lol, I was worried for a while that Nickel prices will collapse!!!!
hehehe.
I haven't even read the article yet.
I'm sure I will learn plenty if I read it.
NOT!!!!
Commodity Strategists: 2007 Nickel Forecast Raised (Update1) July 26 (Bloomberg) -- Nickel prices may average 15 percent higher than forecast in 2007 because of possible delays in projects being developed by BHP Billiton and Inco Ltd., said Macquarie Bank Ltd., Australia's biggest investment bank.
Nickel prices may average $5.75 a pound ($12,679 a metric ton) in 2007, up from a previous forecast of $5 a pound, analysts led by Jim Lennon said July 18. Macquarie left its 2006 forecast unchanged at $6.50 a pound.
BHP, the world's biggest miner, and Toronto-based Inco plan to start new mines in 2007 using so-called acid-pressure leaching technology to produce nickel, which is used to make stainless steel. Development costs of resource projects have risen in the past year as steel, heavy machinery, fuel and labor costs surged amid record raw material prices driven by Chinese demand.
``The complexity of commissioning new acid-pressure leach operations is likely to lead to delays,'' London-based Lennon, 49, said in the report. ``The next generation of nickel supply from acid pressure leach operations is facing higher capital and operating costs than previously thought.''
The forecasts by Lennon, who was the third-ranked commodities analyst in a survey published by Australia's BRW business magazine in October, are higher than those of Alan Heap, a Sydney-based analyst at Citigroup Inc. Heap said June 30 that nickel may average $5 a pound next year and $4 a pound in 2007.
Nickel for delivery in three months on the London Metal Exchange gained 61 percent in the past two years as output from mines lagged consumption driven by Chinese demand for stainless steel.
Mine Supply
The London futures, which traded at $14,000 a ton at 5:15 p.m. Sydney time, have averaged $14,699 ($6.67 a pound) in the past 12 months. Nickel is expected to average $7.04 a pound this year, from a previous forecast of $7.07, Macquarie said.
H. Fraser Phillips, a Toronto-based analyst at RBC Capital Markets forecast June 30 that nickel prices will average $7 a pound in 2006 and $6 a pound in 2007. Demand for nickel is expected to beat mine supply by 16,000 metric tons, or 1.2 percent of global production this year, Standard Bank said in a May report.
The two acid-pressure leach projects planned by Melbourne- based BHP and Toronto-based Inco are forecast to produce the equivalent of 8.4 percent of 2004 global production. BHP plans to spend $1.05 billion building a 50,000 tons-a-year laterite nickel mine and plant at Ravensthorpe in southwestern Australia. Inco plans to produce 60,000 tons a year from the $1.88 billion Goro project in New Caledonia.
Murrin Murrin
Acid-pressure leaching treats laterite ore, which is harder to process than other nickel ores, using sulfuric acid at high temperatures and pressures. Minara Resources Ltd.'s Murrin Murrin acid leach plant in Western Australia has been dogged by technical problems since opening in 1999 and still hasn't reached full production.
Development costs at Ravensthorpe might increase 25 percent to $1.3 billion, Merrill Lynch & Co. analysts Vicky Binns and Mike Harrowell said in a June 6 report after a BHP presentation to analysts. Goldman Sachs JBWere on the same day said costs might increase 20 percent.
``Key to Ravensthorpe's success will be the ability to reliably deliver 50,000 tons a year contained nickel, reliability being'' historically difficult to achieve with laterite projects, Binns and Harrowell said in the report.
Inco's Goro project was delayed in December 2002 after estimated development costs ballooned from $1.45 billion to $2.1 billion. In October, Inco said it would build the new mine for $1.878 billion, 1.5 percent higher than a May, 2004 estimate of $1.85 billion. Scott Hand, Inco's chief executive, said in an April interview in Melbourne that he didn't expect development costs to increase at Goro.
Costs
Rising steel and labor costs doubled the estimated cost of the Boddington gold mine in Western Australia to more than A$1 billion ($762 million), from a 2002 forecast of A$450 million, Paul Dowd, managing director of the Australian unit of Newmont Mining Corp., the world's biggest gold miner, said in April.
On July 14, Royal Dutch Shell Plc. said development costs at its Sakhalin field, the world's biggest oil and gas project, may double to $20 billion because of soaring metal prices.
Higher capital costs and operating costs as prices of steel surged this year have ``raised trigger prices for new capacity considerably,'' said Macquarie's Lennon, who joined the bank in 1994. Lennon raised his ``long-term'' nickel price to $4 a pound from $3.75.
Anaconda
BHP said in April that some of its planned expansion projects will cost more than previously expected. Spokeswoman Emma Meade on July 21 declined to say which projects would have cost increases.
Perth-based Minara's Murrin Murrin plant was built to produce 40,000 metric tons of nickel a year. The mine produced 29,088 tons in the year ended June 30, and 28,578 tons the year before. Minara was previously known as Anaconda Nickel Ltd., which reported a $920 million loss in 2002 after slashing the value of the plant. The company changed its name after paying out its creditors and reducing the numbers of its shares in 2003.
At Murrin Murrin, ore is treated with acid at a temperature of 255 degrees Celsius (491 degrees Fahrenheit) and pressure of 44 atmospheres (647 pounds per square inch). That's the same pressure as at a depth of 455 meters (1,493 feet) of water.
