Nickel Miners Emerge From Slump – by Rhiannon Hoyle (Wall Street Journal – July 15, 2014)

Nickel Prices Up 40% This Year

SYDNEY—Nickel miners are ramping up spending on exploration for deposits of a metal used to make stainless steel and readying new investments, as the industry emerges from a prolonged slump in prices.

The change in sentiment is being driven by Indonesia’s ban on exports of unprocessed ore, which has helped push up nickel prices by 40% this year. Russia’s ongoing tensions with Ukraine have also played a part in the turnaround in nickel’s fortunes, as metals traders bet on the potential for trade sanctions that could disrupt global supply.

For years, nickel was one of the worst-performing commodities as supply outpaced demand from industries such as auto manufacturing and construction.

A report by U.K. consultancy Wood Mackenzie last year estimated that two-fifths of the world’s nickel was being produced at a loss. To protect profits, producers of the metal including Australia’s Western Areas Ltd. WSA.AU +1.81% and Russia’s Norilsk Nickel GMKN.MZ +0.44% cut spending, laid off workers and even closed pits.

“Last year wasn’t a very good time for us,” says Dan Lougher, Western Areas’s managing director. “But suddenly the planets all aligned and we’ve got this rise in the nickel price, and it’s gathering momentum.”

Shares in Western Areas have more than doubled so far this year, reflecting the newfound bullishness. Other nickel miners have notched up gains, with shares in Australia’s Independence Group IGO.AU -1.03% NL and Norilsk—the world’s biggest producer, which also sells metals like palladium and copper—rising 54% and 35% respectively.

Higher nickel prices are strengthening companies’ cash flow, letting them to take more risk. For Western Areas, that means spending more on exploration and scouring the sector for potential partnerships with companies which own promising projects. The Perth-based company also expects to make a decision on improvements to its processing facilities.

It mirrors moves by Australian peer Panoramic Resources Ltd. PAN.AU +1.64% , which recently bought out joint venture partner Thundelarra Ltd. THX.AU -8.93% in the Copernicus and East Kimberley projects in Western Australia state and ramped up its own exploration efforts.

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