Voisey's Bay bad news for nickel prices, broker warns Tim Treadgold 21 June 2002 JUST as the world nickel market shows signs of revival comes the first word of caution about a looming supply surplus courtesy of the decision by Inco to proceed with development of the Voisey's Bay mine in Canada.
Japanese stockbroking house Nomura has warned that nickel could be in a position of chronic surplus by 2006 as Voisey's Bay begins delivering at its forecast 50,000 tonnes of nickel metal a year.
The broker told its Australian clients that the Voisey's Bay go-ahead would probably be negative for the nickel price.
Nomura estimates that if Voisey's Bay did not proceed the world would see a nickel deficit of 20,000t in 2006. With the new mine, this switches to a surplus of 30,000t.
The broker said the commitment to develop Voisey's Bay, after five years of dispute between Inco and the provincial government of Newfoundland, could have other effects on the world nickel market.
One possible development could be the mothballing of rival nickel projects, which would be unable to compete with the high-grade, low-cost Voisey's Bay mine.
The new Canadian mine is forecast to produce nickel at around US$1 a pound compared with the global industry average of US$2.40/lb.
"Such competitiveness has the potential to drive marginal players out of the business," Nomura said.
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At first glance you could say the prospects for Wingellina took a nosedive. BUT - Wingellina will be an even lower cost producer (according to Uncle Egs latest interview the cost per pound will be US0.80 cents ) than Voiseys bay.
"BHP Billiton, in reporting extensive atmospheric leaching testwork for its Gag Island nickel laterite project in Indonesia, indicated that the major advantages over the pressure acid leach method included a substantially lower capital cost, lower operating costs, shorter construction period, a more rapid plant ramp up and higher plant availability.
BHP Billiton estimated that, for Gag Island nickel laterites using atmospheric leaching, the capital cost per annual pound of production is US$4.50 per pound of nickel compared with US$11.30 for high pressure acid leach.
Similarly, operating costs were estimated at US$0.80 per pound of nickel for atmospheric leaching compared with US$0.97 per pound of nickel for pressure leaching. This information was presented at the New Caledonian Nickel Conference in June 2001."
Goro and other existing HIGH COST ( Capital and operating ) HPAL projects may/will be in trouble. Wingellina has the potential to singlehandedly ruin the New Caladonian nickel industry IF 100,000 tpa/500 mill tonnes becomes a reality. Good night ANL etc as well.
Between Voiseys Bay and Wingellina the potential exists to hold back the 2nd generation projects for a decade (particuarly IF Wingellina hits(or has hit) Sulphides big time of which I am confident ) Out with the high cost producers and in with the low.
Good incentive for AEX to quicken the pace for a sale.
INCO may be thinking about shelving GORO and taking Wingellina ? The obvious economic/enviromental advantages are there for all to see. It becomes more and more evident as to WHY AEX are focussing on proving up 500 mill tonnes +.That sheer size and low cost cannot be ignored by the globals regardless of the remote location. BHPB Ravensthorpe - I doubt it will happen.
Anyway what the heck would a broker know.
AEX Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
