The Independence Group NL (ASX: IGO) share price rallied to a more than one-year high on Wednesday on the jump in the nickel price and after the miner announced positive exploration results at its Lake Mackay joint venture (JV) project.
The IGO share price jumped 3.6% to $5.18 ahead of the close and is the fifth best performer on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index with the Elders Ltd (ASX: ELD) share price, Austal Limited (ASX: ASB) share price, Western Areas Ltd (ASX: WSA) share price and BlueScope Steel Limited (ASX: BSL) share price taking the top four spots, respectively.
While today's outperformance in the Independence Group share price will give shareholders something to smile about, it only lifts the stock to around 7% over the past 12 months – the same level as the ASX 200 benchmark and well behind the circa 30% gain by big miners like the BHP Group Ltd (ASX: ASX: BHP) share price.
Can this laggard play catch-up?
This leaves room for Independence Group to run higher in my view and the surge in the nickel price to its highest level in a year and the latest announcement that Lake Mackay holds more copper and cobalt than expected could help it close the gap.
The bout of nickel buying is driven by worries that the commodity, which is used in electric vehicle batteries, could be in short supply.
However, there are mixed views on the outlook for nickel and this is one of the reasons for Independence Group's underperformance, in my view.
But make no mistake, it's the nickel price that is driving the stock's outperformance today more than the exploration announcement. Nonetheless, the drilling results at Lake Mackay could be significant in the longer-term as it will help the miner diversify its minerals base.
Lake Mackay could run deep
Independence Group's junior partner in the JV who is leading the drilling campaign, Prodigy Gold NL (ASX: PRX), suspects there could be multiple ore bodies across Lake Mackay.
The latest discovery at the Phreaker prospect is well south of the project. This is in addition to an earlier successful drilling campaign at the north of the project.
"Drilling at Phreaker has defined mineralisation over 250m vertically," said Prodigy Gold's Managing Director, MattBriggs.
"This is more than double that seen at Grapple and the modelled conductor associated with the EM anomaly is 1km long making this a sizable target. Drilling is planned to test the length of the target on a 200m spacing to confirm continuity of the sulphide and to explore for thicker and/or higher grade zones."
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