Nico Resources (ASX:NC1) is wholly focused on its Wingellina Nickel-Cobalt Project (Wingellina or the Project). Wingellina is a fully owned, development-ready, large-resource project with a demonstrated ability to produce nickel and cobalt in Mixed Hydroxide Precipitate (MHP).
In Corporate Connect Research's (CCR)view Wingellina is the highest-quality nickel project in Australia with ore grade circa 1% NI, low operating costs (tier 1 globally), low-risk open cut mining (0.5:1 strip ratio), ideal chemistry and minerology for HPAL processing, long mine life and sustainable credentials. Nico shares are trading at a fraction of its listed nickelcobalt peer valuations and to our estimate of fair value.
Nico shares have been sold off in sympathy with the weakening nickel price since the beginning of 2023 caused by the volume of nickel coming out of Indonesia. There has also been ongoing negative news with some major nickel projects in Australia going into care and maintenance because of the soft nickel price. Despite the current adverse news cycle, due to its ideal minerology and chemistry. Wingellina is likely to be highly profitable even at cyclical low nickel prices of US$16,000/t and will prove to be decidedly competitive in the global markets.
The quality of the mine, the extremely positive long-term demand characteristics of the Nickel market and the geopolitical advantage of Australia means we believe that Wingellina will inevitably be developed. Battery companies and EV manufacturers will inevitably be looking to diversify nickel supply away from Indonesia and reduce their exposure to the volatile nickel price. Investing directly in low-risk jurisdictions and projects is the best way to achieve this.
Based on CCR's research, Nico can imminently sell an 80% interest in Wingellina for $1 billion and retain a 20% free carry on the project. As such, Nico has realistic ways to fund the Wingellina development that won't involve large dilutive equity capital raisings.
The IEA estimate that the global Nickel market will require 1 million extra tonnes over and above expected supply capacity by 2040 and Australia is in a wonderful position to become an important global player given our extensive nickel laterite resources and geopolitical advantages. The Inflation Reduction Act, introduced by the US Government in 2022, gives Australian sourced nickel a material advantage relative to Indonesian nickel for US companies (see page 18). Wingellina is the best prospect Australia has to provide critical minerals to the rapidly growing clean energy sector.
With the extremely experienced Board and management owning stock (that they have actually paid for with their own money!), their interests are perfectly aligned with shareholders. As such, they are focused on ensuring they pursue funding strategies that maximize value for shareholders.
The full report can be downloaded in the CCR website here or the ShareCafe website here.
