Nickel is a vital component in lithium-ion batteries, which are seeing "hockey stick"-like production rates around the world as electric vehicles become more prevalent.
According to the Australian government, the country holds around 19.7 million tonnes in economic demonstrated reserves of the metal, making it a top nation for nickel reserves, as well as a top nation for nickel production with 180,000 tonnes produced in 2019.
2020 saw a small dip to 170,000 tonnes (thanks to the pandemic and impacts on supply lines), but Australia is still ranked fifth globally behind the likes of Indonesia, the Philippines, Russia and New Caledonia.
The key jurisdiction within Australia when it comes to nickel is the mining behemoth Western Australia, where the top mining company in the world — BHP (ASX:BHP,NYSE:BHP,LSE:BHP) — operates three huge mines. It makes sense that most nickel activity would be there, as the state accounts for a whopping 90 percent of Australia's economic reserves of the metal.
How and why to invest in nickel stocks in Western Australia
Western Australia is an attractive jurisdiction, and has been ranked highly by the Fraser Institute for many years in a row — most recently it came in fourth place in 2020 (after falling from first in 2019).
To get exposure to the companies operating in Western Australia, investors will need to go through the Australian Securities Exchange (ASX), or through a dual-listed company in their country of origin. Here's a handy guide on how to go about investing in companies on this Australian exchange.
Nickel stocks in Australia are almost all operating in Western Australia, with only a handful of companies elsewhere in the country. The top mines overall in the nation are Ravensthorpe, Murrin Murrin and Mount Keith, which are owned and operator by Canada's First Quantum Minerals (TSX:FM,OTC Pink:FQVLF), the Anglo-Swiss Glencore (LSE:GLEN,OTC Pink:GLCNF) and BHP (ASX:BHP,NYSE:BHP,LSE:BHP), respectively.
Each company is ploughing millions into the region in order to get the most out of the jurisdiction, as Australia's competitors are less developed, less reliable and more risky investments.
The outlook for nickel in Australia, and therefore Western Australia, is bright. The export value for the metal stood at AU$4,285 million in 2018, as per government data, and economic reserves show that Australia will remain a major nickel player well into the future — at 2018 rates of production, Australia would be able maintain the same output level for 133 years.
Major nickel stocks in Western Australia to watch
Which nickel stocks are both listed on the ASX and operating in Western Australia? The key operator is of course BHP, which contributes a huge share of Australia's entire nickel output. Here's a look at BHP and its nickel compatriots in the state.
All market cap and share price information was accurate as of July 15, 2021.
Market cap: AU$238.57 billion; current share price: AU$51.53
In 2020, all the nickel companies in Australia produced 170,000 tonnes of nickel. For its part, BHP reported production of 80,000 tonnes during the 12 months ended on June 30, 2020 — while that period of course doesn't overlap completely with the full 2020 calendar year, BHP can comfortably claim to produce almost half of Australia's nickel.
In Western Australia, BHP has both high- and low-grade ore sources, with high-grade ore coming from the Cliffs and Leinster underground mines and the Rocky's Reward open-pit mine, and low-grade ore coming from the Mount Keith open-pit mine. All ore is processed at Leinster, and is concentrated at a plant at Kambalda for sale to third parties, making BHP a vertically integrated operation wholly within Western Australia.
2. IGO (ASX:IGO)
Market cap: AU$6.54 billion; current share price: AU$8.64
IGO is the owner and operator of the Nova nickel-copper-cobalt operation in the Fraser Range, which is between Kalgoorlie and Esperance. Discovered in 2012, the project got going quick, moving through construction to reach nameplate capacity by Q4 2017. In 2020, the mine produced over 30,000 tonnes of nickel (along with over 13,000 tonnes of copper and 1,100 tonnes of cobalt).
3. Mincor Resources (ASX:MCR)
Market cap: AU$493.14 million; current share price: AU$1.14
Mincor Resources is the owner of the Kambalda nickel operation, which is made up of three mines in South-Central Western Australia. Kambalda is not fully operating, but the company hopes to report the first nickel-in-concentrate output by the first quarter of 2022, according to a definitive feasibility study released in early 2020. One of the mines at the complex opened officially in March 2021. The company plans for nickel ore to be processed through BHP's facilities and sold on to the larger company.
Besides the big three companies above (and the Canadian and Anglo-Swiss operators in the state), other nickel companies on the ASX operating in Western Australia are Azure Minerals (ASX:AZS), Ardea Resources (ASX:ARL,OTC Pink:ARRRF), Poseidon Nickel (ASX:POS) and Auroch Minerals (ASX:AOU).
For more on Australia's nickel landscape, click the links below:
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.