Morning News Bites – October 14

It was another great day at Diggers with a diverse range of miners presenting. We will give you a snapshot of some presentations, which will include iron ore and nickel.

Mount Gibson Iron (MGX) was the first of the iron ore producers to kick off proceedings with Peter Kerr, their CEO, presenting. With their Koolan Island operations now in full swing the mine is producing the highest grade hematite at 65.2% and on track to export between 1.8 – 2.1Mwmt this financial year.  With cash costs expected to be around $65/Mwmt they will be looking at ways to reduce this in case the price of iron ore comes off its highs in the next year or two.  They are bullish though and looking at ways the mine life can be increased beyond the current five year plan. CAPEX has been high this year and some of that was the building of the new airstrip on the island.

Their Mid-West operations are low grade but the company is making the most of the high iron ore prices and mining continues in this region.  Extension Hill sales will continue into next year and the Shine project is expected to progress to targeted sales in mid 2021. With the company cash flow positive, debt free and providing a dividend, shareholders must be very pleased with how they are positioned in the market.

Fortescue Metals (FMG) presented and their CEO Elizabeth Gaines delivered. Elizabeth is taking the company to new highs and not just in production values. It is how they are achieving those production levels that is of some interest.  But first lets look at the eye watering figures.

178.2mt was shipped in FY19 up a healthy 6% on the previous year. C1 costs were just under US$13/wmt and a healthy dividend of A$1.76 per share was paid to lucky shareholders. Billions of dollars are to be spent on capital works across several projects, but with high prices and low costs you would expect the payback time to be small. The forecasts for production and costs in FY21 are very similar to the last financial year.

Fortescue is investing heavily in its personnel and the diversification of the workforce is opening up opportunities for people that may otherwise find it difficult to obtain work in this sector.  As an example there is a 14% employment rate of aboriginal workers across their Pilbara operations.  For a company of this size it is a credit that they are offering so many opportunities to aboriginal people.  Like other companies they are also experiencing higher participation rates with women in the workforce and currently 19% of the workforce is women.  Who better to lead this company than Elizabeth herself who is overseeing exciting times in the iron ore sector.

Legend Mining (LEG) had Managing Director, Mark Wilson present at Diggers and he was keen about the prospects of this junior nickel explorer. They are currently focused on the Fraser Range area, north of the Nova mine now owned by IGO.  They have some big players supporting them, mainly the Creasy Group and IGO, who have substantial holdings on the share registry.

They have nearly 3,100 square kilometres of land to explore and some early results are promising.  In one hole they have 19.8 metres at 2.71% nickel from about 230 metres below surface. Mawson and Hurley projects are showing a lot of promise and they believe that in these areas the resource will be bigger than what was modelled.  From current visual drill results they believe Mawson is open to the East and West.

The company is bullish on the future of nickel and believe they are in the right sector, with the right resource at the right time to make the most of the EV and battery storage market.

Poseidon Nickel (POS) presented at Diggers with Peter Harold the Managing Director addressing the attendees. It seems that nickel explorers and producers are more upbeat than they have been for a long time and Poseidon is no exemption. The presentation included a quote from Elon Musk which said: “I’d just like to re-emphasize, any mining companies out there, please mine more nickel”, and Poseidon is keen to do just that.

Their current projects include the Mt Windarra mine near Laverton, Black Swan and Silver Swan just outside Kalgoorlie and Lake Johnston near Norseman. A study is currently underway to check the feasibility of recommencing mining at the Emily Ann mine site that feeds into the Lake 1.5Mtpa Lake Johnston Mill.  Historically it has produced nickel at 3.5% and they believe they have a resource there that could produce 52kt.

The Windarra project is interesting because they believe they are sitting on 180,000oz of gold in the tailings from historical mining in the area. If they can turn those ounces into money they believe that it will pay for ongoing exploration and mining activities at the other sites.

Poseidon could be one nickel play to keep an eye on if all the plans fall into pace.

Listening to the presentations it is apparent that nickel just could be the new gold.  All the nickel companies that have presented so far have been very bullish on their outlook. Talk of the EV market about to take off, battery storage to be an even bigger market and the price slowly creeping up augers well for nickel miners.  Could we see nickel prices reach the highs of just over a decade ago or will it be a lot more subdued this time around, if it happens?  If I can be parochial, it would be great to see nickel surge and breathe new life back into towns like Kambalda. It is well placed for it to happen and if Kambalda booms, Kalgoorlie rockets.

Gold has been and looks like being a strong performer as well for miners and what were less than optimal projects are being looked at. Depending on who talk to there is still mutterings about gold hitting $10,000 per ounce. Good luck if that happens but I feel that in general the economy will be down the gurgles if that occurred.

Iron ore prices are high and the trifecta of nickel, gold and iron ore will see the WA economy bustle along, even when economies in other states are suffering.  Good luck to all the miners and their projects.  May they prosper and I hope that all of WA will benefit because of it.