The Nickel Mines Ltd (ASX: NIC) share price is gaining strongly again today, up 15.58% at 89 cents at the time of writing.
This comes after the company announced it had signed a memorandum of understanding (MoU) with Shanghai Decent Investment Co. The MoU indicates Nickel Mines will acquire a 70% interest in PT Angel Nickel Industry, a development project in Indonesia's North Maluku province.
Today's share price gains bring the company's gains to more than 31% so far in October. Year-to-date, the Nickel Mines share price is up 41%.
By comparison the All Ordinaries Index (ASX: XAO) is down 6% so far in 2020.
What does Nickel Mines do?
Nickel Mines is involved in both the production and processing of nickel. The company has a financial, operational and strategic partnership with China's Tsingshan Group, which is the largest stainless steel producer in the world.
Nickel Mines also owns an 80% interest in the Hengjaya Nickel and Ranger Nickel RKEF processing facilities in Indonesia, the world's largest vertically integrated stainless steel facility. In addition, the company holds an 80% interest in the long life, high-grade Hengjaya nickel mine, also in Indonesia. Nickel Mines has a market cap of $1.8 billion.
What was in the announcement?
The company said the Angel Nickel Industry (ANI) project would be a joint collaboration with Shanghai Decent Investment (SDI). SDI is Nickel Mines' largest shareholder.
The project comprises 4 "next-generation" 54 KVA1 rotary kiln electric furnace lines with an annual nameplate production capacity of 36,000 tonnes of nickel metal. There is also a 380MW coal-fired power plant, which the company says will reduce its nickel pig iron production operating costs with its secure and integrated power supply.
The MoU stipulates the Nickel Mines will acquire a 70% interest in ANI for US$490 million (AU$690 million). An initial 30% interest will be secured by the end of Q1 2021 for US$210 million. The remaining $280 million will be paid by the end of Q4 2021 for the additional 40% interest.
The company has already paid a US$10 million good faith deposit.
Nickel Mines managing director Justin Werner commented:
The acquisition of 70% of ANI will more than double Nickel Mines' attributable annual nameplate nickel metal production capacity and further cement Nickel Mines as a globally significant, low cost nickel producer.
Once again, this transaction represents a compelling investment opportunity and comes at a valuation that we believe is unrivalled in the global nickel market. For little over 40% of our current market capitalisation, we have the opportunity to double our nameplate production profile…
We will now work expediently to progress this MoU to a Definitive Agreement over the coming weeks and look forward to keeping the market informed on this exciting next step in our journey.
With global demand for nickel forecast to remain strong, the Nickel Mines share price is one to watch.
