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Nickel is present in over 3000 different alloys that
are used in over 300,000 products for consumer, industrial, military, transport/aerospace, marine and architectural
applications.
Nickel's biggest use, about 65%, is in alloying -
particularly with chromium and other metals to produce stainless and
heat-resisting steels. Its primary function is to stabilize the austenitic
(face-centered cubic crystal) structure of the steel. Normal carbon steel
will, on cooling, transform from an austenite structure to a mixture of
ferrite and cementite. When added to stainless steel nickel stops this
transformation keeping the material fully austenite on cooling. Austenitic
stainless steels have high ductility, low yield stress and high tensile
strength when compared to carbon steel - aluminum and copper are examples of
other metals with the austenitic structure.
Another 20% is used in other steels, non-ferrous alloys
(mixed with metals other than steel) and super alloys (metal mixtures
designed to withstand extremely high temperatures and/or pressures or have
high electrical conductivity) often for highly specialized industrial,
aerospace and military applications.
About 9% is used in plating to slow down corrosion and
6% for other uses, including coins, electronics, in *batteries for portable
equipment and hybrid cars, as a catalyst for certain chemical reactions and
as a colorant - nickel is added to glass to give it a green color. In many of
these applications there is no substitute for nickel without reducing
performance or increasing cost.
*Rechargeable nickel-hydride batteries are used for
cellular phones, video cameras, and other electronic devices. Nickel-cadmium
batteries are used to power cordless tools and appliances.
The U.S. Department of Energy (DOE) has funded a
variety of programs designed to encourage more rapid development of renewable
energy sources. Specific research and development projects included:
- domestic manufacturing of advanced batteries
- development of improved stationary and portable
fuel cell power systems
- development of commercial scale bio-refineries
- improved design of molten salt storage facilities
at power plants that concentrate solar energy
- design and evaluation of parabolic troughs,
dishes, and heliostats for solar power stations
- construction of demonstration facilities designed
to recover and better utilize geothermal energy
All of these expanding subsectors for generating power have
the potential to be important users of nickel metal and or nickel-bearing
alloys.
 
Nickel Deposits Come in Two Forms
Nickel deposits are generally found in two forms: sulphide or laterite. About 60% of the world's known
nickel resources are laterites. The remaining 40% are sulphide
deposits.
Nickel Sulphide Deposits -
the principal ore mineral is pentlandite (Fe,Ni)O(OH) - are formed from
the precipitation of nickel minerals by hydrothermal fluids. These sulfide
deposits are also called magmatic sulfide deposits. The main benefit to sulphide ores is that they can be concentrated using a
simple physical separation technique called flotation. Most nickel sulfide
deposits have traditionally been processed by concentration through a froth
flotation process followed by pyrometallurgical
extraction.
Magmas (magma is a mixture of molten rock, volatiles
and solids that is found beneath the surface of the Earth - Lava is the
extrusive equivalent of magma) originate in the upper mantle and contain
small amounts of nickel, copper and PGE. As the magmas ascend through the
crust they cool as they encounter the colder crustal rocks.
If the original sulfur (S) content of the magma is sufficient,
or if S is added from crustal wall rocks, a sulphide liquid forms as droplets dispersed
throughout the magma. Because the partition coefficients of nickel, copper,
iron and Platinum Group Elements (PGE) favor sulphide
liquid these elements transfer into the sulphide
droplets in the magma. The sulphide droplets sink
toward the base of the magma because of their greater density and form sulphide concentrations. On further cooling, the sulphide liquid crystallizes to form the ore deposits
that contain these metals.
There are two main types of nickel sulphide
deposits. In the first, Ni-Cu sulphide deposits,
nickel (Ni) and copper (Cu) are the main economic commodities - copper may be
either a co-product or by-product, and cobalt (Co), Platinum Group Elements
(PGE) and gold (Au) are the usual by-products.
The second type of deposit is mined exclusively for
PGE's with the other associated metals being by-products.
Nickel sulphide deposits can
occur as individual sulphide bodies but groups of
deposits may occur in areas or belts ten's, even hundreds of kilometers long.
Such groups of deposits are known as districts. Two giant Ni-Cu districts
stand out above all the rest in the world: Sudbury Ontario, and Noril'sk-Talnakh, Russia.
The most important platinum-rich PGE district in the
world is the Bushveld Complex, South Africa. The
second PGE district in importance is the Noril'sk-Talnakh
district, which is exceptionally Palladium (Pd)
rich as a by-product of its Ni-Cu ores.
Nickel Laterite deposits - principal ore minerals are nickeliferous limonite (Fe,Ni)O(OH) and garnierite (a hydrous nickel
silicate) - are formed from the weathering (nickel sulphides
are converted to oxide ores) of ultramafic rocks and are usually operated as
open pit mines. There is no simple separation technique for nickel laterites.
The rock must be completely molten or dissolved to enable nickel extraction.
As a result, laterite projects require large economies of scale at higher
capital cost per unit of capacity to be viable. They are also generally much
higher cash-cost producers than sulphide
operations.
Roughly 60 percent of global available nickel is in laterite
deposits - a deposit in which weathering of ultramafic rocks has taken
place. The initial nickel content is strongly enriched in the course of lateritization - under tropical conditions fresh rock
weathers very quickly. Some metals may be leached away by the weathering
process but others, such as aluminum, iron and nickel can remain.
Typically nickel laterite deposits are very large
tonnage, low-grade deposits located close to the surface. They tend to be
tabular and flat covering many square kilometers. They are most often in the
range of 20 million tonnes and upwards, with some
examples approaching a billion tonnes of material.
Laterite deposits usually contain both an upper dark
red limonite (higher in iron and lower in nickel, magnesium and silica) and
lower bright green saprolite zone (higher nickel,
magnesium and silica but lower iron content). Due to the different quantities
of iron, magnesium and silica in each zone they must be processed differently
to cost-effectively retrieve the nickel.
Laterite saprolite (higher
nickel, magnesium and silica but lower iron content) orebodies
are processed with standard pyrometallurgical
technology.
However a laterite limonite zone is higher in iron and
lower in nickel, magnesium and silica, which means using High Pressure Acid
Leaching (HPAL) technology.
HPAL (which has up to now enjoyed a highly mixed
performance record) involves processing ore in a sulphuric
acid leach at temperatures up to 270ºC and pressures up to 600 psi to
extract the nickel and cobalt from the iron rich ore - the pressure leaching
is done in titanium lined autoclaves.
Counter-current decantation is used to separate the
solids and liquids. Separating and purifying the nickel/cobalt solution is
done by solvent extraction and electrowinning.
Production
Today, nickel sulfide deposits are the primary source
of mined nickel - about 58% of world's nickel production
come from nickel sulfide and 42% of mined nickel comes from nickel
laterite deposits. The majority of today's nickel is produced from sulphide deposits because they are easier and cheaper to
mine and process than lateritic ore.
However, known sulphide
deposits, which are large in scale and of higher nickel grade, are depleting.
The trend of future nickel production is changing
because of the current lack of high quality nickel sulfide exploration
targets - nickel laterites are most likely to be developed as the world's
future primary nickel sources.
Three countries dominate the top three spots in terms
of nickel deposits:
Russia is the world's leading country for nickel
production and Russian mining giant Norilsk Nickel is the world's largest producer.
Most of the countries nickel production (an amazing one-fifth of global
production) is from Norilsk - the largest nickel sulfide deposit in the
world.
Canada is the world's second largest nickel producing
country. Most of the country's nickel currently comes from the Thompson
Nickel Belt in Manitoba, the Sudbury Basin of Ontario, and the Ungava
peninsula of Quebec.
Australia is the world's third most important producer
of nickel. The country primarily exports its nickel products to Europe, Japan
and the United States.
Capital Intensity
Capital inputs account for about half the total costs
in mining production - the average for the economy as a whole is 21 per cent.
Obviously many of the costs, once incurred, cannot be recovered by sale or
transfer of the fixed assets.
Mining is an extremely capital intensive business for
two reasons. Firstly mining has a large, up front layout of construction
capital called Capex - the costs associated with
the development and construction of open-pit and underground mines. There are
often other company built infrastructure assets like roads, railways,
bridges, power generating stations and seaports to facilitate extraction and
shipping of ore and concentrate. Secondly there is a continuously rising Opex, or operational expenditures. These are the day to
day costs of operation; rubber tires, wages, fuel, camp costs for employees
etc.
Capex costs are escalating because:
- Declining ore grades means a much larger relative
scale of required mining and milling operations
- A growing proportion of mining projects are in
remote areas of developing economies where there's little to no existing
infrastructure
The bottom line? It is becoming increasingly expensive
to bring new mines on line and run them. The same trends are also evident for
new nickel mines, where capital intensity has gone through the roof:
- Capital costs on a per pound basis escalating
rapidly over the last decade
- The discrepancy between the initial per pound
capital cost of nickel projects, and the ultimate construction costs,
are over 50 percent
- Economies of scale have not been reflected by
lower unit capital costs - large projects have similar or even higher
capital intensity
As written earlier in the article global nickel supply
is increasingly going to come from laterite nickel deposits, and the
high-pressure acid leach (H-Pal) plants to treat the ore require much bigger
investments - there is often significant cost and technical challenges
associated with laterite projects.
We are now looking at north of $35/lb
capital intensity as we move into these very large ferronickel and H-Pal
projects that are requiring many billions of dollars to build.
Key nickel projects going forward are:
Vale's New Caledonia (Goro)
is many years behind schedule. The Goro nickel project
in New Caledonia has become the bad boy poster child for the assortment of
problems associated with HPAL technology. Minority partners Sumitomo and
Mitsui have reduced their participation in the project.
Vale's Onca Puma project, a
ferronickel producer, has been completely shutdown.
Vale has said that a return to production is not yet scheduled.
Xstrata's Koniambo - In 2007 capex was set at US$3.8b, in August of 2011 it was
revised upwards to US$5b. According to Xstrata the increased cost was because
of increased labor costs from competition from the oil and gas sectors for a
limited labor pool on a remote island. First pour was slated in the second
half of 2012, there has been no news from the
company.
US$5b/60,000t capacity = $41.66lb capital intensity.
Sherritts Ambatovy - Sherritt has run into permit delays at its US$5.5-billion
Ambatovy nickel-cobalt project in Madagascar. The
company revealed on July 25 that it had received notice from Madagascar's
transitional government indicating there would be a subsequent review of the Ambatovy operational permit. Sherritt's
commercial deadline at Ambatovy has been pushed
back.
US$5.5b/60,000t capacity = $45.83lb CI
In cost cutting moves Xstrata closed its Cosmos mine in
Australia, Vale shuttered its Frood mine in Canada
and BHP Billiton has been trimming costs at its Australian operations.
In September Anglo-American closed its 17,000 tonne per year Loma de Niquel
mine (a ferronickel producer in Venezuela) because of disputes over mining
concessions.
Nickel Pig Iron
Chinese sulphide nickel ore
supply was insufficient to support demand from its stainless steel industry
so they began direct shipping nickel laterite ore from the Philippines,
Indonesia and New Caledonia into the country to produce a low-nickel,
high-iron product called nickel pig iron or "NPI" that is used as a
feedstock for stainless steel mills in China. In 2011, over 25 million tonnes - 53% of China's total imported nickel ore - came
from Indonesia.
Indonesia (the world's top exporter of nickel ore)
enacted an export tax system, effective May 6, 2012, under which a 20% export
tax is levied on 14 raw ores of Indonesian origin, including nickel - the
result was to drive hundreds of small miners out of business and sending
Chinese laterite buyers elsewhere. This is the first step by Indonesia
towards a full ban on the export of minerals that is scheduled to begin in
2014.
Indonesia's first nickel pig iron smelter recently
began initial production of about 1,000 tonnes of
ingots a day. The Indoferro smelter will be the
first of several different kinds of mineral smelters as the Indonesian
government forces operators downstream into value-added production through a
combination of an outright ban on exports of nickel (and other ores) ore and
higher taxation for approved shippers.
Consider:
- 35 years of underinvestment equals few new large
scale greenfield nickel sulphide
exploration discoveries - since 1990, the only large greenfield
discoveries that have occurred, happened when exploration was going on
for other metals: Voisey's Bay diamond
exploration, Kabanga was gold exploration and
when Enterprise was discovered they were looking for copper. Very little
project development and exploration has been done over past few years
for nickel, the result has been a very limited pipeline of new projects,
especially lower cost sulphide projects in
geo-politically safe mining jurisdictions
- Increased political risk, population and economic
growth are causing the exploitation of lower grade larger deposits in
geo-politically riskier countries. Mineral deposit distribution is
log-normal - a few large deposits control supply. Generally sulphide deposits are found in more politically
stable jurisdictions (e.g. Canada, Australia, Greenland) versus laterite
deposits (Indonesia, Philippines, PNG, New Caledonia, many parts of
Africa)
- In 2010 Chinese nickel consumption was .4 kilogram
per capita, Germany was at 1.3 and Japan was the same. If the Chinese
were to consume nickel at the same rate as Germans and Japanese Chinese
nickel demand would increase by over one million tonnes
- Collapse of former Soviet Union demand (20% of
world total) provided supply during 1990s. Ni pig iron and demand
destruction in 2000-10 closed gap caused by lack of new supply from weak
project pipeline development.
- Inherently, sulphide
minerals require much less energy to liberate nickel than laterites -
Nickel sulfide flash smelt +SG ref: 114 MJ/kg (0.39 gal/lb), Nickel laterite pressure acid leach:194 MJ/kg
(0.66 gal/lb)
- China is the leading consumer of nickel and is
competing for supplies with US industrial demand, as well as India,
Russia and Brazil. Exploration and development are subject to bubbles -
boom to bust to boom. Capital Requirements are huge and the time
required to bring in new capacity is measured in decades
- Technology is leading to the use of more and more
exotic minerals, this causes an increase in refining - metallurgy
(extraction of mineral) gets more complex and energy intensive, more
expensive. Over the longer term prices are dependent on technology
keeping ahead of resource depletion. So far technology has been winning
the race but with the increasingly lower grades of ores now being mined
energy becomes more and more of a factor when considering economics. The
cost of energy is climbing, the amount used is climbing but the returns from energy expended is declining. Eventually
the quantity of resources used in the extraction process will be 100% of
what is produced
- Global demand growth is dominated by China, China's nickel demand is expected to increase
by 4-8% per year going forward. North American demand is expected to
increase by 6-7% per year. With the current market so tight production
delays, for any reason, even if only for a short period of time, could
result in even tighter markets and much higher prices
Conclusion
Nickel laterite deposits were first discovered in 1864
by French civil engineer Jules Garnier in New
Caledonia - commercial production started in 1875. New Caledonia's laterites
were the world's largest source of nickel until Sudbury Ontario's sulphide deposits started production in 1905 and totally
dominated global production.
Mining companies are now stepping back in time and are
shifting exploration efforts to ever more remote, geo-politically challenged
locations in a search for laterite ore because of a lack of discovery of new
nickel sulfide deposits.
Ask yourself, "when is the best time to
invest?"
While you mull over that question here's five facts for
you:
- Nickel is currently unloved
- There aren't any nickel names left. Without Inco
or Falconbridge, who do you invest in if you want nickel? The largest
nickel producing companies, Norilsk, Vale and Xstrata don't actually
provide a lot of leverage to nickel as they are diversified miners -
meaning they also produce iron, manganese, bauxite, aluminum, copper,
coal, cobalt, potash, platinum-group metals, gold and silver
- Every country needs to secure supplies of needed
commodities at competitive prices yet supply is increasingly constrained
and demand is growing
- All of a sudden, in the not too distant future,
juniors exploring for nickel from sulphide ore
deposits will become much more interesting. Especially so if they are
working in geopolitically stable countries
- Pure junior sulphide
nickel exploration plays aren't common
Is there a junior
sulphide nickel play, exploring on a district
sized scale in a geo-politically safe jurisdiction, on your radar screen?
If not, maybe there should be.
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