This ASX Stock to Help BHP Help Tesla?
Published 24-MAR-2021 12:18 P.M.
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3 minute read
Battery metals stocks in our portfolio have been performing very well for us:
- Vulcan Energy Resources at 36c in June 2020 - now up 1,638% .
- Euro Manganese Inc at 20.5c in October 2020 - now up 237% .
- European Metals Holdings at $1.40 just a fews ago - now up 24%.
There is another metal that is a key component of batteries - Nickel.
We think nickel is going to perform well as a commodity over the coming years, riding the demand for EV batteries.
We have been looking into getting more nickel into our portfolio, running due diligence on a number of stocks.
We have just made an investment in one nickel stock, and we will explain why.
Tesla has been in talks with BHP to get more nickel for its batteries.
The stock we have invested in has acquired a historical nickel mine that used to supply BHP.
We think this stock has the potential for significant upside over the coming months (and years) as it tries to extend its remnant nickel resource:
Firstly - Why nickel?
Nickel packs more energy into batteries and allows producers to reduce the use of cobalt, which is more expensive and has a less transparent supply chain.
Out of all the battery metals, nickel is causing the most headaches for Tesla to scale up is battery production.
In July 2020, Elon Musk publicly demanded that the world’s producers deliver more nickel.
Tesla and other EV makers are going to need a lot more sustainably sourced nickel in the decades to come.
In October 2020, the AFR revealed Tesla was in talks with BHP over a nickel supply pact.
BHP wants to ramp up its nickel production to serve battery metal makers like Tesla.
In BHP’s October 2020 Diggers and Dealers presentation , the mining giant predicts a surge in nickel battery demand from the mid-late 2020s, and is re-positioning its business to supply that demand.
In Western Australia, BHP is busy increasing its nickel ore reserves, acquiring projects, and is seeking to restart its Kambalda nickel mill with ore fed from third parties...
AOU has a number of nickel projects within trucking distance to BHP’s nickel smelter.
Including the former nickel mine that once supplied BHP’s mill...
AOU recently acquired 80% of a historical high grade nickel mine that used to supply BHP but was shut down after the nickel price plummeted a few decades ago.
The nickel price has roared back over the last 12 months.
AOU is hoping to discover a giant nickel body underneath the historical nickel mine’s original ore body.
AOU wants to emulate the success of a company called Western Areas that discovered a huge ore body underneath a historical mine and sent its stock price soaring.
This is the great unknown and the great upside in AOU - are there more nickel resources lurking below the surface and nearby to the existing nickel?
Investors love high grade nickel intercepts - we have invested in the hope that AOU hit the next one.
ASX investors have had a long history of reacting positively to thick, high grade nickel intercepts:
AOU plans to drill next to and beneath its nickel ore body in the coming months, and we have invested on the expectation that this could lead to a re-rate in the share price.
Here is our detailed analysis on why we have invested in AOU.
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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
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