Mining Project deals with frozen nickel products

On the morning of May 20, at the 2014 Beijing Mining and Investment Summit that began at 9 o'clock in the morning, Mr. Sun arrived at the venue less than 8 o'clock. Throughout the morning, Mr. Sun did not care about the main topics of the summit. He constantly sought opportunities to chat with more people and exchange business cards.

Mr. Sun is a director of a mining company in Qinghai. This time, he was mainly involved in “selling” a molybdenum project under the company. The molybdenum project was obtained at a high price and is now almost stagnant. “Because the mining industry is in the doldrums, the three shareholders of the project have disagreed and they are looking for a bigger company to take over.”

However, in the mining industry into the downward cycle today, whether it is to buy a miner or sell a miner, have become cautious.

A company executive who came to attend the meeting briefed the reporter that one of his business partners had a mining asset value of 3 billion yuan. Before that, 28 billion yuan was not sold by others, and now someone is bidding 15 billion yuan to make this business partner very regret.

Mining lows

“Now the global market is in the economy. Due to the slowdown in China’s economic growth, the downstream demand for minerals has weakened. This is reflected in the continued decline in prices.” A senior company who came to the meeting accepted "First Financial Daily" reporter said in an interview.

Similar to Mr. Sun, the company’s top management currently has two iron ore assets. Through the meeting, he also wanted to find the right person. But whether it is to buy a miner or sell a miner, they become cautious. “I asked people to have a meal at night but I couldn’t know how to cooperate with the other person,” he said.

China’s foreign direct investment has grown rapidly, from US$26.5 billion in 2007 to US$90.2 billion in 2013, an increase of 2.5 times. Mining investment has increased from US$4.1 billion in 2007 to US$20.2 billion last year, an increase of nearly 4 percent. Times.

However, from the second half of 2013, the mining market began to become different.

Min Xiaohui, assistant president of Minmetals Group, said that if the mining cycle is compared to seasonal changes, from 2002 to 2012, it has experienced the spring and summer of the mining industry. Since 2013, the mining industry has entered the winter season. "At the time, we hoped to be a warm winter, but unfortunately it was a cold winter."

First, it is reflected in the general decline in the prices of bulk mineral products. The data shows that the iron ore index has apparently declined. The price of gold has fallen by more than 30% since the second half of last year and will continue to oscillate at a low level. At the same time as prices are declining, the production capacity of mineral products is still being further released. Take copper as an example. With the successive launch of new development projects, the gap between supply and demand is gradually decreasing, while the continuous increase in supply has transformed the supply situation into excess.

At the 2014 Beijing Mining and Investment Summit, Pan Guocheng, CEO of China's Hanwang Group, told the reporter of the “First Financial Daily” that the low season of the mining industry has already come and the mining market may experience a major round of adjustment in the future.

According to Wang Yuhui's introduction, starting in 2012, minerals inventories were operating at a high level. Product prices continued to decline. Overcapacity and declining demand caused the decline in industrial commodity prices. The total return to shareholders of major diversified mining companies declined significantly, lower than other industries. The market value of mining companies continues to shrink by 20% to 60%.

Pan Guocheng believes that the mining market may experience a major round of adjustment in the future. "The new round of global mining market decline is mainly due to the fact that China's driving factors have gradually weakened with the slowdown in economic growth and its excessive investment and expansion during the bull market. Many large-scale products have already experienced a situation of oversupply." He said.

It is reported that in the past decade, the mining market has experienced peaks and there have been troughs. One is from 2008 to 2009, and the other is from the second half of 2013. It is not yet clear when the stoppage is due.

Nickel prices stand out

It is worth noting that the mining industry has entered the downward cycle, but the rigid costs of mining companies have continued to increase. Behind this cost, not only is the mining difficulty caused by the continuous decline of ore grades more difficult, but also important mineral resources countries have amended the mining laws or adjusted the mining industry. Policy, at present, Indonesia has already banned its export of raw ore from this year.

“The Indonesian ban on ore exports will bring a huge impact on China’s nickel production and it will also lead to a serious structural imbalance in nickel metal supply.” Pan Guocheng stated that it is difficult to supplement the nickel metal gap in the short term, which will lead to nickel metal prices Continue to rise.

Since 2008, the growth of global nickel metal supply has mainly come from China, and most of China's growth comes from NPI products obtained from Indonesia's lateritic nickel ore smelting.

Data show that China's total imports of lateritic nickel ore exceeded 70 million tons last year, of which 58% came from Indonesia and the rest came from the Philippines. Indonesia's laterite nickel ore is mainly medium- and high-grade.

Our reporter was informed that after the nickel price reached an all-time high in 2008, with the advent of the financial crisis at the end of 2008, the growth in demand for stainless steel slowed markedly, and China’s NPI’s nickel smelting capacity expanded excessively, resulting in rapid nickel metal and product prices. The decline made the nickel ore market experience a five-year downturn.

However, with the ban on exports of lateritic nickel ore in Indonesia earlier this year, nickel prices have regained strong growth.

Pan Guocheng said that most of China's NPI smelting facilities are no longer under the influence of the banned minerals policy, resulting in a supply gap of 300,000 tons to 350,000 tons of metal nickel, which will support the price of nickel metal for a longer period of time.

His forecasting data shows that based on the supply and demand relationship and the huge capital investment requirement for nickel smelting, the average price of nickel metal per ton for the next two years will fluctuate between $25,000 and $27,000, and will be above US$22,000 over the next six years unless Indonesian laterite nickel ore exports were lifted.

“Having a high-quality laterite nickel mine and building a factory in Indonesia will be the best solution.” Pan Guocheng said.

At present, in addition to mastering Chinese iron ore assets and Australian gold mineral assets, Hanking also has its own nickel ore assets in Konaway, Northwest Sulawesi, Indonesia. The mining area of ​​the project is 78.7 square kilometers. The JORC resources are 350 million tons of laterite nickel ore, and 4.8 million tons of nickel metal. Currently, it has the capacity of mining 3 million tons per year during the production and expansion phase.

According to the Hanwang nickel ore project construction investment plan, by the next year, its ore output is expected to reach 3 million tons, and the smelting capacity will reach 10,000 tons. By 2020, the ore output is planned to reach 5 million tons, and the smelting production capacity at that time will also reach 60,000 tons.