Ravensthorpe a reminder of cyclical price fluctuations

The subdued nickel market and suspension of mining at Canada’s First Quantum Minerals’ (TSE:FM) Ravensthorpe Nickel Mine in Western Australia highlights the cyclical commodity price fluctuations that come with the market, industry sources say. 

As reported by Mining.com.au, nickel was the worst-performing metal on the London Metal Exchange (LME) to close off 2023, with spot prices being down 45% from the early January 2023 peak of US$30,958 per tonne. 

As a result, Western Australia has witnessed the $2.2 billion Ravensthorpe Nickel Mine mothballed once again — just shy of 4 years since mining restarted in 2020. 

Up to 30% of the 420-strong workforce is expected to be cut while mining is suspended. 

The closure of Ravensthorpe comes only a week after Panoramic Resources in December entered into voluntary administration after announcing on-site staff at the Savannah nickel mine were to be made redundant due to the falling prices. 

Speaking to Mining.com.au, Western Australia Premier Roger Cook says the suspension of Ravensthorpe mining is a firm reminder of the cyclical commodity price fluctuations and other market factors beyond our control.   

“While the nickel industry is experiencing significant headwinds at the moment, I am confident it will continue to survive and thrive in the longer term, supplying a responsibly sourced quality metal product that is critical to the world’s energy transition.”

Echoing these sentiments is Western Mines Group (ASX:WMG) Managing Director Dr Caedmon Marriott who says the whole junior nickel sector in general is experiencing horrific headwinds as the price descends lower. 

“We’ve been starting to see mine closures. That’s the interplay of the nickel cost curve with the metal price. Obviously, we’ve reached a point now where these mines and their position on the upper tiers of the cost curve, the price isn’t high enough to sustain them.”  

Western Mines Group is a mineral explorer focused on delivering ‘high-value’ gold and nickel deposits across a portfolio of ‘highly prospective’ projects in Western Australia. 

ASX-listed junior keeping an eye on nickel is Alchemy Resources (ASX:ALY). Chief Executive Officer (CEO) James Wilson tells this news service for those projects and mines still in operation, ‘grade is king’. 

Alchemy’s Wilson adds that it proves once again that grade is king if miners want to ride out a low commodity price environment.

“It’s a question of costs – the nickel price has been hovering just over AUD$11/lb for the last month or so – and Savannah had all-in costs of $12.52 in the last quarter so it’s really ‘grade is king’ at the moment for existing operations

“It’s a question of costs the nickel price has been hovering just over AUD$11/lb for the last month or so and Savannah had all-in costs of $12.52 in the last quarter so it’s really ‘grade is king’ at the moment for existing operations.”

However, Marriott believes this is a complete misconception and forecasts further closures across the nickel market until a potential rebound in 2025 to 2026. 

“I think the whole grade is king is a complete misconception. The nickel projections talk about this probably being a 2025, possibly 2026 story.

The reason why it’s a 2025-2026 story is probably because by the end of this year we should have got through all the Indonesia ramp up, and all the new builds should have reached maximum capacity. Therefore there’s no incremental supply or oversupply out of Indonesia.

If you look at Mincor’s (ASX:MCR) mines and resource statement, they’ve got about 20 different mines and every single one of them has got a grade of over 4% nickel. And I would bet you that those are going to close.”

Mining.com.au reported in November the consolidation of Alchemy Resources’ and Helix Resources’ (ASX:HLX) nickel-cobalt assets under Helix’s subsidiary Ionick Metals. 

Under the option agreement, Helix will acquire Alchemy’s 80% joint venture (JV) interest in the West Lynn Project in New South Wales, which hosts an inferred mineral resource of 21.3 million tonnes (Mt) @ 0.84% nickel and 0.05% cobalt at a 0.06% nickel cutoff. 

Ionick Metals is expected to float onto the ASX via an initial public offering (IPO) this year.  

Nickel is a strong, lustrous, silvery-white metal that is essential to modern life. From the batteries in a television remote to the stainless steel in a kitchen sink. It is predominantly an alloy metal. Its inclusion in steel, particularly with chromium and other metals, produces strong, corrosion-resistant, heat-resistant stainless steels, as per First Quantum’s website.

About 65% of all nickel produced goes into stainless steel and modern construction, engineering, transport, and power infrastructure would not be possible without it.

Non-steel uses for nickel include magnets, coinage, rechargeable batteries, electric guitar strings and special alloys. It is also used for plating and as a green tint in glass. Despite being a vital component of electric vehicles (EVs) and stainless steel, as well as being one of the top 5 most common and most versatile elements on earth, nickel has witnessed a loss of love within the market. 

According to Trading Economics, the price of nickel has dropped 39.5% as of 12 January to below $16,500 per tonne, inching closer to nearly 3-year lows as ‘robust’ supply from producers such as Indonesia, Philippines, and China continue to weigh on the commodity. 

However, Trading Economics forecasts a slight relief for prices from hopes of rate cuts by major central banks and stronger demand prospects linked to growing use of nickel in EV batteries and the revival of the stainless-steel sector.

Write to Adam Drought at Mining.com.au

Images: First Quantum
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Written By Adam Drought
Born and raised in the UK, Adam is a sports fanatic with an interest in Rugby League and UFC/MMA. When not training in Muay Thai and Brazilian Jiu Jitsu, Adam attends Griffith University where he is completing his final year of a Communication & Journalism degree.