Thread by @METhompson72

#Nickel
Below are my thoughts in investing in Nickel. I have only ever made one Nickel mining investment, which is probably indicative of just how difficult I think Nickel deposits are to get confident about! Everything comes as a series of comments to this first tweet.

#Nickel
Nickel comes in two forms, as do most base metals, of sulphides and oxides. Sulphides are processed by a normal crush / grind / flotation process to produce a 6% - 12% nickel bearing concentrate that is then further processed.

#Nickel
Pentlandite is the most important nickel sulphide mineral. (Fe,Ni)9S8. Typically it has a 1:1 iron to nickel ratio, and often occurs with cobalt, platinum, palladium and minor copper minerals and inclusions.

#Nickel sulphide concentrates can be leached, but most commonly they are smelted in a flash or bath process, at relatively high temperatures of >1,300C. The result is a nickel “matte” which is further processed and then electro-refined to make nickel cathodes.

#Nickel sulphides are almost always hosted in mafic rocks – alkaline rocks from deep within the mantle. In the Sudbury Basin a large meteor strike brought these rocks to surface. At Norilsk this was due to volcanic activity.

#Nickel
New nickel sulphide mines tend to be large, and capital-intensive affairs. Cash costs are in the $10k - $15k range for the middle 2 quartiles of production. Norilsk produces Nickel at minus $8k per tonne due to massive copper and palladium credits.

#Nickel
The other source of nickel units is oxide ores in the form of laterites, formed from intensive weathering of nickel bearing ultramafic rocks. Limonite and silicate styles carry typically 1% - 2% Ni and are found at surface.

#Nickel
Because of the amount of weathering required, tropical reasons with very high rainfall such as Indonesia and The Phillipines are hosts of large laterite deposits

#Nickel
Processing laterites usually requires an expensive hydrometallurgical process of leaching with strong acids at high temperature and high pressure. Billions of dollars was invested (and lost) in this “HPAL” – high pressure / acid leach tech in the last nickel bull market.

#Nickel
Billions more was lost in a feeding frenzy of buying up junior Nickel producers and projects – e.g. Norilsk’s $7bn acquisition of Lionore, Vale’s $19bn on Inco and Xstrata’s $18bn on Falconbridge.
Nickel peaked at $53,000 per tonne in 2007, and bottomed at $8,000 in 2016.

#Nickel
Some limonite hosted nickel laterites contain very high grades of iron – up to 60%. This is iron ore grade. Some very clever Chinamen had the idea of direct-smelting these ores – and produced a nickel-iron pig iron. This was a base for making low-cost stainless steel.

#Nickel
This tech has massively reduced the cost of producing stainless steel – the single biggest use for nickel. Recent announcements suggest that going one step further and producing nickel matte has from laterites been proven.

#Nickel
If this is the case then it will completely turn over the market conviction that sulphide production is cheaper than laterite production. This will also cause permanently lower nickel prices and render nickel sulphide exploration companies uninvestible.

#Nickel
My personal conclusions: Nickel is a game for the multinational mining companies. Technology risk is making investing in nickel sulphide exploration companies too risky for the foreseeable future.
Caveat emptor!