NEW YORK, Feb. 21, 2020 /PRNewswire/ -- As the electric vehicle market sees impressive growth, the demand for nickel is also rising. Indonesia, which boasts 25% of the world's nickel resources, is looking for ways to profit from the valuable base metal.
As Indonesia benefits from the growing market, so do the companies involved in the production of nickel, including Pacific Rim Cobalt Corp. (CSE:BOLT) (OTCQB:PCRCF) (XFRA:NXFE) (PCRCF Profile). Pacific Rim Cobalt has established a bold expansion plan following a successful exploration and development season in Indonesia last year. Other companies with interest in nickel production include BHP Group (NYSE:BHP), which is expanding its nickel business and has plans to ramp up sales for the fast-growing electric vehicle (EV) sector, and Vale S.A. (NYSE:VALE), which is planning to increase production of the metal by an estimated 70% in coming years, primarily through expansion in Indonesia. One of the world's largest diversified natural resource companies, Glencore (OTC:GLNCY) is also deeply interested and invested in mining for battery metals. A major copper producer, Freeport-McMoRan Inc. (NYSE:FCX) is also looking to see additional revenue from the growing EV sector.
- Indonesia ideally located with ready access to markets in China and Japan.
- Nickel one of essential minerals needed to produce batteries for the growing electric vehicle market.
- Companies on the ground in Indonesia ideally positioned to profit from growing production, strong EV market.
To view an infographic of this editorial, click here.
Growth in EV Market Spurs Mining Boost for Indonesia
In many people's minds, electric vehicles (EV) are associated with big cities in East Asia, North America and Western Europe. These are major markets where new vehicles are making their presence felt, particularly as environmentally conscious consumers seek to retain their personal mobility while protecting the planet from carbon emissions.
But the drive to put more EV on the roads is having a knock-on effect in other regions. Indonesia, a giant in the production of nickel, is seeing both its economy and its global status boosted by the need for nickel in EV batteries. This shift could help turn the country into an economic superpower, which may have significant consequences for companies working there.
"Mineral to Market" Strategy in Place
Among the companies developing Indonesia's nickel supply is Pacific Rim Cobalt Corporation (CSE:BOLT) (OTCQB:PCRCF) (XFRA:NXFE), a Canada-based battery metals company with offices in Vancouver, Shanghai, Jakarta and Sentai, Indonesia.
Specializing in acquiring and developing production-grade battery metal projects, Pacific Rim is committed to providing these essential metals to companies producing EV batteries. PCRCF is committed to leveraging its flagship nickel-cobalt Cyclops project by employing a vertically integrated "mineral to market" strategy. The Cyclops operation is nestled at the edge of the Cyclops Mountains in the Papua Province, a region rich with nickel deposits, where past operations have established the presence of the mineral.
Keenly aware of growing interest in the industry, the Indonesian government is paying special attention to licensing rights given to extract minerals in the country. Recently the government updated the mining registration process, in part to encourage companies in this industry.
In light of the favorable government outlook and as a result of consistent efforts, Pacific Rim recently secured government approvals needed from the OMBUDSMAN of the Republic of Indonesia for the Cyclops project to move forward. The nickel and cobalt project has been found fully compliant with the updated mining registration process, meaning it is clear to progress.
Pacific Rim Cobalt CEO Ranjeet Sundher commented: "2019 was a pivotal year for us, and we're pleased to carry this momentum into 2020. Obtaining approval from Indonesia's OMBUDSMAN is an important step toward our goal of securing strategic partnerships and participating in Asia's growing battery metals supply chain."
Obtaining the approvals marks a significant accomplishment for Pacific Rim, an accomplishment made possible because of the connections the company has established. National, regional and local support has been found for the project, which will provide jobs in Papua Province in mining, transport and support services. With government approval in hand, company officials have now begun discussions with potential strategic partners and investors to further develop the operation.
Rich Resources, Direct Trade Routes Create Global Hub
Pacific Rim's operation is well timed to tie in with plans of the Indonesian government. Indonesia aims to become a global hub in the EV industry supply chain. Not only does the country have rich sources of nickel, it also has direct nautical trade routes to China and Japan. These powerful neighboring countries represent major markets for the materials Indonesia is producing, thanks to Japan's high-tech consumer economy and China's powerful battery industry. Vehicle manufacturers in both countries are focused on becoming leaders in EV, and for that they'll need battery-grade nickel.
Indonesian president Joko Widodo has established rules to bolster the EV industry in the country in an effort to make the most of this opportunity. Through a series of incentives, the government aims to make EV 20% of the country's car production by 2025. This movement has attracted investment from major EV players. Operations such as the Cyclops project should appear ideally positioned to play a key role in making that happen.
To support its plan to become a world-leading player in the EV supply chain, Indonesia has stopped export of unprocessed nickel ore. The government has also recently approved environmental impact studies evaluation the completion of several factories designed to produce battery-grade nickel chemicals.
With the Indonesian government providing support for nickel production, and factories being established to process the chemicals, Indonesia won't just be a source of nickel-bearing ore — it will become a major market for the base metal.
Ambitions of Country, Companies Key for Future
The Indonesian government's ambitious plans for the country's EV industry are matched by the ambition of the companies working in the region.
For Pacific Rim, this ambition is supported by the company's remarkable exploration successes in 2019. Testing on its wholly owned site revealed substantial nickel and cobalt mineralization near the surface.
These conclusions are based on several successful operations in the second half of 2019. Excavation and sampling of test pits produced 530 kg of sample materials, which were sent to Canada for bench scale testing. Test results indicate 75 drill holes, 51 augur holes and 11 test pits were used to check mineral levels down to various depths. Combined with historic results from 856 drill holes and 26 test pits, these provide a detailed picture of the mineral profile at the Cyclops site.
With these results in hand, Pacific Corp. has identified ambitious milestones for development in 2020, including the completion of a pilot plant in Canada and a demonstration plant in Indonesia, which would produce battery-grade nickel and cobalt material to suit the growing EV market. The operations and success of these initial operations will be used to develop design criteria for a full commercial scale plant.
Demand for Nickel Growing
The demand for EV batteries translates to high demand for nickel; demand that doesn't appear to be letting up any time soon. According to research by Deloitte, EV sales reached 2 million units globally in 2018 and should reach 4 million units in 2020, expanding to 21 million by 2030. At the same time, the cost of EV battery packs has been falling by 20% per year, making EV a more affordable option for consumers.
CRU Mobility and Energy Futures has predicted that the EV market will need 1.3 million tons of nickel per year by 2030, compared with 600,000 tons in 2018. This means that demand for Pacific Rim's products could more than double in the next decade.
With Indonesia holding 25% of the world's nickel reserves, the country — and companies with operating inside the country — lies at the nexus of these developments. Spending on new nickel processing plants in the country is expected to reach $20 billion by 2024, thanks to the government's efforts to create a world-leading EV supply chain. Companies such as Pacific Rim, with an early position in the country's nickel market, look to be ideally positioned to profit from this.
The EV Nickel Market
The nickel market is increasingly defined by the car manufacturers working in EV.
BHP Group (NYSE:BHP) announced plans to start production of nickel sulphate in the Q2 2020 as the company anticipates increasing sales of its nickel products to the battery industry (http://nnw.fm/6WzrB). In a presentation, company officials noted that BHP sold about 78% of its nickel production to the battery industry in the second half of the 2019 financial year, up from below 60% the year earlier. BHP currently produces around 75,000 tons of nickel metal at its Kwinana refinery on the outskirts of Perth.
The world's largest producer of nickel, Vale S.A. (NYSE:VALE) is looking to boost its production of the base metal to some 360,000 tons a year, with much of the growth coming from projects planned for Indonesia (http://nnw.fm/z53H7). "Nickel is poised for dramatic change," said Mark Travers, Vale's interim executive director for base metals. Currently there is an oversupply of high-quality nickel, but experts anticipate that the market will tighten in coming years as electric vehicle sales climb, observed Travers, who also noted that Vale has two nickel projects on the drawing board in Indonesia being developed with joint venture partners.
In addition to mining nickel, Glencore PLC (OTC:GLNCY) is one of the world's largest recyclers and processors of nickel-bearing products such as batteries, extracting the minerals from discarded goods and finding ways to reuse them (http://nnw.fm/gCxL7). A major global producer of platinum-group and base metals, Glencore's nickel supply is produced primarily from locations in Australia, Canada and Europe.
Nickel isn't the only metal needed for electric vehicles. Copper producer Freeport-McMoRan Inc. (NYSE:FCX) could see a $4 billion increase over the next five years (http://nnw.fm/5RKOy), with the EV market driving a decent chunk of that growth. FCX has a copper mine in Indonesia, which is currently undergoing a transition from open pit to underground. That transition is slated to be complete in 2021, and increased production from that mine, combined with continuing production growth at FCX's North and South American sites point to copper shipments increasing from 3.8 billion pounds in 2018 to 4.8 billion pounds by 2023.
With EV production anticipated to grow dramatically in the coming year, mining for nickel and other metals essential for that growth takes on added value and importance. Companies involved in that mining appear certain to benefit.
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