Nickel stocks were supported by positive commodities news this week as a report found that stock exchanges are not generating enough support for junior miners and their crucial role in exploration.
Canadian explorer FPX Nickel Corp (FPX.V), which is developing the large-scale Decar Nickel District in British Columbia, tweeted a chart from Morgan Stanley’s latest commodity thermometer showing nickel amongst the top prospects on a 12 month view. Copper, Silver and Palladium were all tipped for a good year but the chart showed gold’s rally hitting a plateau after about 6 months.
Nevertheless, there was considerable excitement around the yellow metal again this week amid predictions it is set to break through major barriers and unleash its first true rally in almost a decade.
Equity strategist Miller Tabak, of Matt Maley, told Trading Nation that gold had broken above its bearish trend line from the 2011 highs.
“That's very positive,” he said. “If we get above that $1,380 level, that was the top in 2014, 2016, 2017 and 2018, [...] if you can finally break above that level, it really takes off. In other words, it confirms that the long-term trend has changed.”
Ira Epstein, in his Metal Report, was more cautious. He said gold momentum looked overbought. But he added: “Overbought is not bearish.. [however] it keeps fresh buyers, particularly savvy buyers, away from a market.”
Jordan Roy-Byrne wrote on Gold Seek that gold and gold stock relative performance had accelerated after the rate cuts, as he argues, has historically been the norm.
He added: “At present the Federal Reserve is in pause mode and the market is on the cusp of pricing in a rate cut. [...] However, precious metals have yet to make new 52-week highs. The gold stocks (GDX & GDXJ) are much closer to doing so than the metals.
“Simply waiting for the Fed to cut rates risks missing out on some upside. As market timers, we have to anticipate it.”
Further interest in gold mining stocks could offer some hope to the beleaguered junior miners, after a Reuters report this week suggested that stock market fund-raising is failing them. Having sampled the views at the Mining Investment Asia conference in Singapore, the report concluded that junior mining companies are finding it increasingly difficult to raise enough capital to fund their exploration ambitions.
Michel Labrousse, the managing partner of Mazarin Capital, went further, saying that small miners should “avoid the stock exchange” as they would be “hand-cuffed and in chains for life. Labrousse's views were supported by other investors at the event, with the consensus being that small miners had to change tactics if they were going to successful. Other methods open to junior miners including royalty streaming deals, private equity and debt financing.
On the nickel front, the Indonesian government this week confirmed the scale of its production plans as it targets nickel for both stainless steel and batteries as a major industry in the coming years.
Indonesia is also set to overtake Japan and India to become the world’s second-biggest producer of stainless steel behind China, when it reaches an industry ministry target of producing 4 million tonnes a year from its main production site at Morowali, on the island of Sulawesi. And the country’s nickel-related industries are set to surpass the value of its second-biggest export earner, palm oil, in the next 10 to 15 years.
“Our palm oil industry is worth about $18 to $20 billion in exports. I could see nickel and its derivatives, stainless steel, carbon steel, lithium-ion battery cells, surpassing that in the next 10 to 15 years,” Thomas Lembong, chief of the Indonesia Investment Coordinating Board, said in an interview.
Closer to home, CanAlaska Uranium (TSXV: CVV) agreed today to go ahead with the purchase of 100% of the past-producing Manibridge nickel mine in the Thompson Nickel Belt of Manitoba, from Pure Nickel (TSXV: NIC). To acquire it, CanAlaska has to issue Pure Nickel 300,000 shares and 100,000 2-year warrants, exercisable at $0.28/share, and pay $25,000. The Thompson Nickel Belt is the fifth largest and third highest grade sulphide nickel belt in the world.