (no byproduct credits)
FPX Nickel PFS 2023 - $3.70/lb (no byproduct credits)
One can easily make the assumption that Astons project being a simple crush and float processing will be around $4/lb Ni.
So what does this mean?
It means that deep underground, high cost Nickel sulphide operations are going to feel the Nickel price and either go into care and maintenance if in production or delay their development until Nickel prices increase. This will result in less Nickel production and delay future production. Further increasing the supply demand gap. Working in Astons favour.
This also means that at current production costs, Large scale, low grade Nickel mining in Canada is competetive with Indonesia costs on the cost curve.
This also means that Indo nickel ramp up will taper off before it hits their costs level, leaving them a margin.
As high cost operation get taken out, Indo will further control the market, they will know their costs and just like OPEC, control the production rates to stabilise Nickel price at a price that suits them. If Aston sit at or below Indo costs, then they too will have this safeguard on margins and can comfortably ride the Nickel wave for decades.
Aston just need to continue with the plan of developing this project, the obstacle of large capex will become irrelevant. Aston and other large scale low grade canadian companies can support the argument that they can compete with indonesia on costs without cutting corners on ESG and supply from own backyard negating supply risk from Chinese / Russian sources, do you really think a $ 1- 2 B capex is going to be an issue? with Canada recently approving $30 Billion for battery plants. It is a very small price to pay for 40 years plus of Nickel supply for your battery plants.
Long story short
Historically mining has been cyclical, the ones who survive are the ones that have the low costs allowing margins for when prices are down. Anyone can make money in bull markets. Aston are well positioned to be a Tier 1, large scale, low cost producer who can compete with the low cost indonesian markets and thrive in the ups and still survive the downs for decades to come. IMO
ASO Price at posting:
3.4¢ Sentiment: Buy Disclosure: Held
(20min delay)