Australian miner Western Areas sees strong bids coming for its nickel
KALGOORLIE, Australia Aug 4 (Reuters) - Australia's no. 3 nickel miner, Western Areas, said on Monday a ban by Indonesia of nickel ore exports was helping stoke strong interest in a tender it is planning for future concentrate sales.
With the ban starting to pinch world supply, metals refining companies and trading houses were scrambling to secure high-purity nickel concentrate for blending with lower grade material to produce metal fetching price premiums, said Western Areas's Executive Director David Southam.
Nickel sells for about $18,380 per tonne compared with $13,900 immediately before the ban went into effect on Jan. 12.
A 13,000-tonnes-per-year supply contract Western Areas holds with Chinese metals refiner Jinchuan Group expires at the end of 2014.
Nickel is being driven, say analysts, on bets that China is running short of the metal used to make stainless steel because of Indonesia's ban. Until the ban, aimed at spurring a value-added processing industry, Indonesia accounted for 15-20 percent of world supply.
However, nickel inventories are recently hitting record highs as hidden stocks leave China following a fraud probe at Qingdao's port, showing supplies are plentiful despite a halt to shipments from Indonesia, which could squash further supply-side price increases.
Still, Southam said the company was already fielding expressions of interest from a range of potential buyers and also expects to see hefty competition emerging from nickel smelters, commodity traders, other nickel producers, including Jinchuan, and stainless steel companies.
Speaking on the sidelines of the Diggers and Dealers mining forum, Southam said Western Areas was producing a high-magnesium-bearing nickel concentrate commanding 90 percent or more of the London Metal Exchange refined metal price.
He declined to name those showing interest in buying the concentrate.
BHP Billiton , which already buys 12,000 tonnes of nickel in concentrate from Western Areas to feed into its Australian smelter, is seen as a logical contender for the additional material, following the closure of one of its own mines last year due to earthquake damage.
Southam said there were signs the ban was working in Indonesia's favour, with some Chinese nickel pig iron producers already relocating to Indonesia to construct plants.
"As that happens, it is less likely that Indonesia would do away with its ban," Southam said. "All indications so far are that the ban is going to hold."
Other Australian miners are also benefiting. Sirius Resources NL is in late-stage negotiations with a trio of major nickel smelters to supply up to 26,000 tonnes of nickel concentrate annually.
Sirius stock has risen more than six-fold in the two years since it discovered the Nova nickel deposit in west Australia, partly on expectations the concentrate would command a premium from smelting companies when output begins in late 2016. (Editing by Muralikumar Anantharaman)