Analysts optimistic about nickel’s future

By Leia Michele Toovey-Exclusive to Nickel Investing News

Investment potential in nickel still high, despite price drop.In most of 2008, nickel prices have taken a battering, as a weakening US currency, steeply rising prices of oil and gold, and shrinking stainless steel demand have extended losses.

LME nickel prices started their rapid descent in July 2008. From beginning to mid August, prices rested in the  range of US$20,500 to US$20,900 per tonne. LME nickel prices for three-month futures fell to a level below US$20,500 per tonne on the 23rd, and after hiting that milestone the price plummeted even further,  touching below US$19,000 per tonne at the 24th.

LME nickel stocks at the beginning of July 2008 came to 46,860 tonnes and, after that, continued a general decrease, punctuated only by sporadic increases. LME nickel stocks as of July 31st, 2008, dropped to 44,526 tonnes, and at the present moment, LME nickel stocks are at a high.

Despite the price crashes across commodities, investors remain optimistic.  Although nickel is expected to face more downward pressure, the underlying value is seen as robust. Ian Henderson, who manages around US$5 billion at JP Morgan’s Global Natural Resources Fund, said he was still in favour of long-term commodity investments.”I strongly believe this is a multi-year cycle … but you have to be a lot more selective and (be able to) distinguish between commodities,” Henderson told Reuters in an interview..”Some people have been hit very badly financially … so there has been forced liquidation,” Henderson said, adding that this could continue to have an “adverse impact on London Metal Exchange traded metals”.

“If people were to go and buy a basket of these completely bombed-out companies, although they might not have picked the bottom, the upside potential is tremendous,” Henderson said.

Iron ore, oil and gas, platinum and gold would also see prices rising on strong demand from emerging markets. Analysts are optimisitic about future demand in the biggest of the emerging markets, China. Continued growth in the BRIC countries (Brazil, Russia, India, and China) will extend support to commodities. On Wednesday, Gold Investing News posted a commentary “Consumer Confidence Strengthening” detailing the enhanced sentiment in that metals future.

In London, this Wednesday, nickel prices continued to fall on the LME due to lack of industrial demand. On India’s MCX, however, nickel August contract increased by 1.48 per cent at Rs 890.80 a kg against its previous closing at Rs 877.80. Nickel September contract opened at Rs 890 a kg against its previous closing at Rs 891.80. Nickel October contract moved upward 1.83 per cent, at Rs 915 a kg.

It has been a busy week at First Nickel (TSX: FNI). On Tuesday, they announced filing their unaudited financial statements for the three and six month periods ending June 30th, 2008.  Highlights of their statements included a second quarter net loss of  US$992,176 compared to net earnings of US$723,904 in the second quarter of 2007, an increase in production during the second quarter of 2008 with 969,865 pounds of payable nickel, as compared to 878,866 pounds produced in the second quarter of 2007.

Moving forward, First Nickel is looking to an aggressive expansion program. This week they announced plans to raise US$4.5 million to finance exploration programs in Ontario. US$15 million of funds will be raised by selling common shares at 30 cents each. “This flow-through financing will be used to expand our aggressive exploration programs in Sudbury and southeastern Ontario while allowing First Nickel to invest our cash from operations on reducing costs, improving efficiencies and adding to resources at the Lockerby Mine,” said William Anderson, President and CEO of First Nickel.

First Nickel also reported on developments at their Ragan Hills Project. The project is a joint venture with Pacific Northwest Capital Corp. (CA: PFN).  Both companies were pleased to announce the commencement of surface mapping and sampling programs at the project. The mapping program is designed to verify the geophysical electromagnetic anomalies identified by an earlier Aeroquest AEM survey. The Raglan Hills Project consists of 21 claim blocks totaling 2,752 hectares situated northeast of Bancroft, Ontario. Minimal exploration has occurred since the late 1980s, and the property has potential to host economic nickel-copper sulphide mineralization. Capital and First Nickel are participating in a 50-50 per cent Joint Venture whereby both Companies agree to bear all expenditures and participate in a single purpose joint venture for the purpose of carrying out mineral exploration on the project.