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NURTURING NICKEL

Disruptions to trading in the wake of Russia’s invasion of Ukraine have put nickel in the spotlight this month. Mining For Zambia sums up what we ought to know about the critical mineral right now.

1. Nurturing the mining of a variety of minerals – including nickel – is an important step in Zambia’s economic diversification

Zambia’s fortunes have always been inextricably linked to the health of the copper mining industry, and that remains as true today as at any point in our modern past. However, Zambia has a wealth of other natural resources on which it has yet to capitalise. If policy frameworks that encourage investment in a range of minerals – gold, manganese, iron, nickel, and copper too – are put in place, Zambia’s economic landscape might look very different in ten years’ time, once new mines are online and the country starts to reap the direct and indirect economic effects of a burgeoning industry, somewhat less reliant on the red metal alone.

2. Nickel is as volatile as it is valuable

Nickel has been on quite the rollercoaster ride over the last couple of weeks. In January 2022, nickel hovered at around US$ 22,355 a tonne, with a forecasted supply deficit by the end of the year helping to keep prices high. But that was before Russia – the metal’s third-largest producer which exports 17% of the world’s top-grade nickel – invaded Ukraine.

When prices reached a record high of US$101,365 a tonne on Tuesday 8 March, the London Metal Exchange (LME) saw no option but to halt trading. It’s “the biggest crisis to hit the 145-year-old exchange” in several decades. Supply chain disruptions, regional instability, and moves by the West to sanction Russia all sent the metal skyrocketing. Added to this was the fact that Chinese billionaire Xiang Guangda, owner of Tsingshan Holding Group, a nickel and steel titan, was forced to recoup on a massive short position it had been building since 2021, when it wagered that prices would drop.

Nickel is now trading at a more sensible US$ 33,100 per tonne but, until the murky and complex issues surrounding Tsingshan’s big shorts are resolved, experts predict that it won’t be smooth sailing for the LME for some time.

But, setting this short-term volatility to one side, nickel undoubtably has a place in fuelling the economy of the future.

3. Nickel is a key battery metal

From the rechargeable nickel metal hydride (NiMH) batteries in early digital cameras, to those that powered the first Toyota Prius hybrid cars in the 1990s, nickel has always been at the forefront of battery technology.

Nickel is an essential component in several types of batteries because the metal offers higher energy density and more storage capacity at a lower cost than a metal like cobalt. Nickel has come along for the ride as technology for electric vehicles (EVs) has advanced, and today most Lithium-ion (Li-on) batteries – which are powerful enough to propel any EV – rely on nickel, too.

Experts predict that, with or without the trading whirlwind that sent markets into disarray at the beginning of the month, the EV battery sector’s demand for high-grade nickel is only picking up speed. Nickel’s value to leading EV manufacturers also stems from the fact that using the silvery-white metal allows producers to rely less on cobalt, which is more expensive and has a less transparent supply chain. CEO of Tesla Motors, Elon Musk, has spent the last couple of years pleading with miners to produce more nickel to prevent exactly the kind of supply deficits that may now become reality even sooner than forecasted.

5. Zambia has plenty of untapped nickel reserves, yet only one operation is currently mining the mineral

Since Southern Province’s Munali Nickel Mine recommenced mining operations in April 2019 – after $50 million of investment by Consolidated Nickel Mines brought it out of an extended period of care and maintenance – it has been slowly and somewhat steadily ramping up production to around 300 tonnes of nickel per month. The miner hopes to increase production to 350 tonnes a month in 2022, and to add a separate copper and platinum group metal circuit, thanks in part to the sophisticated separation technology being utilised in its Dense Media Separator. According to Consolidated Nickel Mines CEO, Anton Mauve, “the nickel produced at Munali is a high-grade sulphide that attracts a premium, and is ideally suited to the EV market.”

6. But…

There is the enticing prospect of  First Quantum Minerals’ Enterprise Nickel Production Project finally coming to fruition. Here, high-grade nickel sulphide is also expected to be suitable for tapping into the battery metals supply chain. Located 15 kilometres from FQM’s Sentinel Mine, Enterprise’s four million tonne-per-year process plant was completed in 2016, but to date it has been used to process copper ore from the Sentinel copper mine. Once fully operational, Enterprise could produce approximately 2,300 tonnes of nickel concentrate per month (28,000 tonnes per year) over an estimated 11-year mine life.

Enterprise has long been conceptualised, but has not yet been developed, thanks to a combination of lower prices from 2015 and a mining regime in recent years that ended all prospects of investment. Now that demand and nickel prices appear to be favourable, it remains to be seen whether a new mining regime could bring Enterprise to life. Enterprise would be the largest mining project undertaken in Zambia since the commissioning of Sentinel mine in 2015, and the largest ever non-copper mining project. It would be a major coup – and a signal to the mining world – if the Government and First Quantum could bring this off.

The tip of the iceberg

Every newly-built mine creates an immense array of economic opportunities, often altogether unrelated to mining. With sufficient capital and foresight, mining operations can be supported by well-planned towns such as Kalumbila, which encourage private investment into independent businesses that will ultimately sustain the town beyond the life of the mine for which it was developed.

Nickel’s recent price spikes amid heightened geopolitical tensions will very likely create a bigger appetite for mining and refining operations in countries that are perceived to be “safe”, with minimal risk of sanctions, and more stable regulatory and trade regimes. With sufficient and timely investment into new and upcoming nickel projects – and a healthy exploration pipeline to ensure that the next nickel mine comes online in the not-too-distant future – Zambia will be in an enviable position to capitalise on the growing market for battery metals, and see nickel mining join copper mining as a flywheel for economic diversification.

Photo Credit and Article by Mining for Zambia

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