Currently the price of Nickel is very low. This has hurt Nickel stocks right across the board.

The largest factor in my opinion supressing the nickel price is the ability of the Chinese to make NPI (Nickel Pig Iron). The emergence of Nickel Pig Iron on a large scale is a relatively new process which began 5 years back when Nickel prices where at there high.

In 2011 the Chinese produced over 150,000 tonnes of Nickel through this process! Check out the LME Nickel Stockpiles at http://www.kitcometals.com/charts/nickel_historical.html.

Now imagine where the price of Nickel would be if those 150,000 tonnes had not been available.

How do they make NPI?

Chinese NPI producers import low grade Nickel Ore from Indonesian, the Philipines and New Caledonia and then process it in high temperature furnaces to create Nickel Pig Iron a lower grade form of Nickel.

According to some experts, estimates the average cost per pound for the Chinese to produce NPI is about $7.50-$8.50 per pound.

This has essentially put a ceiling on Nickel prices as of late provided that the Chinese can continue to produce.

A recent very positive factor for Nickel prices as of late is that Idonesian has place a 20% tax on the export of Nickel Ore as of May 6th in an attempt to encourage Foreign companies to setup up processing inside the country, instead of the ore leaving straight for China.

This 20% tax is only the first step. The tax will increase with an outright ban taking effect by 2016. China imports almost 60% of their Nickel ore from Indonesia. The Philipines and New Caledonia are rumoured to also follow suit with taxes.

The cost of the Nickel Ore is the largest cost component of NPI. Power is second and the cost of power in China is rising as the Government is taking steps away from subsidizing power rates.

These two factors will immensly effect the cost of production of NPI and ultimately the price of Nickel in the medium term. Short-term prices will not be effected as the Chinese have stockpiled for about 3-6 months according to some.

Another factor is that is affecting Nickel prices is the anticipated new production from large mines by some of the big miners (Vale, Sherrit, etc). As much as 400,000 tonnes of new Nickel was anticipated through 2012 and 2013, but half of these mines will be using High Pressure Acid Leach Technology (HPAL) to process the Nickel. HPAL to date has had it's difficulties leading to limited output on cost overruns.

All in all the supply of Nickel is available but it is expensive, which could lead toward much higher medium term prices.

Long-term supply may be effected considering mine investment will be low due to the lack of quality deposits to mine.

By 2016 and onwards the demand for Nickel will be more robust of course from China plus new strong demand from India and other bergeoning economies.

RCF most also believe the cost of Nickel is promising. They just did a PP with Mirabela Nickel for $20 million (now let's not be jealous as RCF can flirt with other Nickel companies too). Side Note: Personally I think they probably offered Noront more than an $10 million as Noront is a way better company to invest in than Mirabela. Mirabela's cost per pound of Nickel is between $6.80 and $7.50. Yikes they can't expect to make much money these day.

As Wes has mentioned many times, Noront's cost per pound of Nickel is the lowest around. In fact it's below $0 when factoring in the Copper, Platinum and Paladium.

Although we are relying on the government for the hundreds of millions in infrastructure, it is not a huge Capital costs compared to other Nickel mines, but it's looking more and more certain that the Government will be ponying up cash to build infrastructure so our capital costs will be peanuts compared to other Nickel mines around the world.

Overall the horizon is very bright for Noront. It can be hard sometimes to view a company for it's actual value when the stock price drops, but I can't think of many juniors that have consistantly added to their resource like Noront has in the last 2 years. I would rather invest in results than hype which is often the case with other juniors (not that we couldn't use some hype with this stock to get it going). It will take some patience to see Noront trade at it's fair value, but I will enjoy it when it comes.

I have taken the opportunity of late to begin to increase my position. I rarely average down, but this type of value is too compelling to pass up.

Enjoy your day,

JDR