The war in Ukraine has sent nickel prices skyrocketing in recent weeks, raising investor interest in nickel mining companies. Russia produces 7% of the world’s nickel and risks of supply interruptions have sent prices for the metal soaring. As such, nickel stocks have also seen wild price movement.
On March 8, the price of nickel briefly reached $100,000 a tonne for the very first time, prompting the London Metal Exchange to halt trading until March 16 because brokers were struggling to pay margin calls. Nickel’s price has since stabilized near $43,000 per tonne but remains at multi-year highs.
Demand for nickel was heating up even before Russia invaded Ukraine and incurred global economic sanctions as the metal is a key component in the lithium-ion batteries used in electric vehicles (EVs).
Nickel production is forecast to increase 10% this year and some forecasts claim that demand will outpace supply by 2024, leading to even higher prices in the future. With nickel in the spotlight, we offer three stocks investors can buy to capitalize on growing demand and prices for the metal.
Nickel Stocks to Buy Now: Vale S.A. (VALE)
Let’s start with Vale S.A., which is one of the largest nickel producers in the world and well-positioned to capitalize on the boom in nickel production and sales..
So far this year, VALE stock has gained 30% as nickel prices have doubled to reach fresh all-time highs. Over the past five years, the share price of Vale S.A. has gained 80% to now trade at $18.26 a share. With a price-to-earnings (P/E) ratio of 3.84, the stock is affordable for most investors who want to capitalize on demand for nickel.
Deutsche Bank (NYSE:DB) recently raised its price target on VALE stock to $20 from $19 previously and maintained a “buy” rating on the shares. The upgrade by Deutsche Bank puts it inline with the consensus view of analysts who cover the company. Among 21 professional analysts who follow Vale S.A., the median price target on the stock is currently $20.50, which implies 12.4% upside from current levels.
After recently beating analyst expectations with its fourth quarter earnings, management at Vale said they remain bullish on nickel prices over the long-term, noting that it expects EVs to be a sustained catalyst for the metal. The company’s fourth-quarter 2021 net profit nearly doubled to $5.4 billion.
BHP Group (BHP)
BHP Group is by some measures the biggest mining company in the world with more than 80,000 employees working in a dozen countries.
The company has extensive nickel mining operations in its native Australia, and announced last summer that it is expanding those operations to meet rising global demand. “We believe that over 2020 to 2030, overall nickel demand will grow at 5% compound annual growth rate, and that nickel-in-battery demand will grow at a rate of 21% CAGR,” said Eddy Haegel, President of BHP’s Nickel West unit. BHP announced that it is increasing its nickel capacity by up to 50% to 15 million tonnes per year.
Additionally, BHP Group has been trying to expand its nickel operations in Canada by attempting to buy Canadian nickel miner Noront Resources, which owns the early-stage Eagle’s Nest nickel deposit in northern Ontario. Eagle’s Nest is widely viewed as one of the largest high-grade nickel deposits in the world and a major untapped resource. BHP Group is competing against fellow Australian mining company Wyloo Metals to try and gain control of Eagle’s Nest, though neither company has yet to secure the mineral rights.
Year to date, BHP stock is up 10% to $66.38 a share.
Nickel Stocks to Buy Now: Rio Tinto (RIO)
Rio Tinto is another major Australian mining company, and the world’s second largest miner after BHP Group. The company is a diversified miner with operations focused on gold, copper and iron ore. However, it is also heavily involved in the exploration and mining of nickel.
The company owns a 75% stake in the Enonkoski nickel project situated in Finland. Rio Tinto is injecting more than $20 million into bringing the Finnish nickel project online. Between 1984 and 1994, the Enonkoski mine produced an average of 6.7 million tonnes of nickel a year, and Rio Tinto hopes to revive nickel production at the site.
Additionally, Rio Tinto is involved in bringing the Tamarack Nickel Project in Minnesota online. Tamarack is expected to be a major U.S. supplier of nickel for the domestic EV industry and a critical component in America’s nickel supply chain. The Australian mining giant is making nickel a key focus of its future operations as demand and prices for the metal soar.
So far in 2022, RIO stock has risen 10% to $73.61 per share. The stock has been gaining traction as prices for nickel and other commodities surge as the conflict in Ukraine has worsened in recent weeks.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
