25/08/2014 - 14:20

Nickel leads base metals mix

25/08/2014 - 14:20

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FEATURE: Subdued iron ore and gold prices over the longer term could signal a lift in exploration for base metals.

Nickel leads base metals mix
SPLIT BUSINESS: The Nickel West project could spark a fresh wave of investment if BHP Billiton manages to sell it as a going concern.

Nickel has been the Western Australian mining sector’s catalyst metal for almost 50 years, with periods of high prices generally signaling the start of a wider upswing; though whether the current spike in the nickel price can be sustained is a question yet to be answered.

What’s driving nickel is a supply-side surprise – a ban by the Indonesian government on the export of most unprocessed mineral ores.

Good news as that has been for the price of nickel, which is up 40 per cent since this time last year to a three-year high of around $US8.40 a pound, a government edict can be changed as quickly as it has been enacted.

More important for the wider base metals complex, which includes nickel, copper, zinc and aluminium, are signs of a slow but steady improvement in the global economy after almost six years of uncertainty after the GFC of 2008.

Because iron ore, WA’s most important mineral product (see story pp16-17) has entered a widely predicted slowdown, and because gold is also stagnating at around the $US1300/ounce mark, base metals could be the next growth sector.

Not generally seen as a prominent part of the WA mining sector, base metals are an important part of the state’s mineral mix, even if overlooked by explorers in the rush to maximise profits from other, easier to mine and market minerals, especially gold and iron ore.

That could change as each of the base metals undergoes some form of recovery, which could occur due to several factors.

• Nickel receiving another boost from fresh investment in the big Nickel West business if BHP Billiton manages to sell it as a going concern, or tips it into the proposed creation of a new business from its discarded assets. Whatever eventually happens to Nickel West, Perth is set to get a new, world-class mining company from the planned spin-off.

• Copper, which has not rebounded like nickel but which is the most important of the base metals, and has become a prime exploration target in the north-east Goldfields region thanks to the success of Sandfire Resources at its Doolgunna project.

• Zinc and its close associate, lead, are two other metals with a long history of production in WA (lead from Ajana, near Geraldton, was the state’s first mineral export). Both are undergoing a supply-squeeze price recovery as old mines around the world close and few new mines are planned.

• Aluminium’s precursor mineral, alumina, is one of the state’s biggest exports. Prices for both are trending up as is the price of their primary ore, bauxite, with higher prices potentially leading to the opening of new mines specialising in the production and export of unprocessed bauxite ore.

• Titanium and zircon, not base metals, but important to WA’s mineral output, are facing a cyclical decline thanks to a lack of new discoveries and a focus by existing producers on regions with more attractive geology, including South Australia’s Eucla Basin.

Overall, the picture for WA’s base metals sector is promising thanks to rising prices, but the sector has been held back by a lack of exploration and discovery, a situation that could change if iron ore and gold prices remain subdued.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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