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- Can you invest in nickel? Yes you can! Here are seven companies with significant nickel mining operations.
- Vale S.A. (VALE): Expects a 9% annual increase in nickel production in 2022.
- Glencore (GLNCY): Marketed 8% of global nickel production in 2021.
- Sherritt International (SHERF): A near pure-play nickel stock that has more than doubled so far this year.
- Lundin Mining (LUNMF): Earn a 3.3% yielding dividend while participating in a nickel upside.
- Centaurus Metals (CTTZF): Expects to produce 20,000 metric tons of nickel per annum by 2024.
- Panoramic Resources (PANRF): The company's Savannah resource estimate includes 209,800 metric tons of nickel.
- Canada Nickel Company (CNIKF): Could produce "NetZero" nickel and cobalt to supply North American battery makers.
It was already on a sustained up-trend for nearly three years, but nickel's sudden price surge in 2022 has made the base metal too attractive to the retail investor community to ignore. A short squeeze triggered the historic turmoil in nickel futures trading recently as the Russia-Ukraine conflict distorts global nickel trading, but a long-term electric-vehicle linked demand surge makes nickel stocks good investments to consider right now.
Tesla (NASDAQ:TSLA) founder Elon Musk shared his concerns on nickel prices and production in 2021. Come 2022, nickel futures prices exploded. Honestly, the recent 250% price spike in nickel futures in two trading sessions on the London Metal Exchange (LME) to hit the $100,000 per metric ton mark in March is by no means a bullish indicator to invest in nickel.
However, rising demand growth from electric vehicle battery manufacturers, global economic growth and increasing construction activity could combine to support strong nickel prices. Although the Nickel Institute claims that about 72% of global nickel production is primarily used in stainless steel manufacturing and just 7% is used in batteries, growing electric vehicle battery production could lift nickel demand significantly going forward.
Before we get down to potential nickel investment plays to consider, it's important to highlight the volatile nature of nickel trading. As a base metal, nickel prices are closely linked to global economic activity. Any economic recessions may heavily impact its demand and weaken its prices.
The biggest threat to an investment in nickel today is Indonesia's rapid production growth. Indonesia is the largest nickel-producing country in the world. Its nickel production levels increased from just 130,000 metric tons in 2015 to an estimated 1,000,000 metric tons in 2021. Any excess supplies of the base metal could weaken its average prices and trigger a plunge in nickel stocks.
That said, investors bullish on nickel price growth can participate in its upside in several ways.
They can invest directly in the metal through the futures market or trade options on nickel futures contracts. Another less common alternative could involve buying physical nickel bars, taking delivery and suffering persistent storage and security costs throughout the holding period. The easiest way to invest in nickel is through buying stocks of nickel mining companies, processors and key players in the nickel value chain.
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Below is an assortment of seven nickel stocks investors could consider. They range from diversified multibillion-dollar mining and commodity trading giants to very small development stage pure-plays that could offer better upside yet with higher equity risk.VALE Vale S.A $15.76 GLNCY Glencore $11.69 SHERF Sherritt International 58 cents LUNMF Lundin Mining $9.12 CTTZF Centaurus Metals $1.13 PANRF Panoramic Resources 26 cents CNIKF Canada Nickel Company $1.76
Vale S.A. (VALE)
Brazil-based Vale S.A. (NYSE:VALE) is a diversified mining house that's the second-largest nickel producer in the world. VALE stock price has risen 13% year-to-date as commodity prices rallied in 2022. Vale's major revenue source is iron ore mining, but its base metals division is dominated by nickel mines and smelters, with some copper exposure on the side.
Although pure nickel sales constituted 10% of total revenue from continuing operations in 2021, Vale is a significant player in the nickel value chain globally. The company produced 168,000 metric tons of nickel last year. Management's production guidance for 2022 includes a potential 9% year-over-year increase in nickel production to between 175,000 and 190,000 metric tons in 2022.
Vale stock is a value play with a low trailing price-to-earnings (P/E) multiple of 3.2. Shares could attract better valuation multiples as the company disposes of its coal business to improve its environmental, social and governance (ESG) profile this year.
Most noteworthy is Vale's investor-friendly capital return programs. These include a generous dividend policy (recent dividends yield 14% annually) and a commitment to share repurchases that bolster shareholder returns.
Global mining and commodities trading giant Glencore's (OTCMKTS:GLNCY) stock price has gained 16% so far this year as commodity prices outperformed most assets in early 2022. It ranks high as a cobalt stock to buy, and Glencore stock could rise further as its significant exposure to other key EV battery materials nickel and copper gives investors a huge opportunity to capture the EV growth upside.
Glencore produced 102,300 metric tons of nickel from owned sources in 2021 and its marketing division sold 202,000 metric tons of the base metal last year (about 8% of total global nickel production). Nickel's marketing volumes surged 36% year-over-year during the past year. Management guides for about 12% annual growth in nickel production to 110,000 to 120,000 metric tons in 2022.
Most noteworthy, the company is developing what it calls "next-generation nickel mines" in Canada, an investor-friendly mining jurisdiction. Commissioning could take place in 2024-25.
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Higher productivity and firmer prices in 2022 and beyond make Glencore a good nickel stock to buy right now. Investors could capture a 4.3% yielding dividend while waiting to capture a promising nickel upside.
Sherritt International (SHERF)
Sherritt International's (OTCMKTS:SHERF) stock price has rallied by 77% so far this year as nickel and cobalt prices shot through the roof. Investors can invest in nickel by buying Sherritt stock.
Through a joint venture with a Cuban nickel company, Sherritt mines for nickel in Cuba and runs high-purity nickel and cobalt refinery operations in Canada. In a recent 2022 production guidance provided in February, Sherritt expects nickel production to increase from 31,184 metric tons in 2021 to between 32,000 and 34,000 metric tons in 2022.
The company has an energy production business in Cuba that provides variable distributions and some fertilizer and related product sales.
However, it's the nickel and cobalt line that management seems overly focused on right now, and there are plans to grow nickel and cobalt annual production capacity by 20% and extend the mine's life beyond 2040.
Lundin Mining (LUNMF)
Canadian base metals miner Lundin Mining (OTCMKTS:LUNMF) is another nickel play one could buy and hold as base metals take a price leap forward in 2022.
Lundin Mining primarily produces nickel, copper, zinc and gold from its mines located in Brazil, Chile, Portugal, Sweden and the United States. Its Eagle mine in Michigan produced nearly 18,400 metric tons of nickel in 2021. Nickel comprised 8% of Lundin Mining's total annual revenue in 2020 and 2021.
Most concerning though is management's current nickel production guidance for the next two years. Lundin Mining guides nickel production for 2022 to decline to 15,000 to 18,000 tons, 13,000 to 16,000 metric tons in 2023 and a further decline to 9,000 to 12,000 metric tons by 2024.
Now that the company is growing its copper, zinc and gold assets through an acquisition this year, nickel's contribution to total financial performance could significantly decline over the next few years.
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That said, investors in Lundin Mining stock do get diversified exposure to base metals upside and a 3.6% yielding dividend.
Centaurus Metals (CTTZF)
Australia-based Centaurus Metals (OTCMKTS:CTTZF) markets its stock to investors as "a rare opportunity to invest in a rapidly unfolding high-grade nickel sulphide growth story."
The small mining company recently acquired the Jaguar nickel project in Brazil's Carajás mining province from mining giant Vale in 2020. Centaurus expects to produce more than 20,000 metric tons of nickel per annum by the end of 2024. The company's other Brazil-located pre-revenue producing asset is the iron-ore-focused Jambreiro resource.
Centaurus Metals stock is a speculative play on nickel upside investors could consider. U.S.-based investors buying the nickel play on the over the counter market may want to utilize stop buy and stop sell orders to minimize trading risks due to thin trades on CTTZF stock.
Better liquidity may be available on the company's local stock exchange.
Panoramic Resources (PANRF)
Panoramic Resources (OTCMKTS:PANRF) is another Australia-based speculative nickel stock that could offer investors exposure to both nickel and cobalt upside. The company restarted its nickel, copper and cobalt production project in Western Australia recently and has since made its third nickel-copper-cobalt concentrate shipment to China this month.
The latest ore shipment to China, valued at nearly $22 million, is the company's largest invoice since resuming production. Two additional shipments are scheduled for this quarter.
New offtake agreements with commodities trading giant Trafigura guaranteed a strong financial partner and provided a reliable customer for the miner's production.
Nickel is Panoramic Resources' major resource. The company's Savannah resource estimate includes 209,800 metric tons of nickel, 13,700 metal metric tons of cobalt and 94,200 metric tons of copper, but ongoing exploration activity could uncover more proven and probable reserves that could lift PANRF stock going forward.
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Soaring nickel and cobalt prices helped shine the spotlight on Panoramic Resources stock, which has gained 107% in value over the past twelve months and 27% year-to-date. However, investment risks are high on the volatile penny stock. Shares have posted a 5% decline in the trailing month.
Canada Nickel Company (CNIKF)
Canada Nickel Company (OTCMKTS:CNIKF) is a penny stock that could allow investors to participate in a nickel upside. The company is advancing an ambitious "NetZero" battery-grade nickel and cobalt production project in Canada.
The company's development-stage Crawford Nickel-Cobalt Sulphide Project targets producing nickel, iron and cobalt in an environmentally friendly way. Canada Nickel Company's stock could thus score high on an ESG scale and attract strong and lasting industry partnerships with environmentally conscious peers as the company seeks to support a growing EV battery manufacturing industry in North America.
A recent equity raise boosts its balance sheet and cash position to fund project development. Canada Nickel Company stock investors could enjoy more capital gains when full-scale production kicks off and execution risks fall away. Until then, the company remains a speculative nickel and battery material pure-play. Over the counter trades on CNIF stock are thin, investors may find better liquidity in Canadian-traded shares of the nickel stock.
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On the date of publication, Brian Paradza did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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