Nickel miner Independence upbeat on electric cars driving demand

Independence Group is already fielding inquiries from electric vehicle battery makers about future supplies of nickel.

Independence Group CEO Peter Bradford.

Independence Group is already starting to field inquiries from electric vehicle battery manufacturers interested in getting their hands on additional supplies of nickel.

Independence managing director Peter Bradford said the Perth-based company, which formally opened its new $456 million Nova nickel mine in southern Western Australia on Friday, had brought the mine on line at a time of growing investor interest in the impact of electric vehicles on demand for base metals such as nickel.

While the new generation of lithium ion batteries behind the electric vehicles and power storage systems being pioneered by Tesla had already driven a surge of investor interest in lithium miners and explorers, the new technologies consumed far greater amounts of commodities such as nickel, cobalt and copper.

All three commodities are coming out of the ground at Nova, with mining giant BHP and commodities traders Glencore and Trafigura holding offtake rights over the output. But those offtake contracts would expire within three years, and Mr Bradford said Independence was already receiving calls from battery manufacturers interested in securing future supplies of the metals.

“That is already happening, that is emerging,” he said. But, he added, the impact of the electric vehicle thematic is yet to manifest itself in prices for nickel and copper, with the metals’ recent price run instead driven by other factors such as the weaker US dollar and supply disruptions.

Nickel last week touched its highest level in two years, capping an eight-week run driven largely by mine closures in the Philippines and the shutdown of First Quantum’s Ravensthorpe nickel mine. A prolonged nickel downturn earlier prompted the closure of nickel mines such as Panoramic Resources’ Savannah mine in WA’s Kimberley and Mincor Resources’ operations around the Kambalda region.

Independence also recently announced its intentions to close its ageing Long nickel mine near Kambalda. Mr Bradford said he did not believe the nickel price had yet done enough to inspire the reopening of closed mines or change Independence’s plans for Long. “Even at the prices we have got today, for the average nickel sulphide project we are not at an incentive price,” he said.

“Wood Mackenzie recently envisaged an incentive price for new nickel production well above $US20,000 a tonne. We saw some recent press out of Indonesia where they had closed down nickel production capacity this year and they indicated they wouldn’t restart any of that existing production until they see prices above $US30,000 a tonne.

“That gives you an idea of some of the drivers there which might help tighten that supply-demand squeeze we are going to see.”

Friday’s formal opening of Nova came just five years after the ore body’s original discovery by then-minnow Sirius Resources. Independence paid $1.8 billion in shares and cash to acquire Sirius and Nova in mid-2015. The mine is expected to produce 27,000 tonnes of nickel, 12,000 tonnes of copper and 1050 tonnes of cobalt this year at a cost of $2.20 a pound.