Kalgoorlie As we rapidly approach the end of this year it is timely to reflect back on 2017 and ponder on what may lie ahead in 2018.
The City has been through a slow period for some years but the last six months in particular has seen it steadily regain some momentum. The last two years has seen the Eastern Goldfields emerge from under the shadow of the Pilbara with renewed interest in gold and base metals and a resurgence in exploration with several spectacular finds throughout the region. Nickel West has underwritten the area financially with its decision to produce nickel sulphate for the emerging battery market and the Government have at last identified the Wiluna Meekatharra Rd as a high priority road for sealing. The City of Kalgoorlie-Boulder has embarked on a comprehensive plan to grow the City which includes a major refurbishment of Hannan St so a number of initiatives are in train already.
For the last three years the nickel price has been a drag falling from a short lived peak of US$9.50 a lb in May ’14 to US$3.50 two years later. It has since recovered to US$5.83 at the time of writing, an upward trend even if the recovery graph looks somewhat erratic! The overall trend line if the current trajectory is maintained and the price consolidates above US$6 a lb will mean that there is a real prospect we will see some of our mothballed nickel mines back in production.
My role is to try and keep ahead of the game so that our clients are well positioned to take advantage of a changing market. It requires a certain amount of crystal ball gazing but also a clinical look as some of the drivers.
The commentary from an increasingly wide sector of the market is about the impact on nickel from its growing use in batteries to power electric cars and household storage systems. Whilst there are a number of new battery technologies being investigated they all use nickel and along with an improving world economy impacting nickel consumption for stainless steel and electro plating these combined uses are probably part of the reason nickel has risen from a low of US$3.50 lb to just under US$5.90 at the time of writing, the highest it has been since May ’15 when it was on a steady downward trend.
A number of industry sources have been quoted as saying that mines on care and maintenance will be looked at once the price is better than US$5.50 and demonstrating a stable to upward trend. It seems that we are in this range now and as long as the current recovery trend is maintained over the summer holiday period and into the start of 2018 there is a reasonable prospect that some of them will be brought back into production.
This is particularly good news for Kambalda which has suffered badly but also for Kalgoorlie Boulder as it should see the rental housing market tip from over to under supply and with that a recovery in rental rates which dropped about $120 per week some two years ago. With an improved rent we should see an increase in sales demand and a return to a reasonable level of investment return.
For those that have been waiting to adjust their portfolios by selling down we believe 2018 will present some better sales opportunities. For those that wish to position themselves to take advantage of any upturn now is probably a good time to look at further acquisitions. Either way we think 2018 will be a rewarding year for the canny investor.
