VIDEO - Brian Leni: Be Picky When Investing in Nickel

At this year’s Mines and Money Americas conference in Toronto, the Investing News Network was once again able to catch up with Brian Leni, founder of Junior Stock Review.

He discussed how nickel laterites will support the anticipated nickel boom, how nickel prices may look in 2019 and shared tips for investors who are interested in investing in the base metal.

For Leni, the nickel sector, and nickel laterites in particular, is exciting because of the metal’s use in electric vehicles.

“Two-thirds of the demand goes into stainless steel, and that’s primarily fed by nickel laterites. And over the next few years, there’s going to be more — potentially a big push for electric vehicles, primarily driven by batteries, and it should be interesting to see the uptake of the electric vehicles,” Leni stated.

“I believe the future is probably nickel laterites. They’re more abundant. They’re open-pitable mined and there’s a potential for HPAL to process these things at a reasonable cost,” he added.

Leni also explained that Indonesia and the Philippines are two of the largest producers of nickel laterites, and said he believes these countries will have a “tremendous effect” on the nickel sector.

As for advice for potential nickel investors? Leni says that they can, and should, be picky.

Watch the video above or read the transcription below for more insight from Leni. You can also click here to view our full Mines and Money Americas interview playlist on YouTube.

INN: How has the conference been so far?

BL: It’s been great. I saw some really good presentations yesterday. Battery metals are a big topic, and yeah, I’m really interested.

INN: You recently wrote a report on nickel laterites, and you mentioned that there’s going to be a nickel boom. Can you describe a little bit about why you think there’s going to be a boom and why it’s a good time to invest in nickel?

BL: Sure. So the nickel market is interesting. Right now, two-thirds of the demand goes into stainless steel, and that’s primarily fed by nickel laterites. And over the next few years, there’s going to be more — potentially a big push for electric vehicles, primarily driven by batteries, and it should be interesting to see the uptake of the electric vehicles. And potentially — Glencore (LSE:GLEN) came out with a 30-percent projection on adoption rate by 2030. If that were to happen, that would represent around a million plus tonnes of nickel demand. And really when you look at the current supply/demand fundamentals, you kind of wonder where it’s going to come from.

What’s interesting is although most of the narrative surrounding the battery market goes around nickel sulfides, I believe the future is probably nickel laterites. They’re more abundant. They’re open-pitable mined and there’s a potential for HPAL to process these things at a reasonable cost. The price does need to go up from where it is today, but I think that’s where the future is.

INN: And my next question was actually circling back to the laterites. Where do you see that going in 2019 and how will it affect the nickel sector? 

BL: It was — it’ll be interesting to see. I think when you talk about nickel laterites, especially if you’re looking over the next year, Indonesia and the Philippines are the … two largest producers of nickel laterite in the world. And Indonesia in particular has a presidential election coming up next year, so it should be interesting to see how that ends up affecting the market, because over the last four years it has had a tremendous effect. So time will tell.

INN: Do you have any advice for someone that would like to invest in nickel right now? 

BL: Be picky. For me there’s one investment vehicle … or one nickel company that I own, that’s FPX Nickel (TSXV:FPX). They’ve got a clear path to improvement on their existing PEA, which I believe is going to be economic probably around US$7. That’s speculation, but I think there’s realistic reasons why that is. So that’s the company I’m investing in. But be picky.

INN: What was one of the major factors that affected the price of nickel in the last quarter and might be affecting it in 2019?

BL: So for the four years preceding 2016, we were in surplus nickel and that’s really what affected the nickel price to the negative. It reached a low of around US$3.50 per pound. Coming off that bottom is really what’s given some bounce to the nickel price, and really it’s what you see coming off bottoms.

And again, the other side was Indonesia and the Philippines came out with some environmental and sort of protectionist types of policies where they required anybody exporting nickel laterite ore from Indonesia and Philippines to put secondary refinement in the country for jobs. And that definitely affected supply and thus boosted the price.

INN: Now, moving on to some other resources. What do you think was a great resource in 2018 that might have been slightly overlooked?

BL: Well, it’s interesting. I think zinc has some great fundamentals, and the price has really come down with the tariff talk, and I think sort of some concerns over supply. But I think the fundamentals look great still for zinc, and right now those zinc projects that were all the rage in the year previous are on sale. And some of them show some very good value, net present value and IRR, so I think you can go right now and get a good deal. And I think while it won’t stay there, I think you might see US$2 zinc in the next year or so and that’ll be a good push for that market.

INN: And what do you think is pushing zinc along? Why do you think it might reach that price?

BL: It’s supply constraints. The fact is the supply chain of developing projects just isn’t there. And interestingly that flows in with lead and silver. The three are usually found together, and they’re just not developing these deposits as quickly as the demand kind of shows right now.

INN: This is going to be my final question. Just as a general sense, how do you see the resource sector shaping up in 2019? 

BL: I’m cautiously optimistic I think. I think 2018 was maybe a little worse than I thought it was going to be, but that makes me excited for next year. When you search for value, these are the best times, and it’s hard to find value in bull markets so you’ve got to take advantage while the sale is on.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.