Kalgoorlie As most will know I keep a close eye on commodity prices.
I am pleased to see that the recent improvement in the price of nickel appears not to be a flash in the pan but establishing a new upward trend.
It hit a low in early February 2016 of US$3.45 a lb but just 5 months later it is US$1 higher at US$4.45 with a recent high of US$4.53 that is up 29% in less than 5 months.
It’s not yet at a level that is going to see mines reopen but it is apparent that nickel producers are watching the price closely.
We are starting to see articles in the financial press making similar comments to the ones I have been making for the last few months, maybe I missed my vocation!!
In parallel with the price rise has been a continued decline in the LME nickel stockpile.
In the last 6 months it has fallen from 453,000 tons to 377,000 a drop of 76,000 tons at a rate of about 13,000 tons a month and the trend line is pretty consistent.
The rate of fall is likely to accelerate as the new Philippines President has said that the countries nickel mines that are below acceptable environmental standards will be shut down.
The same report commented that the Philippines is one of the larger nickel producing countries globally so cutting its production will impact on the tons of nickel coming onto the World market accelerating the rate of LME stockpile decline, good news for the Eastern Goldfields!
At the same time we have a strong Gold price recently given a boost by the Brexit vote.
We are unlikely to see a resolution to the turmoil in Europe for some years and gold was already doing well so we will probably enjoy the flow on effects for some years to come, we are already witnessing increased exploration and new mine developments.
Add the flavour of the month Lithium and the emergence from the shadows of Uranium plus other new technology metals and things are looking much healthier for our patch of WA.
If the Shires of Wiluna and Meekatharra can extract enough money out of the Royalty for Regions pool from the WA Government and seal the road between Wiluna and Meekatharra that will be the last piece needed to complete the jigsaw and unshackle the Eastern Goldfields enabling it to reach its natural level which I believe could be double its current size.
Where are the drivers for this growth going to come from?
Undoubtedly partly from our expanding mining industry where exploration successes are occurring across the breadth and depth of our vast region but a fully sealed road north will open up two new areas of growth.
The first is the direct freight route for traffic crossing the Nullarbor that will be able to go direct to the Pilbara on an all-weather sealed road saving hundreds of kilometres of road travel on a road that is far less prone to flooding from cyclone activity than those closer to the coast which cross much larger rivers that swell in heavy rain events.
Probably the more important is the opportunity for Kalgoorlie Boulder to become the heavy plant assembly and rebuild centre for mining plant and equipment throughout the State and particularly that being brought south for overhaul.
Kalgoorlie Boulder already has the facilities in its heavy duty workshops to rebuild large plant but its main advantage over the only other centre capable of doing the work, Perth is our location.
We are closer and transport, particularly escorted low loaders, is very expensive and every kilometre adds to the cost so every kilometre saved is a dollar less.
More importantly though is the route.
The road to Kalgoorlie Boulder is at the same elevation as the Pilbara, 300 – 400 m above sea level (AHD) so avoiding the need to drop down and then drag it up again.
Its not just once but through many foothills as it gets closer to Perth and hills are expensive on fuel. The road to Perth is also windy and busy and as it gets closer to Perth there are numerous traffic lights and roundabouts to negotiate, none easy driving for over-width heavy loads.
The road south from Meekatharra to Kalgoorlie on the other hand is flat wide straight and empty with only one large roundabout and one set of traffic lights to get into a West Kalgoorlie Yard and neither to get into a South Boulder yard making it much quicker and cheaper.
Both will save the Pilbara money as they drive down their costs to cope with a much weaker iron ore price.
The irony is that consecutive State Governments have failed to see the huge economic advantages to WA that sealing this last short 150 km or so section of formed gravel road will bring.
Let’s hope the Wiluna and Meekatharra shire win the funding and we can demonstrate just how much our regions have been missing out on and how much we can add to the Sates productivity.
