China's massive growth means more demand for Nunavik nickel

-Several new projects being planned











A Financial survey of 24 economists has estimated that China’s economy is currently growing at massive 11.7 percent, a faster rate of growth than before the 2008 global recession.

This means that China is hungry for nickel – the key ingredient in stainless steel.

Stainless steel demand is tied directly to infrastructure spending. It is required for the manufacture of automobiles, planes, factories, buildings, bridges etc.

Without new supplies of nickel, the Chinese economic growth will be in jeopardy.

With yearly domestic nickel imports worth about $1 billion, it’s a safe bet that China nickel shopping basket is not full.

Indeed, last August a Chinese-Canadian joint venture (Goldbrook and Jilin Jien Nickel Industry Co) bought out Canadian Royalties for $191 million cash. The joint venture acquired all shares of Canadian Royalties for 80 cents, a 30% premium over the closing price on the Toronto Stock Exchange.

Canadian Royalties handed over the fully permitted and construction-ready Nunavik Nickel Project in Nunavik, Northern Quebec, about 1,500 miles (1,700 km) north of Montreal.

And they may not have to look far for a new asset.

Knight Resources holds a 45% interest in a joint venture with Anglo American at the West Raglan nickel project in northern Québec, 90 kilometres west of Xstrata’s nickel mine.

On July 7th 2010, Knight Resources announced that drills were turning on their West Raglan project in Northern Quebec. Two drills are active on the project, and a revised budget of $5.75-million has been approved for the 2010 exploration program.

The London Metal Exchange (LME) inventory levels are down 20% from the peak in February and the latest International Stainless Steel Forum (ISSF) production data suggests that the nickel market will remain in a global deficit of 36,000 metric tonnes for 2010.

Barclays Capital is also seeing a supply/demand imbalance.

Barclay’s is forecasting nickel spot price increases of 30% for over the next 24 months, supported by China's furious pace of industrialisation.

These estimates may be conservative. While gold, silver and copper have all flirted with or surpassed their 36 month highs, nickel still has a long way to run.

The cash-rich Chinese steel manufacturers – and the Chinese government - are unlikely to tolerate this sort of pricing uncertainty in one of the key drivers of their economic engine.

KNP has identified several high grade nickel zones that look similar to Xstrata’s. The last drill hole returned values of 28.28 metres of 3.21% nickel and 1.3% copper. They’ve just completed a financing and are about to begin drilling.

With all the positive macro fundamentals pushing nickel, and the Chinese hunger for a new nickel asset, we look at the nickel exploration companies to fill the worlds growing demand.

Bloomberg