Nickel: The Outperformer And Top Pick For 2015 – by Stephan Bogner (Seeking Alpha – April 21, 2015)


Nickel was the best performing metal in 2014.
Nickel is the top commodity pick of several investment banks, including Morgan Stanley.
The Voisey’s Bay area may host the next big nickel discovery since it is abnormally under-explored.
From today’s perspective, Voisey’s Bay wasn’t really a great nickel discovery, but still one of the world’s biggest.

• 22 years ago, Robert Friedland’s Diamond Fields Resources Inc. stumbled onto nickel while looking for diamonds in Canada’s remote north.

• Only three years later, in 1996, Friedland sold his lucky strike, the Voisey’s Bay Nickel Deposit, for $4.3 billion USD to Inco.

• Prior to being purchased by CVRD (now Vale (NYSE:VALE)) in 2006, Inco was the world’s second largest producer of nickel.

• In 2005, the Voisey’s Bay open-pit and concentrator started production. Vale is currently completing an engineering study for an underground mine to be constructed between 2016-2019, extending mine life to 2035.

Now, one could think that some more nickel deposits were discovered around Voisey’s Bay, as being the case with all other major nickel mining districts in the world (Sudbury, Norilsk, Thompson, Raglan). However, this is not the case. The multi-billion dollar question is why.

Bottom line:

• 20 years ago, explorers needed a good portion of luck to make a discovery as exploration technologies were, at most, only able to scan a few meters below surface; i.e. only deposits with surface expression or association were detected.

• Soon after Voisey’s Bay’s discovery, it became clear that the deposit is gigantic and that an entire mining district may evolve as these types of deposits typically occur in clusters. Hence, an aggressive staking rush began in the region, putting the most prospective areas into checkerboard-style ownerships widely dispersed and wildly fought after – which made effective regional, large-scale exploration unfeasible.

• Today, next-generation exploration technologies, such as VTEM, can see an order of magnitude deeper, up to 750 meters.

“Voisey’s Bay is a world-class nickel deposit, but it is not the largest or richest example of its type; based on its contained nickel metal, it is probably the seventh largest in the world. However, it is probably the only place in today’s world where high-grade nickel sulphide ores are known to sit close to deep-water access. Large, high-grade nickel deposits are rare, because they are difficult exploration targets. The large exploration expenditures in Labrador in the post-Voisey’s Bay years have still only scratched the surface of a remote and poorly explored region.” (A. Kerr in “Voisey’s Bay and the Nickel Potential of Labrador: A Summary for the Nonspecialist”)

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