by Ross Louthean
A leading Australian sharemarket and commodities observer has told the Australian Nickel Conference in Perth that while nickel demand has surged, explorers for that and other metals in Australia are being heavily discounted by investors.
The principal for PCF Capital, Liam Twigger, said in his opening address that new analysis showed the nickel price surge favoured the “big end of town.”
Despite the share price of junior explorers going counter to this trend he felt there would soon be some investor relief for junior explorers.
The problem for the junior market has been the increasing technology on global share market trading where robots now influenced trading, and the perception was different for producers providing cash flow and profits than for those in the exploration spend.
Mr Twigger said that after years of forecasting a recovery in the nickel market, the metal had outperformed every other commodity over the past 12 months, and compared to a year ago was up 75 per cent.
This had come from increasing demand from strong electric vehicle (EV) growth and a bigger than expected kick in stainless steel production.
He said nickel stockpiles at London Metals Exchange warehouses are falling, with the market further tightened with Indonesia’s September announcement that it will start the ban on nickel ore exports on January 1, 2020, two years earlier than expected.
“This move will take ~350,000 tonnes of nickel off global supply markets,” he said.
“The prices of nickel producers are up 37 per cent – but nickel explorers on average are down 11 per cent.
On the issue of robots, Mr Twigger said data released by Morningstar last month showed that it was the first month in human history that the sum of money managed by passive index tracking and algorithm-based funds, exceeded that run by humans.
““The highly regarded Economist journal noted last week that the rise of the financial robot is not only changing the speed and makeup of the stock market, but it also raises questions about the purpose of markets, the impact on the wider economy and global financial stability,” he said.
He said no algorithm-based fund had the capacity to assess exploration risk and return.
“As such, junior nickel explorers are completely avoided as an investment vehicle.
“The other impact is the fallout from artificially low global interest rates – possibly 3 per cent lower than they might otherwise be.”
The sole Queensland-based nickel project developer to present at the conference Australian Mines dropped out last night due to corporate demands elsewhere. Australian Mines has its flagship the Sconi nickel-cobalt laterite project in the hinterland north-west of Townsville.