|Dylan Howse, Director of Finance|
What do you think of when you hear the words “metals and mining”? You’re probably imaging a gold mine of some sorts that’s going to be used to make a luxurious necklace at your local jewellery store.
That is a completely accurate depiction of what happens, except for the fact that gold only makes up a small percentage of the global metals and mining industry. Most of the money lies where people least expect it – in nickel.
Yes, the metal that makes up the pipes and plumbing in your house is projected to become the most profitable and promising commodity over the next 10 years or longer.
As we see Tesla continue to skyrocket after its unprecedented stock price climb throughout 2020, (shooting up nearly 9 times what it was worth in 2019), somehow, they have to keep up with the increasing demand for an electric and battery-powered society. That’s where nickel comes in as nickel delivers high energy density and greater storage capacity at a lower cost.
“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way” said Elon Musk, the CEO of Tesla, last July.
The trouble is that nickel is becoming a rarer metal to mine every year. In 2019, 2.7M metric tonnes were produced out of the 89M left in nations reserves, with Indonesia and the Philippines leading the pack. This was an increase of 12.5% from the previous year and with those current reserves and production rates, it only implies a 33-year mining lifespan for the global nickel industry.
With a limited resource supply, the demand for nickel has already seen an uptick in commodity prices as well as in mining company’s stock. Over the last 4 years, the price for nickel futures has increased roughly 130%, more than any other metal during that period.
“Wherever you are in the world, please mine more nickel and don’t wait for nickel to go back up to some high point you experienced some five years ago or whatever, go for efficiency”.
Industry leaders in the electric vehicle area, such as Elon Musk, are consistently urging miners to efficiently extract nickel, and big corporations like Tesla are willing to pay the price for this as they set up expensive “Giga Factories” around the US to manufacture the nickel into electric vehicle batteries.
In tandem with Tesla stock, small nickel mining companies whose balance sheets may be limited yet own the rights to scores of minable nickel deposits, are setting up mining facilities daily in the race to produce high-grade nickel sulphide for car manufacturers and other products in the electric-powered industry.
With such great demand, there also comes reward in the form of dramatic stock prices for these penny stock miners. Take Talon metals (TLO) for example, with a nickel deposit in nearby Minnesota. It had a stock price of $0.09 at the beginning of the pandemic, yet as Tesla’s stock grew with hopes of an EV (electric vehicle) society in sight, so did Talons stock as promising mineral reports propelled it to increase 500% up to $0.54.
Similar tales can be told for other nickel miners as described by Nova Royalties (NOVR), who own a piece of 17 different nickel miners across the globe and have risen their stock price nearly 200% in the last 2 months.
The mining sector is always a risky investment because you don’t know what you have until you start digging, but with the imminent demand for nickel soon, it certainly has some promise. It’s still pretty early in the game for the EV and nickel industry but the sudden price rise is a positive indicator for things to come.