An environmental incident in the far north of Russia has confirmed the case for nickel as a metal with strong investment appeal and might also play a role in the world’s biggest mining company, BHP, speeding up the sale of its thermal coal assets.
Linking those seemingly unrelated events are the contentious claims about climate change and the need to ween the world off fossil fuels, replacing coal and oil with alternative energy sources and battery storage of electricity.
The case for nickel has been explored in a number of my recent reports including one early last month headed “Nickel Rush Restarts As Steel And Battery Demand Rises”.
A containment boom deployed on a river in the far north of Russia after a major spill of diesel … [+]
On the same day that story was published, June 4, a massive spill of diesel fuel into a Russian river triggered the declaration of a state of emergency with warmer weather linked to climate change helping melt the permafrost under diesel storage tanks.
Norilsk Nickel, one of Russia’s biggest mining companies, was publicly rebuked by the country’s President, Vladimir Putin, and ordered to pay for the clean-up of 20,000 tons of diesel at an estimated cost of $1.4 billion.
Two weeks after the incident in Russia Norilsk started a corporate clean-up of its international assets, including the sale of a big but undeveloped nickel deposit in Australia.
Russia’s President Vladimir Putin holds a video conference meeting on the diesel fuel spill clean-up … [+]
Honeymoon Well, acquired by Norilsk more than a decade ago, was seen as a marginal proposal if developed alone, though if part of a regional nickel-mining plan it might become a profitable project.
BHP, which until a few years ago was also a seller of nickel assets, pounced on the Honeymoon Well opportunity seemingly created by Norilsk’s problems at home.
From Unloved To A New Star
The addition of Honeymoon Well to its already substantial portfolio of nickel assets in Western Australia has confirmed BHP’s vision of turning nickel from an unwanted commodity into what could become the company’s major investment in a sector dubbed “new energy metals”.
While other commodities, such as lithium, graphite and cobalt, are more commonly associated with the sort of batteries used in electric vehicles, nickel also plays a crucial and growing role.
It’s the development of the battery market alongside the traditional use in specialty steels which makes nickel a favorite of investment banks such as UBS which last week published an update price forecast for the metal which is sitting around $5.70 a pound today by is forecast by the bank to reach $7/lb next year and $8/lb in 2022.
A BHP coal mine in Australia. Photo by Ian Waldie/Getty Images.
More nickel from BHP, in part courtesy of Norilsk’s exit from Australia, will be occurring as BHP pushes ahead with the planned sale of its thermal, or electricity-producing, coal assets — but not the company’s metallurgical, or steel-making, coal assets.
J.P. Morgan, an investment bank, is reported to have won a mandate to sell BHP’s thermal coal interests.
BHP has not publicly linked its expanding nickel assets with its fading interest in thermal coal interests but the connection is easy to see picture is easy to see with an old-economy energy source in coal being replaced by a new-economy energy storage metal in nickel — with a Russian climate-change incident perhaps acting as a catalyst.
