Alliance Nickel has long flown under the radar, despite its ownership of one of the largest undeveloped nickel deposits in Australia.

Formerly known as GME Resources before a name change last week, that is no longer the case for Alliance Nickel (ASX:AXN) which signed a non-binding MoU with auto giant Stellantis last year and is now being watched closely by Australia stockbrokers.

That shift in perception has been picked up by analysts at Fosters Stockbroking who say the rapid emergence of the EV industry and its thirst for nickel have completely changed supply-demand dynamics for the battery material.

With its JORC resource of 85.2Mt at 1.03% nickel and 0.065% cobalt for 878,000t of contained nickel, Fosters analysts said in a note last week that will the NiWest nickel laterite deposit has been around for several years, a “confluence of positive factors over the past year has accelerated momentum”.

The next Murrin Murrin?

Located just 30km from Glencore’s massive Murrin Murrin mine, one of the largest nickel and cobalt producers on the planet, NiWest boasts similar geology to the global supermajor’s long standing operation.

While Murrin Murrin took years to hit nameplate capacity of ~40,000tpa as it ramped up early generation high pressure acid leach technology, AXN has been developing its knowledge on ambient acid heap leach.

That has gradually been seen as a viable alternative to the higher capex HPAL process to treat lateritic nickel orebodies, Fosters say, with the process now operating in tandem with HPAL at Murrin Murrin, with AXN also completing its own testwork.

Murrin Murrin has also treated third party ore before, with the scale of NiWest evident in a July 2022 PFS that showed robust metrics of a 27 year mine life, with low strip ratio of 2x at its 2.4Mtpa nameplate capacity.

“Assuming nickel price of US$11.00/lb – below US$12.27 spot – yielded NPV8 post-tax of A$2,079M at an of IRR 23.0%, with  AISC of US$4.15/lb and pre-production capex A$1,261M,” Fosters noted.

“Murrin Murrin mine has treated third party ore, and this may be a potential second option for GME to accelerate NiWest into production.  Other resource houses may look at GME for its scale.”

Despite this Alliance has a market cap of just over $60m. Fosters notes this is around 3% of project NPV, below half of the laterite peer average of 6%.

Building the EV revolution

It has been realised in recent years that the EV revolution which has become all-encompassing in the transport sector will spur a massive uptick in demand for nickel, cobalt and copper, leading to the development of mines that may not have been required in the old paradigm where nickel largely supplied stainless steelmakers.

“Probably the most important change since the inception of the NiWest project has been the rapid emergence of the EV industry and its insatiable demand for battery grade nickel,” Fosters noted.

“This has irrevocably changed supply-demand dynamics, with increasing impetus for new long-life nickel projects’ such as NiWest to be developed.”

That was a driving force behind the Stellantis deal to announce the offtake plans for NiWest, which could produce around 90,000tpa of battery grade nickel and cobalt sulphate.

Stellantis is looking for sources of nickel for its batteries at its US operations that will enable it to apply for the subsidies contained within the Inflation Reduction Act. The major Biden Administration policy will provide incentives for EV producers to source materials from mines in the USA or trading partners with free trade agreements like Australia.

“Stellantis non-binding offtake provides external vindication from a leading global automaker,” Fosters analysts said.

“No doubt it is attracted to the large scale resources in a Tier 1 jurisdiction that has a US FTA, allowing it tax credits available under the Inflation Reduction Act for its US plants.

“Stellantis is seeking to reach 100% of passenger EV sales in Europe and 50% in US by 2030.”

While the offtake MoU, which remains non-binding, provides corporate backing for Alliance, offtake remains formally uncommitted, meaning a number of options are open for AXN to leverage for access to project of corporate funding for the 100% owned NiWest.

On top of that, the addition of Paul Kopejtka as MD has given it a high degree of corporate muscle and development experience.

“Paul Kopejtka commenced as new MD in September 2022, bringing a fresh approach and proven development record to accelerate project momentum,” Fosters analysts said.

“He was previously founder of Murchison Metals, overseeing the development of the Jack Hills iron ore project into production and entering it into a JV with Mitsubishi Corporation.“

Catalysts to come

A number of future events have been picked out as major catalysts for Alliance Nickel.

Along with the binding offtake with Stellantis and other agreements, project funding announcements could also be in the works.

Most importantly, there is the DFS, which is scheduled for the fourth quarter of this calendar year.

A number of key appointments were made by Alliance and engineering partner Ausenco last week to progress the DFS.

North American company EXP will carry out design and cost estimation of the sulphuric acid plant for NiWest.

The acid plant is a critical piece of infrastructure, which will produce sulphuric acid for the Heap Leach process by consuming elemental sulphur and in the process, produce steam for power generation.

Alliance believes electricity from the acid plant means NiWest will have a low energy intensity (~80 MJ/kg Ni), leading to significant cost and environmental benefits.

Meanwhile, globally recognised firm Knight Piésold has been appointed to undertake design work for the heap leach area, residue storage facilities and site-wide water management structures and mining consultancy firm SRK has been appointed to carry out the resource modelling for the project.

 

 

 

This article was developed in collaboration with Alliance Nickel, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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