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The Fraser Range and Australia's Nickel Hope

Brazilian mining giant Vale (NYSE:VALE) is moving in to the enviable Fraser Range in western Australia as it looks to  into nickel production in the country. While the company has vast experience running mining operations around the world, including nickel mines in Canada, this will be its first foray into nickel mining in Australia.

The Sydney Morning Herald reports that Vale is exploring the region as it looks to make a new major nickel discovery. The news could be a welcome boost for the Australian nickel market as it looks to fill the void caused by Indonesia’s departure from the ore-export scene.

Fraser Range

The region is mostly populated by junior mining companies, listed on the ASX, with Sirius Resources (ASX:SIR) the big player in the area. The area first stepped in to the spotlight about two years ago when Sirius discovered a type of nickel mineralization previously not seen in Australia. The Nova nickel and copper discovery, as well as the Bollinger and Polar Bear deposits boosted Sirius Resources from a $6 million market cap to a roughly $1.3 billion.

In 2013, Sirius gave a maiden mineral resource estimate at Nova of 10.2Mt at 2.4 percent nickel, 1.0 percent copper and 0.08 percent cobalt for 242,000 tonnes of nickel, 100,000 tonnes of copper and 7,700 tonnes of cobalt based on a 0.6 percent nickel equivalent

The magmatic nickel sulphide deposits found by Sirius are similar to deposits found in Canada at the Thompson, Raglan and Voisey’s Bay deposits. The presence of copper and cobalt, the similar ratios of those metals and the age of the rocks all help tie the Fraser Range to its Canadian counterparts.

Since the find by Sirius, a variety of junior exploration companies have come to ply their trade in the region.

Juniors hoping to strike it rich

Three junior mining companies have released news within the past two weeks about projects in the Fraser Range.

Orion Gold (ASX:ORN) has been drilling in the area since August 2013. On September 26, the company announced it had seen nickel potential in reconnaissance drilling performed on its Pennor Prospect, which is part of its Fraser Range project. The company says the drilling showed both drill holes were co-magmatic and have experienced substantial crustal contamination – which is an essential component to the ore forming process.

Segue Resources (ASX:SEG) received approval for diamond and reverse circulation drilling at its Plumridge project on September 18. The company says rigs to test four high priority electromagnetic bedrock conductors will be mobilized by the end of September with a diamond rig scheduled to be onsite by the first week of October. The drilling is estimated to last four weeks.

Ram Resources (ASX:RMR) has been operating in the area since acquiring the Fraser Range North and South projects in 2012. Ram currently owns an 86 percent interest in the projects. As of September September 22, the company had identified four targets within its Fraser Range South project which it says will test further to confirm the presence of nickel.

As the junior companies search for the next Nova deposit, Australian nickel prices could be enjoying an increase.

A bright future for Australia?

Nickel has enjoyed a surge this year as Indonesia followed through on its threat to halt ore exportation and the Philippines threatened to do the same. While the threat from the Philippines has yet to materialize, with the bill proposing the ban not scheduled to be heard in parliament until 2015 at the earliest, prices have still been a marked improvement from 2013.

Carey Smith, an analyst with Alto Capital, told Mining Australia that pressure from the American dollar could also help provide a boost to the nickel market.

“By next year, I expect that the Australian dollar will be trading around the range of 85-87 [cents] to the US dollar on average and that will be a bonus for Australian nickel producers,” he said.

Smith estimated Australian nickel prices could rise anywhere from 10 to 20 percent higher in the coming year.

Australia produced about 240,000 metric tonnes of nickel in 2013, accounting for nearly 11 percent of the world’s nickel production. If the Philippines drop out of ore exports in 2015, it could propel Australia to second place in terms of world production, placing high hopes on the Fraser Range to continue its rich vein of form.

 

Securities Disclosure: I, Nick Wells, hold no investment interest in any of the companies mentioned.

By Leia Michele Toovey- Exclusive to Copper Investing News

tugofwarIn early trade Tuesday, better than expected US home data buoyed copper on the COMEX after dipping for four straight sessions. But, the ascent was just a blip with the upside being limited by a lack of positive economic indicators.

The metal’s upside is largely being limited by Chinese demand concerns.  In 2009, China’s aggressive stimulus programs were largely responsible for copper’s swift rebound; but as the nation has taken steps to tighten monetary supply analysts have been left wondering what is next for the red metal.

Last week, the market anticipated February trade data out of China. Surprisingly, the data was palatable. China’s refined copper imports in February rose 12 percent on the month to 220,530 tonnes.  However, inflation reports were not so rosy.  In February, the nation’s inflation hit the highest point witnessed in 16 months.  This has traders wondering how much more tightly the government will clamp down on monetary policy.

Dropping crude prices and a strengthening greenback reduced the metal’s appeal as a hedge against inflation; and the failure of the EU to come up with a solution for debt-embattled Greece also contributed to copper’s four day slump. Europe’s stalemate over possible aid for Greece deepened as European Central Bank President Jean-Claude Trichet spoke out against offering low-interest loans that the Greek government has requested.

Copper for three-month delivery on the London Metal Exchange traded at $7,360 a tonne at 1124 GMT from a close of $7,435 on Friday. By 1044 GMT, copper for three-month delivery on the London Metal Exchange traded at $7,447.25 a tonne from $7,450 at the close on Monday. The metal continued trading flat as the day wore on. One analyst from Barclay’s Capital claimed: “The market is waiting for direction. It is waiting for some sort of convincing data flow…what is happening just now, is that we’re getting a lot of mixed messages — that’s why you are seeing this push and pull.”

Rising global interest rates, uncertainty over a stable Euro-zone, tight credit, and an erratic dollar have all added up to keep the metal range-bound.  Many analysts insist that without a significant force to drive the metal in one direction or another range-bound will be the story for the coming months.

Company News

Ivanhoe Mines has closed its private placement with Rio Tinto.  Announced on March 1, the private placement involved the issue of 15 million common shares to Rio Tinto, at a price of CDN $16.31 per share.  Total gross proceeds of the offering were CDN $244.7 million.  The funds will be used to purchase mining and milling equipment for Ivanhoe’s Oyu Tolgoi copper-gold mining complex in Mongolia. With the completion of this transaction, Rio Tinto has increased its ownership in Ivanhoe Mines from 19.6 percent to 22.4 percent. Rio Tinto holds rights to subscribe for common shares from Ivanhoe’s treasury and also to make purchases on the open market that could increase Rio Tinto’s stake in Ivanhoe to up to 46.6 percent during the next 19 months.

In a step to gain control of copper and nickel mines in Canada, Quadra Mining Ltd. is set to buy FNX Mining Co. The transaction is valued at about C$1.69 Billion, or C$15.12 based on Monday’s closing price. Quadra shareholders will control 52 percent of the combined company, to be called Quadra FNX Mining Ltd., and FNX holders will own the remainder, the companies said. Quadra, based in Vancouver, owns mines in Nevada, Arizona and northern Chile. Toronto-based FNX owns copper and nickel mines in Sudbury, Ontario and sells ore to Vale SA’s neighboring mills.

Without any explanation, Grupo Mexico shut down its copper smelter in San Luis Potosi, Mexico.  The smelter, operated by subsidiary Southern Copper Corp, had an annual capacity of 230,000 tonnes per year. The smelter had been in operation since 1925.  All 300 workers at the smelter have been laid off.

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