Indonesian mineral export ban helps ASX nickel, aluminium, zinc companies
Indonesian policy maker's ban on unprocessed mineral exports has
resulted in an expected rally in global nickel prices along with
Australian nickel miners.
London Metal Exchange nickel rose 4% on Friday before increasing a further 2% in early Asian trade today to US$13,675 per tonne.
Indonesia,
which accounted for about 15% of global nickel supplies, had last week
made final tweaks to its controversial mineral export ban that took
effect on Sunday, 12 January 2014.
The policy is designed to
force companies to build processing plants and other downstream
infrastructure in Indonesia, and has been described by analysts as the
biggest supply risk the nickel and aluminium markets has faced in recent
years.
Australian listed nickel companies are set to be beneficiaries
The rise in nickel prices is a boon for Australian nickel miners with Western Areas (ASX: WSA) rising 8.94% today to $2.57.
Mincor Resources (ASX: MCR) rose 3.54% to $0.585 and Sirius Resources (ASX: SIR) up 5.66% to $2.24.
Poseidon Nickel (ASX: POS), which aims to restart the Mt Windarra mine, put on 1.45% to $0.07.
A
feasibility study on Mt Windarra, which has Reserves of 498,000 tonnes
at 1.78% nickel, was completed in April 2013 which looked at a 10 year
underground mining operation targeting the restart of Mt Windarra and
the greenfields development of the Cerberus satellite deposit.
This
defined a C1 cost of US$3.35 per pound, placing the project in a strong
competitive position due to being in the second quartile cash cost
position, with low capital intensity to catch any shortfall in nickel
supply.
Aluminium players also benefitted given that the ban
extended to Indonesia’s bauxite exports as well. Alumina (ASX: AWC)
climbed 3.59% to $1.15.
While zinc concentrate has been excluded
from the ban, zinc companies have also seen more support on the market
with analysis having recently predicted that prices would increase as
oversupply in the market shrinks.
Ironbark Zinc (ASX: IBG),
which has identified over 13 billion pounds of zinc and lead at its
Citronen Zinc-Lead deposit in Greenland, gained 3.7% to $0.056.
Its
Feasibility Study had forecast production of 3.3 million tonnes of
feedstock; initial mine life of 14 years and CAPEX $484.9 million from
the project.
Life of Mine OPEX is estimated at US$3.42 billion to produce total revenue of US$5.65 billion.
The
Internal Rate of Return is estimated at 32.0% (22.2% post tax), and Net
Present Value is US$609 million (US$354 million post tax).
Ban Impact
China consumes about half of the world’s nickel production, or about 850,000 tonnes per annum.
While
it rarely draws down on nickel stocks held by the London Metal
Exchange, some analysts believe this could change if its supply of
Indonesian nickel pig iron – representing about half its consumption –
is cut off.
In addition, the ban could have a net negative effect by reducing foreign investment in smelters.
