Opportunities in the Nickel Market – A Glance at IGO, WSA, MCR, ARL, JRV

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Opportunities in the Nickel Market – A Glance at IGO, WSA, MCR, ARL, JRV

 Opportunities in the Nickel Market – A Glance at IGO, WSA, MCR, ARL, JRV

The sharp fall in share prices of companies, impacted by the spread of COVID-19, has given the investors an opportunity to enter the nickel market at a reasonable price which has corrected a lot recently. There has been a structural shift in the demand for nickel by different sectors worldwide. Specifically, the demand from electric vehicles and storage systems segments has been on the rise.

At present, ~5% of the global supply is used for the manufacturing of batteries. According to a media source, the demand for the metal is projected to rise to ~19 times if the lithium-ion production facilities under construction get online as scheduled. Some analysts are buoyant on the nickel prices in the first half of 2020, but due to the US presidential elections they have a bearish outlook for 2H 2020.

Let us look at five ASX-listed nickel stocks and their recent updates.

IGO Limited (ASX:IGO)

IGO Limited is an ASX-listed company that is engaged in the mining and exploration of nickel ore, gold, copper, silver and zinc. The Company has a 100% interest in the Nova Operation (nickel, copper and cobalt) situated in the Fraser Range and a 30% interest in the Tropicana Gold joint venture (Anglo Gold Ashanti: 70% interest) in Western Australia.

On 13 March 2020, the Company announced that the aircore drilling program had begun for testing of bedrock miniralisation. As part of the project, ~40 aircore holes will be drilled. In another announcement, dated 12 March 2020, Arrow Minerals limited highlighted that the Plumridge Nickel JV (IGO:90%, Arrow:10%) has expanded its exploration licence holding by over 160 km2 in the Fraser Range Province through a successful ballot across three exploration licence applications.

2Q20 weaker than 1Q20: IGO, for the first half of 2020, reported a 33% growth in revenue and other income to A$475 million, a 107% increase in the underlying EBITDA to A$271 million and a significant rise in profit after tax to A$100.1 million.

However, for 2Q20, compared to 1Q20, the Company delivered a 20% fall in the revenue to A$211.6 million, a 24% decline in underlying EBITDA to A$116.7 million, and a 48% decline in profit after tax to A$34.1 million. The results were on the back of a 19% decrease in nickel price in the second quarter compared to the first quarter.

1H FY 20 Financial Performance (Source: Company Reports)

Moho has signed a farm-in JV agreement with IGO and got hold of a 70% interest in E70/4688 by incurring $450,000 on exploration activities on the Burracoppin Project tenement. Moha has started maiden aircore drill program for testing the bedrock mineralisation at Crossroads prospect. Further, IGO has signed an earn-in agreement worth $15 million in Paterson Province.

Stock Performance: On 17 March 2020, the IGO stock closed the day’s trade at $3.820, an increase of 2.413% compared to its previous close.

Western Areas Limited (ASX:WSA)

Western Areas Limited is an Australian mining company that produces and develops highest grade nickel at a low unit cash cost. WSA’s portfolio includes wholly-owned Forrestania project including two nickel mines - Spotted Quoll and Flying Fox. The Company mines the second biggest independent sulphide nickel and manufactures about 21,000 to 22,000 nickel tonnes in concentrate annually.

Odysseus mine is a vital growth project for Wester Areas and has a lengthy ten-year mine life. The mine produces nickel at a small operating cost. The project is forecast to support the Company’s nickel production going forward.

Production of Nickel in 1HFY20 was at mid-point of guidance: For the fiscal year 2020, the Company expects Nickel tonnes in Concentrate Production to range between 21,000 to 22,000. WSA has produced 10,658 in 1H 2020. Unit Cash Cost of Production (Nickel in Concentrate) is expected to range between A$2.90/Ib to A$3.30/Ib. Capital Growth is likely to be in a range between A$7 million to A$10 million.

FY 20 Guidance (Source: Company Reports)

Stock Performance: On 17 March 2020, the WSA stock closed the day’s trade at $2.100, an increase of 12.903% compared to its previous close.

Mincor Resources NL (ASX:MCR)

Mincor Resources NL is a company engaged in the exploration of nickel and gold in Western Australia. MCR is the owner of Durkin North Nickel Project, Miitel Nickel Mine, McMahon Nickel Mine, Otter Juan Nickel Mine, Stockwell Nickel Project, and Wannaway Nickel Mine.

Funds Raised, Operating Loss reported 1H 2020 (period ended 31 December 2020): The Company for the first half of 2020 has reported an operating loss after income tax of $7,035,000, compared to $4,466,000 in the first half of 2018. The loss comprises of exploration & evaluation outlay expensed worth $8,053,000 and $1,697,000 worth of administrative expenses. Revenue from contracts stood at $21,356,000, compared to $15,541,000 during 1H 2019.

During the period, Mincor Resources raised $35,560,000 via a Share Placement and Share Purchase Plan (before costs) and issued 59,266,534 new fully-paid ordinary shares at the issue price of $0.60 per share.

Stock Performance: On 17 March 2020, the MCR stock closed the day’s trade at $0.520, an increase of 0.971% compared to its previous close.

Ardea Resources Limited (ASX:ARL)

Ardea Resources Limited is into the development of mineral properties of cobalt, zinc, gold, and nickel sulphide. The Company’s key development projects include Goongarrie Nickel Cobalt Project and Bardoc Tectonic Zone (BTZ), among others.

Shallow gold mineralisation at Ardea’s Mulga Plum Gold prospect: The Company got the early stage and positive intersection of low gold mineralisation at the Company’s Mulga Plum project, situated at the northeast of Menzies in the Western Australia’s Eastern Goldfields. The results reflect that the gold mineralisation is related to both flat-lying and steep cross-cutting features.

For the period ended 31 December 2020 (1H FY2020), Ardea reported an operating loss after income tax of $514,841, compared to $836,763 in the previous corresponding period. Basic loss per share stood at 0.46 cents, compared to 0.79 cents in pcp.

Stock Performance: On 17 March 2020, the ARL stock closed the day’s trade at $0.190, a decline of 13.636% compared to its previous close.

Jervois Mining Limited (ASX:JRV)

Jervois Mining Limited is a leading exploration company that is also engaged in the development of cobalt and has significant exposure in nickel and copper.

Bankable Feasibility Study for ICO projected to complete by the end of March 2020: The Company projects to complete the Bankable Feasibility Study for Idaho Cobalt Operations (ICO) by the end of March 2020. As per the Updated ICO Mineral Resource Estimate (MRE), the contained cobalt in Measured Resource has increased by more than 20%.

For the half-year ended 31 December 2019, Jervois reported a total loss of A$4,599,911, compared to a loss A$3,758,621 in the pcp. The Company had A$12,425,816 worth of cash and cash equivalents at the end of the period (31 December 2019).

Stock Performance: On 17 March 2020, the JRV stock closed the day’s trade at $0.005, an increase of 3.333% compared to its previous close.


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