Two Competing Markets on Base Metals Exploration: Australia and Russia

Submitted by Emma Cox as part of our contributors program.

Two Competing Markets on Base Metals Exploration: Australia and Russia

World events have had a major impact on the movement of commodities in the economy. Perhaps at the forefront of everything else is the Indonesian ban on ore exports, which predictably drove the price of nickel up in the market. Nickel can be found in iron ore, and it is an important ingredient in making stainless steel.

It was understandably a relationship of supply and demand — and when it looked like the world will be short of nickel after Indonesia closed its doors, there was a collective effort to look elsewhere. China, especially, had to find a new partner fast — production didn’t stop, and demand is ongoing. It is the largest consumer of nickel, and quite a big influence on the global market. Whoever can give China what it wants would stand to gain a lot of ground, economically.

At the moment, it is the Philippines who seems to be able to do that, albeit production volume isn’t as high, and quality, too. It was also reported recently that the country is thinking of an export ban, too. Financial analysts are not exactly sure if that is a wise decision, although if it ends up happening then the world must be prepared for it.

Some say that China should expand and widen its search a little bit, because there are other neighboring countries who could be potential suppliers. They have been competing for a long time in base metals exploration, and both have a lot to offer.

Mining Down Under

The Australian mining sector is very robust and earns a lot of revenue for the country. They are known for being reliable and productive, as well as innovative in their process. The land is also very rich in natural resources, and so a lot of base metals as well as precious metals are found and mined here, in particular: nickel, lead, zinc, and uranium. It is said that Australia has the one of the largest mineral reserves in the world. It also leads in mining, equipment and technology services (METS).

In the recent International Mining and Machinery Exhibition, Australian Trade Commissioner Tom Calder was quoted saying, “Australian mining companies are leaders in economic exploration, mining, mineral processing and transformation of raw minerals. The world’s most extensive mineral research and development programs and facilities are in Australia. A number of innovative methods of mining and mineral beneficiation have originated in Australia. As mining is conducted in remote and harsh environments, Australian companies are at the forefront of developing effective new technology and services, and demand for Australian expertise continues to grow.”

Some of the biggest mining companies in down under:

BHP Billiton Limited (NYSE:BHP) focuses on petroleum and metals and is based on Melbourne. Per its revenues in 2013, it is considered to be the largest mining company in the world right now. The company has lucrative aluminium and manganese businesses, like the Cerro Matoso mine, the Cannington mine Energy, the Illawarra Metallurgical Coal, and the Coal South Africa. Earlier this year, it has reported a 9% increase in production, especially in iron ore, with a recorded 225 million tonnes.

It has a market capitalization of 133.35B. It has a volume of 2.45M and a 52-week price range of 50.35 to 73.91 per share. It closed at 51.35 as of 4 December, falling by -0.37 points (-0.72%).

Fortescue Metals Group Limited (ASX:FMG) specializes in iron ore. Its operations are focused in the Pilbara region of Western Australia, spanning more than 87,000 square kilometres. The company is known for constructing and designing port and rail facilities to support the development of their mines, namely, Cloudbreak and Christmas Creek, which can annually produce 40 million tonnes and 50 million tonnes of iron ore respectively.

It has a market capitalization of 8.18B. It has a volume of 33.37M and a 52-week price range of 2.47 to 6.22 per share. It closed at 2.77 as of 4 December, up by +0.06 points (2.21%).

Rio Tinto plc (NYSE:RIO) produces a lot of commodities, including aluminium, coal, copper, diamonds, iron ore, and uranium. It has also expanded its operations to refining bauxite and iron ore. It has a market capitalization of 99.85B. It has a volume of 2.64M and a 52-week price range of 44.50 to 60.61 per share. It closed at 46.00 as of 4 December, falling by -1.25 points (-2.65%).

Together they are called Australia’s “Big Three.”

In terms of exploring nickel, Carey Smith, a research analyst from Alto Capital in Perth, has this to say: “By next year, I expect that the Australian dollar will be trading around the range of 85-87c to the US dollar on average and that will be a bonus for Australian nickel producers…That exchange market environment can potentially add another 20 per cent in Aussie dollar terms to revenue for producers, so the outlook for nickel not only looks pretty rosy at the moment but continues to hold firm for the long-term.

Mining in the East

Despite the ongoing conflict between Russia and Ukraine, the mining industry in the Kremlin continues to be one of the world leaders in base metal production, as well as natural gas and oil.

Two companies which have been very much on the radar of many are:

Norilsk Nickel (MCX:GMKN), a miner famous for its precious metals like gold and silver, as well as its base metals like copper and nickel. Other by-products include chromium, cobalt, iridium, rhodium, ruthenium, selenium, sulphur, and tellurium. It has a market capitalization of 1.54T. It has a volume of 390,661.00 and a 52-week price range of 6,548 to 10,035 per share. It closed at 9,835.00 as of 4 December, falling by -65.00 points (-0.66%).

Amur Minerals Corporation (AIM: AMC), meanwhile, has steadily been gaining traction in the market as the company moves closer to the approval of its exploration license. Amur’s flagship project, Kun-Manie, is reported to be among the top twenty nickel-sulphide projects in the world at a promising 120 million tonnes of mineralization. It has a market capitalization of 39.54M. It has a volume of 782,588 and a 52-week price range of 2.29 to 9.74 per share. It closed at 9.20 as of 4 December, up by +0.20 points (2.22%).

Onwards to 2015

Says Indonesia, its policy on iron ore stays. That means that price for the nickel will rise significantly in the future. Per Bloomberg, forecast from Citigroup puts the global deficit at 62,400 tonnes in 2015, with a possible increase to 103,600 tonnes in 2016.