Kobalt

Jemand?

PjFF

LONDON (Metal-Pages) 15-Nov-06. The cobalt market has rebounded, after drifting down to the bottom of its long-term range of $15-20/lb at the end of October. Western traders put 99.8% at between $16-18/lb today, with 993% at around $15.50-16.50.

There are several factors in the market driving the price, not least rumours that Norilsk will link up with OMG next year. Speculation has been fuelled by reports that Norilsk has not started to offer metal for long-term contracts in 2007. Sources close to Norilsk confirmed that the Russian producer has yet to offer, with the sales team waiting for direction from Moscow on distribution and allocation of metal.

The sources also confirmed good spot activity and said that the current website price of $15.20/lb could be revised towards the end of the week, when Norilsk had a “better picture of the market”. Certainly business was good last week, with the Norilsk website reporting 57 tonnes of sales at an average price of $14.80/lb. The site is currently selling at its offer price.
There have also been reports of AIM-listed Nikanor buying Chambishi, the Zambian cobalt producer. Nikanor already has copper and cobalt assets in Zambia and the move would seem a logistical step for a company keen to become a prominent player in the region.

Nikanor was unavailable for comment when Metal-Pages called today. However, John Leslie, Nikanor executive chairman, has gone on the record to say that the company is having exploratory talks about buying the 3,200 tpy Chambishi cobalt plant. Chambishi’s owners (who count among their number Israeli diamond merchant Beny Steinmetz who also has a stake in Nikanor), were considering an AIM-listing for Chambishi, so a takeover by Nikanor would achieve the listing via a different avenue.

Whatever the outcome of the talks, the Chambishi owners stand to make a good profit, with the company’s former owners Anglovaal Mining (Avmin) selling off the company for just $6.5 million in 2003, writing off $90 million on the deal.

Informed sources close to Chambishi said that any change of ownership was unlikely to impact the market or the distribution of the metal.

The mooted Norilsk deal is more likely to have an impact and is already having one just on pure speculation. The sales on BHP-Billiton this week are also driving the market north, with the company moving up its offer price a further 50 cents today to $17.50, having just secured a 5 tonne sale into North America. The company has sold 40 tonnes to North America this week at ever-increasing prices.

The bulls, of course, are delighted with the current rally, with one ebullient western trader once again rubbing the producers’ noses in it. “They always sell at the bottom of the market,” he complained, “When will they ever learn? We are entering the most phenomenal bull run ever. Demand hasn’t ever been so strong. We are just on the first rung of the ladder – not even at the first floor yet – and we have a building to climb.” Even the most pessimistic of observers now believe that this rally has a way to go yet, if not through the roof.

LONDON (Metal-Pages) 15-Nov-06. The cobalt market may be set for an erratic jump higher after the OM Group (OMG) last week hinted it might sell its nickel business to reduce its exposure to price volatility, with Russian cobalt producer Norilsk heading potential suitors, industry sources told Metal-Pages today.

Fluctuation has typified the cobalt market for many years – the hallmark of a market prone to manoeuvring – but that trend has weakened since producers such as Norilsk and BHP Billiton have listed sales on their respective public websites in recent years. The cobalt market has been relatively weak compared with the price rally in many world metals recently, partly because Norilsk has sold metal at discounted prices, sources said.

If OMG sold its nickel division to Norilsk it might release the dampening effect of the Russian company’s sales on spot prices - if cobalt feed was part of the deal.

Although Norilsk is not the only potential suitor, Canada’s LionOre Mining International is also being touted, the Russian company has much to gain in getting its hands on OMG’s assets, notably the Harjavalta refinery in Finland, sources said.

Norilsk could make money if it bought Harjavalta and processed concentrates that have been delivered for toll processing to Ufaleynickel in Russia – some 2,500 tonnes a year -- while adding a potentially useful presence in the European stocks market. Harjavalta has capacity to make 60,000 tonnes a year of nickel and gets concentrates from suppliers such as Norilsk, BHP Billiton, and LionOre.

However, Norilsk would need permission from the Russian government as the cobalt concentrates contain precious metals whose export is subject to strict controls.

“Norilsk has yet to respond to their customers, many of whom submitted purchase offers weeks ago,” one dealer said. “Apart from a few spot sales, Norilsk isn’t offering any material beyond the New Year. The market is tightly balanced. Whatever happens in the long term, vacuum creates rumours and rumours create trade, expect to see higher prices in the next few weeks.”

Another dealer said: “Market sentiment is shaky. Norilsk has cut its activity on the spot market in recent weeks and has yet to start negotiating long-term deliveries for next year. The market feeling is that Norilsk may have already sold most of its cobalt to OMG, which would leave spot supply much tighter and probably more expensive.”

POTENTIAL SUITORS

Norilsk declined to comment, although a company official did admit it has yet to start contract settlements for 2007.

In return OMG could get a regular feed of cobalt from Norilsk, while avoiding volatile metals prices on the open market, something that hurt the company in recent years. In 2002 former OMG chief Jim Mooney blundered on over-estimating future cobalt prices, which cost the company more than $100 million to revalue its reserves and forced it to restate its earnings while its share price collapsed.

Keen to put that event behind it, OMG has deemed the nickel sector too volatile, despite putting down a large proportion of its third-quarter net income of $88 million this year – from $3.4 million in the same quarter of 2005 — to higher average nickel sales prices and increased revenue from toll refining activities.

“Despite our strong financial performance thus far in 2006, we remain undeterred in our commitment to forge a new business model for OM Group that will produce more predictable and sustainable performance,” said chairman and CEO Joe Scaminace in a statement last week. “We continue to examine various options that include the possible sale of our nickel business and/or strategic acquisitions.”

For its part, LionOre, which missed out on buying the Nikkelwerk refinery in Finland from Falconbridge earlier this year, has nickel mines in Africa and buying a refinery would benefit their production process.

LionOre’s agreement to buy Nikkelwerk as part of the proposed merger between Falconbridge and Inco ended when Xstrata bought Falconbridge.

Month Available Quantity Price
(USD/lb) Delivery Terms
Nov 2006 5 MT $21.00 CIF main Asian port,
CIF main North American port,
DDP - Europe

Sale Date
Quantity Delivery
Date Price
(US$/lb)
Location
20 Nov 2006 5 MT Nov 2006 $20.00 Europe
20 Nov 2006 5 MT Nov 2006 $19.00 Europe
20 Nov 2006 5 MT Nov 2006 $18.50 Europe
20 Nov 2006 5 MT Nov 2006 $18.25 Europe
20 Nov 2006 5 MT Nov 2006 $18.00 Europe
16 Nov 2006 5 MT Dec 2006 $17.75 North America
16 Nov 2006 5 MT Dec 2006 $17.50 North America
15 Nov 2006 5 MT Nov 2006 $17.00 Europe
15 Nov 2006 10 MT Nov 2006 $16.50 Asia
15 Nov 2006 10 MT Dec 2006 $16.30 North America
14 Nov 2006 10 MT Dec 2006 $16.10 North America
13 Nov 2006 10 MT Dec 2006 $15.80 North America
13 Nov 2006 5 MT Dec 2006 $15.70 Europe
13 Nov 2006 10 MT Dec 2006 $15.70 Europe
10 Nov 2006 10 MT Dec 2006 $15.50 Europe
10 Nov 2006 10 MT Nov 2006 $15.40 Europe

Sale Date Quantity Delivery Date Price (US$/lb) Location
22/11/2006 5 MT Nov 2006 $25.00 Europe