Nickel Juniors Pursue New Deposits As Indonesia Supply Faces Geopolitical Squeeze

• Nickel prices have been volatile, with a 5% swing in recent weeks driven by news around Indonesian supply and export policies. Prices settled around $16,500/tonne.
• Indonesia is pursuing an OPEC-like cartel for nickel which could have significant market influence given the country's large share of global supply.
• The Inflation Reduction Act's "entity of foreign concern" provision limits access to subsidies for majority Chinese-owned nickel projects, affecting a large share of Indonesian supply.
• Several junior miners and explorers like Blackstone Minerals, Western Mines, Premium Nickel and Fathom Nickel have released positive drill results, raising capital for project development.
• Major miners are also advancing carbon mineralization initiatives like BHP testing enhanced weathering of mine tailings with UBC/CarbonCorp to demonstrate economic viability.

Nickel Price Volatility Driven by Indonesian Export Policies, While Juniors Advance Projects

Nickel prices have seen significant volatility in recent weeks, with a 5% swing up and down over the past month according to nickel market veteran Mark Selby. After falling to $15,500 per tonne, news around Indonesian export restrictions catalyzed a short covering rally back up to almost $17,700 per tonne before settling around $16,500 currently. Selby believes further fluctuations are likely near-term.

Two key factors drove the whippy price action.

1. First was new Indonesian policies around setting domestic nickel prices, trying to ensure adequate domestic supply. “There was a tidbit of it, they haven't talked about the whole piece of it yet, so that's still to come,” explained Selby.

2. The second factor was short covering by traders who got overextended, with Selby estimating massive short positions existed in the nickel market.

These two drivers could continue to create volatility in the coming weeks and months.

“The reason you saw that massive whip is that that trade down went well down into the cost curve and there was a massive short position in the nickel Market,” said Selby, illustrating the risky positioning. “So if your downside risk versus upside starts to skew in one direction you're always going to see short covering. And that's what we saw, so that's why it was such a face rip down and a face rip back up again.”

Selby believes prices could test down towards $16,000/tonne which sits at the 70th percentile of the global nickel cost curve. But he thinks the long-term incentive price, at the 90th percentile, is around $19-20,000 driven by ore grade declines in Asia.

Indonesia Pursuing an “OPEC of Nickel” Cartel Model

Indonesia itself has significant potential to influence prices in the future through export restrictions and coordination policies. The country has discussed creating an “OPEC of Nickel” or ONEC to band together with other Southeast Asian producers like the Philippines.

“Indonesia on its own is more than OPEC was at its peak back in the early 70s,” highlighted Selby. “It’ll be nice for them to have a few other people come along for the ride, but they can be an ONEC of one and still have more impact than OPEC did at its peak.”

With China being the dominant buyer of nickel, mostly from Indonesia currently, an Indonesian cartel could hamper access for Chinese stainless and battery manufacturers if coordinated supply restrictions occur.

US Inflation Act Favors Domestic, Non-Chinese Projects

The Inflation Reduction Act also creates complex dynamics around nickel supply chains feeding into US electric vehicle manufacturing. One key provision requires that materials receiving IRA subsidies cannot come from “entities of foreign concern” that are majority-owned by adversaries like China.

“The big news there obviously is, and Benchmark Minerals put out a note on that highlighting the fact, that 82% of Indonesian supply is majority Chinese control,” explained Selby. “They won't be lining up for IRA subsidies and it'll be more difficult for US or Western European car companies to hold their noses and use Indonesian nickel.”

KEY TAKEAWAY: So despite booming nickel production growth, Indonesian supply may face market access challenges in selling into US and European auto supply chains needing nickel for EV batteries in the coming years if Chinese control persists.

Junior Miners Advance Nickel Projects

While Indonesia pursues mineral nationalism policies, junior miners and explorers in more stable jurisdictions are working to advance new sources of nickel supply needed for the EV transition.

Companies like Blackstone Minerals, Western Mines, and Fathom Nickel have announced positive drill results in recent weeks. Blackstone signed an agreement to develop past-producing mines in Manitoba, Canada. Western Mines drill core samples showed strong mineralization at its Mulga Tank project in Australia. And Fathom Nickel’s drilling in Saskatchewan, Canada demonstrated promising grades at its past-producing Janice Lake deposit.

These companies along with other juniors like Premium Nickel and Centaurus Resources are aiming to publish initial resource estimates in 2023/2024 to outline the size and quality of their deposits. Although early stage, it shows the potential for new nickel discoveries coming from prospective geology across North America and Australia.

Raising capital remains a key challenge, but Perseverance Metals successfully closed new private financing from mining veteran investors while Fathom and Premium Nickel also upsized recent funding rounds. Continued access to capital will determine if these juniors can advance their targets into production later this decade.

BHP Tests Carbon Mineralization

Even major miners like BHP are working on innovative ways to produce low-carbon nickel, signing a new agreement to test enhanced weathering of mine waste rock with Carbon Corp and University of British Columbia researchers.

“Anything that helps advance the cause for ultramafic rock and its ability to soak up CO2 is helpful for all of us in the ultramafic space,” said Selby. By demonstrating economic viability around carbon mineralization, it builds confidence across the industry.

While technology commercialization will still take time, it shows the momentum and strategic importance of long-term carbon reduction solutions tailor-made for nickel production rather than just relying on renewable power purchases.

Nickel Market Faces Short-Term Volatility but Long-Term Supply Squeeze

For investors, the whipsaw price action might continue near-term as macroeconomic uncertainty around China and shaky trader positioning contribute to nickel volatility. But the long-term supply and demand picture appears much more bullish. Grade decline coupled with mineral nationalism policies constraining Indonesian exports could leave a big supply gap emerging before the end of the decade just as EV battery demand is set to surge. Juniors advancing new nickel discoveries outside this geopolitical complexity will be best positioned to capitalize on the looming supply shortages.

1. Indonesian export restrictions drove recent nickel price volatility through news and short covering. Further policy changes could spark more fluctuations ahead.
2. Indonesia is pursuing a coordinated "OPEC of Nickel" cartel which could massively influence global supply and prices over time.
3. Inflation Reduction Act rules around "foreign entities of concern" limit access to EV subsidies for Chinese-owned nickel supply, affecting Indonesian projects.
4. Juniors like Blackstone, Western Areas and Fathom are advancing early-stage nickel projects outside this geopolitical complexity through ongoing exploration and fundraising.
5. Major miners like BHP are also focused on innovation around low-carbon production methods like carbon mineralization, underscoring nickel's long-term strategic value.

Blackstone Minerals

Blackstone Minerals signed an agreement to acquire projects containing the past-producing Wodden and Bucko Lake nickel mines in the nickel-rich Thompson belt of Manitoba, Canada. Bucko Lake gained notoriety during the 2000s nickel boom but then collapsed, which is unfortunately common among underground nickel sulfide deposits. Blackstone plans to pursue the deposits as open pits initially, with potential for deeper underground mining later. Manitoba is considered a highly favorable mining jurisdiction with 100% hydroelectric grid power, providing low-carbon operations at low electricity rates. While additional project details are still limited at this stage, Blackstone's move into a proven nickel belt with infrastructure advantages provides upside potential.

Western Mines Group (WSA)

WSA's drilling results at its Mulga Tank project, located just north of the major mining district in Kambalda, Western Australia, showed exceptionally high grades. Interval results included 100+ meters over 0.3% nickel and sections up to 18% nickel. While still early stage, the deposit occurs in the targeted Crawford-style mineralized body with favorable geometry and nickel-to-sulfur ratios that should allow high-grade concentrate production similar to other mines in the region. However, WA's high labor and energy costs pose economic challenges. The company's modest market capitalization points to strong re-rating potential if further drilling continues to delineate a sizeable high-grade resource.

Fathom Nickel

Fathom Nickel released promising drill results from its Janice Lake sedimentary copper-nickel project in Saskatchewan, Canada, with intervals of 1-2% nickel discovered adjacent to past-producing 1950s-era mines in the area. While narrow widths were intersected, it demonstrates broader regional prospectivity that is still underexplored. As a small sub-$20M company, Fathom faces financing risks if unable to continuously raise capital for ongoing exploration campaigns. However, its latest $4.5M funding round following the strong drill results provides runway to advance the project. Additional results confirming size and continuity of mineralization present potential for strong upside price moves.

Centaurus Metals

Centaurus Metals released new drill results from below its existing Jambreiro nickel resource in Brazil, showing continuity of mineralization at depth. Intervals included consistent nickel grades above 1% over meaningful widths that could allow future open pit mining to extend deeper towards the broader disseminated mineralized zones. The results help strengthen Centaurus' total contained nickel resource base at the project, which is approaching the 1 million tonne mark. Ongoing exploration success could provide further upside.

SPC Nickel

SPC Nickel's infill drilling at its Lockerby East nickel-copper project in Sudbury, Ontario intersected encouraging grades for an open pit deposit. Results showed 1% nickel and 0.3% copper over 5 meters within a broader 50-meter interval grading 0.6% nickel and 0.4% copper. With ample local processing capacity from underutilized mills in the prolific Sudbury mining hub, SPC Nickel could potentially fast-track development of a modest mine to take advantage of existing infrastructure. The company is aiming to publish an initial resource estimate in 2023 that will provide greater clarity on the project's overall potential.

Alaska Energy Metals

Alaska Energy Metals recently consolidated ownership of the past-producing Santa Gertrudis nickel-copper-PGM project located in Alaska. Leveraging extensive historical drilling, the company published an initial resource of over 300 million tons grading 0.22% nickel with additional co-product metals. While modest grade, it represents one of the largest undeveloped nickel deposits in the U.S., providing strategic value amid surging domestic demand from the electric vehicle sector. Next steps are focused on metallurgical testing and engineering studies to determine economics, with nearby road access and ports offering logistical advantages.

Premium Nickel

Premium Nickel's latest drilling at its Selebi-Phikwe nickel-copper project in Botswana intersected consistent high-grade massive sulfide mineralization up to 2% nickel and 1% copper. The company sees potential for a multi-million-ton resource amenable to open pit mining. Recent capital raising of US$17 million provides funding for an accelerated 2023 drill program to expand the known deposit ahead of an expected initial resource estimate by mid-year. However, carrying debt on its balance sheet adds risk should the next resource update disappoint.

Panoramic Resources

Panoramic Resources attempted to restart its past-producing Savannah nickel-copper-cobalt mine in Western Australia but faced continual operating challenges at the underground mine. Despite a relatively high reserve grade around 1.5% nickel, the project ultimately lacked viability, forcing Panoramic to shut it down for a second time and try selling the asset. The unfortunate outcome illustrates the high grades required for economic underground mining, which is far costlier than open pit development. It also showsAustralia regional disadvantages around higher energy, labor and logistics costs compared to projects in North America and parts of Asia.

Perseverance Metals

Perseverance Metals raised C$5 million in new private financing from a group of experienced mining executives to support exploration at three nickel-copper-PGM projects in Canada spanning Quebec, Ontario and Michigan. The company is targeting historical deposits and occurrences that saw some past drilling but limited modern exploration, providing near-term resource delineation potential. Access to capital from veteran investors aware of nickel market dynamics provides credibility. Follow-on drill results could offer substantial upside for Perseverance to establish new resources amid surging battery metals demand.