Motley Fool Australia

Here’s why the Nickel Mines (ASX:NIC) share price spiked 7% this afternoon

man holding hard hat and giving thumbs up representing rising mining asx share price
Image source: Getty Images

The Nickel Mines Ltd (ASX: NIC) share price took a rapid leap higher just before 2pm AEST today. Less than 20 minutes later, shares in the S&P/ASX 200 Index nickel miner had gained 7%.

Now even that spike wasn’t enough to put shares back in the black for the day. With the Nickel Mines share price having opened the day sharply lower, the share price remains down 4% in late afternoon trading.

What drove Nickel Mines 7% share price spike this afternoon?

Nickel Mines shares surged within moments of its ASX release announcing the company’s potential to diversify into the electric vehicle battery supply chain.

Earlier this week, the Nickel Mines share price fell almost 19% from market close on Wednesday through to midday today.

That came after Tsingshan Holding Group reported it had signed a 1-year contract “to supply 60,000 tonnes of nickel matte to Huayou Cobalt and 40,000 tonnes to CNGR Advanced Material Co. Ltd”.

Tsingshan said it had successfully concluded trial production of the high-grade nickel matte in Rotary Kiln Electric Furnace (RKEF) facilities in the Indonesia Morowali Industrial Park at the end of 2020 (IMIP).

Initially, Nickel Mines management was unsure how this development would impact its own operations in the Indonesia Morowali Industrial Park.

In today, ASX release, the company’s directors dispelled any concerns, writing, “The ability for Tsingshan to produce a high-quality nickel matte within the IMIP suitable for use in the EV battery supply chain is an overwhelmingly positive development for Nickel Mines.”

Nickel Mines highlighted the potential for it to sell high-grade nickel matte into the global battery nickel supply chain.

What did management say?

Commenting on the developments, Nickel Mines’ managing director Justin Werner said:

The potential for RKEFs to produce a nickel matte for use in the rapidly growing battery supply chain has long been spoken about so it comes as no surprise to us that Tsingshan is now set to establish this as a commercially viable option.

For Nickel Mines to potentially be part of this evolution in the nickel market is an exciting development for the company and our shareholders and will further enhance our standing as a globally significant nickel producer with a unique capability of delivering nickel units for use across a broad spectrum of nickel markets.

Werner added that this is all still playing out and there won’t be any immediate change in Nickel Mines’ operations.

Nickel Mines share price snapshot

Despite this week’s selloff, the Nickel Mines shares have been a star performer over the past 12 months, up 160%. That compares to a 5% gain from the ASX 200.

Year-to-date the Nickel Mines share price is up 13%.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…