ARM considers restarting options at Nkomati Nickel following 42% price surge

AFRICAN Rainbow Minerals (ARM) may restart production at Nkomait Nickel operations in South Africa’s Mpumalanga province following an improvement in the price of the metal.

Mike Schmidt, CEO of ARM, said last week at the group’s interim results presentation the company was also considering options regarding underground mining at Nkomati.

“We’ve always said we put the mine on care and maintenance and wait for better prices,” said Schmidt. “The questions raised is ‘you’ve got the good prices, what now?'”.

“So, we are busy with study options with our partner and we are considering a number of options in terms of the way forward,” said Schmidt.

“The recent rally in nickel may not be entirely market driven; there may be other fundamental changes. We do need to understand the market fundmanetals and [if] prices are sustainable,” he added.,

Schmidt said the otion of going underground – which he described as “a very large resource that can last for 20 years” – was currently “under study”.

ARM owns Nkomati Nickel on a 50/50 basis with Norilsk Nickel (Nornickel), the Russian platinum group metals producer which has seen its share price dive nearly 90% in the last month following the beginning of Russia’s invasion of Ukraine.

ARM and Nornickel decided to put Nkomati in mothballs in 2019 after it reported losses. ARM wrote up a R890m impairment against the asset in that year.

Nickel is considered a critical metal in the manufacture of electric vehicle batteries. Demand growth totalled 16% last year and was expected to grow again, by about 8%, in the current year to 2.89 million tons, according to a report by Morgan Stanley.

“Looking specifically at nickel electric vehicle demand, we forecast this to grow by 70,000 tons (about 55% year-on-year) this year, and see it expanding with a 40% compound average growth rate through the 2020s, reaching a demand-share of 25% by 2030,” the bank said in its report.

At $26,489/t, the price of nickel is 27% higher year to date and 42% higher year-on-year. It is the second only to aluminium in best performing base metals over the last year.

Last week, ARM reported a 27% year-on-year decline in interim headline share earnings to R18,87/share. It declared an interim dividend of R12/share.