Nickel’s 56% Rally Spurs Mine Restarts Amid Ore Ban – by Phoebe Sedgman and Ben Sharples (Bloomberg News – August 12, 2014)

Indonesia’s ban on nickel ore exports is resonating globally as prices climb to the highest since 2012, prompting companies from Avebury Nickel Mines Ltd. to Poseidon Nickel Ltd. to restart operations at idled mines.

Avebury, based in Perth, plans to reopen a deposit in Tasmania six years after it was mothballed. Poseidon is preparing to resume production at a mine in Western Australia, while Panoramic Resources Ltd. may restart mining at its Copernicus deposit in the same state. More producers globally may reactivate facilities as prices extend gains, according to OAO GMK Norilsk Nickel, the world’s largest supplier.

Nickel, used to make stainless steel, rallied as much as 56 percent this year to $21,625 a metric ton after Indonesia halted ore exports in January to compel investment in local processing plants. While the restarted mines such as Avebury’s will add to supplies, the additional production won’t be enough to prevent the global market from dropping into a deficit, with Goldman Sachs Group Inc. to BNP Paribas SA forecasting higher prices.

“Australia is certainly at the forefront of the potential for restarts,” said Stephen Briggs, a metal strategist at BNP Paribas in London, the second most-accurate nickel price forecaster in the eight quarters to June, according to rankings compiled by Bloomberg. “Nickel is one of my top picks,” he said in an Aug. 4 interview, describing $25,000 as plausible.

Avebury Mine

The metal climbed 36 percent to $18,882 a ton on the London Metal Exchange this year, beating all other base metals. The LMEX Index of six metals rose 3.1 percent in 2014 as the Bloomberg Dollar Spot Index added 0.3 percent. The MSCI All-Country World index of equities advanced 2.8 percent and the Bloomberg Treasury Bond Index gained 3.9 percent.

Avebury may produce as much as 12,000 tons of concentrate a year, according to Chris Daws, chief executive officer, referring to semi-processed metal. The cost of reopening the mine in Tasmania will be A$22 million ($20 million) to A$25 million, he said. The facility, mothballed since February 2009, is scheduled to restart in the first half of 2015.

Nickel demand will outstrip supply by 97,100 tons in 2015, ending four years of gluts, according to Morgan Stanley, which sees shortages through to 2017. Goldman Sachs forecasts a 200,000 ton deficit next year and last month raised its 2015 price forecast 29 percent to $22,000.

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