The outlook for commodity market remains bullish and it is expected that the market will be heading towards a supply crunch. Amidst this, it has been observed that demand for nickel has been increasing as clean energy revolution is rapidly increasing. Nickle is one of the major components used in the lithium-ion battery. With the governments of various parts of the world, announcing for use of electric vehicles, the demand for nickel seems to be advancing up. Given the scenario, IGO and WSA are two nickel players that are expected to leverage from the supply demand interplay.
 

Stock Details

Independence Group NL (ASX: IGO)

Collaborative working relationship with Orion: Orion Minerals Limited (ASX: ORN) announced that it entered into an agreement with IGO and the latter became the substantial holder of Orion and developed a collaborative working relationship between the two companies. Orion entered into an agreement so that IGO can subscribe for a placement of ordinary shares in Orion at 5.0 cents per share and can raise $5.0 million. The agreement outlined the terms of an agreed collaborative working relationship between the two parties, whereby IGO secured the matching rights to any potential joint venture or sale of Orion’s nickel projects located in the Areachap Belt, South Africa.  These relationships will enhance Orion’s planned regional exploration programs. On the basis of regional exploration programs that were already completed, Orion identified the potential for discovery of nickel hosting massive sulphide bodies that were similar to IGO’s Nova Bollinger Mine in the Fraser Range, Western Australia in the Areachap Belt.


Trend of Nickle Mine Supply by Product (Source: Company Reports)

These preferential rights between these two companies, strengthened the existing relationships between them and lately they entered into a joint venture agreement on the Fraser Range Nickel-Copper Project. This agreement was an add-on to the Company’s current strategy to fast-track its flagship Prieska Zinc-Copper Project and a progress is expected towards its highly prospective regional exploration projects located within the Areachap Belt, South Africa. Moreover, with a robust balance sheet, the Group is solidifying its position to become a world-class base metals producer aligned to the growing electric vehicledemand. The stockwas up by 48.17 per cent in one year and was up by 13.55 per cent in last six months. The stock prices slipped by 9.16 per cent in last one month. We give a “Hold” recommendation at the current market price of $4.85 by looking at the current commodity pricing landscape and the Group’s future potential.
 

Western Areas Limited (ASX: WSA)

Positive free cashflow generation: Western Area, being the Australia’s highest grade, lowest cash cost nickel producer reported another quarter (March 2018) of free cashflow generation. Cash increased to A$135.7 million, after capital expenditure, feasibility study and exploration costs of A$13.6 million. The cash and receivables were recorded in excess of A$150 million and there was no debt recorded. The Group had substantially invested in Kidman Resources Limited. Meanwhile, Commonwealth Bank of Australia ceased to be a substantial holder of Western Area since 9 May 2018.


Massive Sulphide Ore Reserve (Source: Company Reports)

Total nickel mined was 6,236 tonnes and was the highest production volume in twelve months and this led to total nickel component in stockpiles to 4,311 tonnes which was the highest level since March 2015. Nickel in concentrate production was 4,827 nickel tonnes and was lower than prior quarters which was due to lower ore feed grade and mill throughput. The Company reviewed its FY18 guidance metrics and expects that nickel in concentrate production will be marginally lower by ~0.5k nickel tonnes to around 21,000 nickel tonnes for the year. The nickel market remains volatile from a pricing standpoint but traded within a consistent range during the time. Moreover, year to date, unit cash cost of production of A$2.57/lb (US$2.00/lb), was within the FY18 guidance range. The stock was up by 9.29 per cent in last six months but fell by 9.3% per cent in last one month. We give a “Hold” recommendation at the current market price of $3.37 based on the overall scenario while the stock trades at a higher price to earnings level.

 
Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.