Swelling Battery Demand Keeps Indonesian Nickel Sector Strong

June 11, 2019 08:00:18

NetworkNewsWire Editorial Coverage: Growth in demand for batteries is pushing up nickel production and economic change in Indonesia.

  • Nickel is an essential component in batteries, including those for cars and phones.
  • Demand for metals is growing, most importantly in China, a major battery manufacturer.
  • Indonesia is the world’s largest nickel producer.
  • The country is working to expand its manufacturing sector, attracting investment from multinational industry and mining giants.

To view an infographic of this editorial, click here.

Pacific Rim Cobalt Corporation (OTCQB: PCRCF) (CSE: BOLT) (PCRCF Profile) is making the most of Indonesian nickel through an aggressive exploration and development program there. VALE S.A. (NYSE: VALE), the world’s leading nickel producer, is also invested in Indonesia. Lundin Mining Corporation (TSX: LUN) (OTC: LUNMF), another leading nickel producer, relies on sources in America and Europe. Cobalt 27 Capital Corporation (TSX.V: KBLT) (OTCQX: CBLLF) has recently acquired access to a significant Pacific nickel resource in Papua New Guinea. One of the major drivers behind this demand for batteries is car production by companies such as Honda Motor Company Ltd. (NYSE: HMC), which is moving more of its work to China.

Building Better Batteries

The past twenty years has seen the demand for battery materials rise like never before. Mobile phones, laptops and hybrid cars are spreading around the world, along with a host of other electronic gadgets. All rely on batteries for their power, causing a spike in demand for the minerals used in these batteries.

This upward movement has created an opportunity for countries with rich nickel deposits, such as Indonesia. By reforming laws and opening up the sector to foreign investors, these countries are seeing a boost to their economies and growing influence on the global stage. The growing demand also creates promising potential for savvy companies who are willing to seize the opportunity to mine Indonesia’s mineral wealth.

The Need for Nickel

For mineral exploration companies such as Pacific Rim Cobalt Corporation (OTCQB: PCRCF) (CSE: BOLT), there’s never been a better time to work on nickel. Two trends are buoying up demand for battery minerals — green energy and high-tech gadgetry. Between them, these two trends are ensuring that the future is busy for nickel companies.

People around the world today live increasingly connected lives, thanks to the proliferation of electronic gadgets. From smartphones to laptops to watches that track fitness, first-world consumers and the rising middle class of the rest of the world are using portable technology around the clock. The portability of these powerful devices is made possible because of their rechargeable batteries, which rely upon elements such as nickel to work.

At the same time, the push for greener living is also giving batteries a boost. Electric and hybrid cars use powerful batteries in place of petrol or diesel — batteries that are essential for self-driving and driver assistance technology. National energy production networks, which increasingly use renewable energy to reduce pollution, need power storage solutions to see them through the ebb and flow of solar and wind power. Mining companies such as Pacific Rim Cobalt are emerging as vital parts in the creation of a cleaner environment.

For Pacific Rim Cobalt, this means continued development of the project with the goal of eventually producing cathode materials such as nickel to meet growing demand. Though tensions over President Donald Trump’s trade wars have softened metal prices in the short term, longer-term needs are essentially immune to presidential policies. Across Asia in particular, demand for battery materials keeps rising, and the market’s long-term strength seems assured.

Indonesia: A Nickel Powerhouse

To make the most of this market, Pacific Rim Cobalt has been operating in Indonesia, the largest nickel-producing nation in the world. With cobalt being a byproduct of nickel production, Indonesia remains in the running to potentially become the largest source of this critical battery mineral outside of Africa.

The Cyclops Project, located in northern Indonesia, is the current focus of Pacific Rim Cobalt’s nickel operations. The project is in its early stages, with 20 step-out holes already drilled to gather information about the mineral resources in the region. The company has just announced (June 6) the commencement of Phase 2 drilling at Cyclops with a goal of completing up to an additional 50 holes. Combined with historical estimates, this information will allow the company to establish a maiden compliant (NI 43-101) resource on the project and determine how best to go about extracting those resources. Up to this point, drilling has confirmed elevated nickel and cobalt values, demonstrating a potentially highly profitable mining site.

The Cyclops site was carefully chosen from among available options in Indonesia. “The Cyclops Project was acquired following extensive due diligence on over 40 projects across Indonesia,” said Pacific Rim CEO Ranjeet Sundher. “We expect the near-surface nature of cobalt and nickel mineralization at the Cyclops Project will lend itself well to low-cost, logistically straightforward drilling. We anticipate the opportunity to undertake a resource calculation study, as well as ongoing metallurgy and process option testing, will present itself in the near future.”

The abundance of mineral deposits isn’t the only thing that makes Indonesia and, in particular, its north coast an attractive place for nickel mining. It’s also location. Close to China, Indonesia is in an ideal position to supply its neighboring country’s huge battery-production market. Chinese batteries play an essential part both in their home country’s embrace of modern technology and in exports to the rest of the world. Chinese companies are becoming leaders and innovators in telecoms and electric cars, making this an important market for nickel producers.

Good transport links are key to making the most of mineral extraction. Whether it’s the solid road connections around Pacific Rim Cobalt’s project or the maritime trade connections between Indonesia and China, these dynamic elements ensure that Indonesia — and the companies working within the country — can make the most of its mineral resources.

Opening Up Markets

Indonesia, however, has set its sights on becoming more than just a resource base. The country’s Industry Minister, Airlangga Hartarto, has identified a bold agenda. The government’s plan is to build Indonesia into a regional manufacturing powerhouse, turning its own raw resources into consumer goods. This strategic move could create even more opportunities for companies already in the country, such as Pacific Rim Cobalt.

The government’s goal is not just a grand statement of intent. Plans are afoot to revise labor laws and open up various parts of the economy to foreign involvement. These moves are expected to make the country even more attractive to investors, whose money can drive the development of the manufacturing base.

The abundance of nickel ore will be one of the draws for these investors. This rich resource will remain a unique selling point for Indonesia, as manufacturing within the country appears certain to reduce transport costs associated with acquiring the mineral and allow greater efficiencies in the end-to-end battery production process.

With ongoing demand from China and the development of strong internal markets, nickel companies working in Indonesia almost certainly will see demand for their products continue to rise. By tapping into buried deposits, both Indonesia and the companies operating in the country appear certain to profit. This promising future is what companies such as Pacific Rim Cobalt are banking on.

Pushing Up Nickel Production

Another of the companies heavily invested in Indonesia is VALE S.A. (NYSE: VALE). The world’s leading nickel producer, Vale is pumping billions into its Indonesian operations, with the aim of unleashing the country’s potential for both nickel and cobalt. The company also has extraction operations in Brazil, Canada, and New Caledonia as it explores some of the world’s most valuable mineral sites. With one eye on the ground and one on the international markets, Vale has been building up its Indonesian operations as a source of exports to the lucrative Chinese markets. The company has also been building ties with Chinese industry.

Like Vale, Lundin Mining Corporation (TSX: LUN) (OTC: LUNMF) extracts a variety of minerals from sites around the world. With operations in Chile, the United States, Portugal and Sweden, the country has access to different markets and mineral resources, with nickel as one of its leading products. Lundin recently announced the acquisition of the Chapada copper mine in Brazil. In addition to copper, the mine will provide gold, which plays a part in some of the same electronic devices as nickel and cobalt.

Cobalt 27 Capital Corporation (TSX.V: KBLT) (OTCQX: CBLLF) provides an investment vehicle for those looking to put their money into battery metals, including the technologies behind energy storage and electric vehicles. The company recently completed the acquisition of Highlands Pacific Limited, and included with that acquisition was control of a share in the Ramu mining operation on the north coast of Papua New Guinea. Like Pacific Rim Cobalt’s investment in Indonesia, this move puts Cobalt 27 in a strong position to export to China. The Ramu operation itself was founded by a Chinese company, alongside which Cobalt 27 will now work.

The hunt for battery metals is made more urgent by the work of car manufacturers such as Honda Motor Company Ltd. (NYSE: HMC). Not only is Honda working on more hybrid and electric cars, but the company is moving part of its operations to China as a result of the escalating trade war. This will boost China’s growing battery industry along with the country’s demand for Indonesian nickel.

As battery demand continues to grow, so will Indonesia’s nickel industry — and the countries involved in that industry.

For more information on Pacific Rim Cobalt Corp., visit Pacific Rim Cobalt Corp. (OTCQB: PCRCF) (CSE: BOLT)

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