Post on 19-May-2015
Three case studies demonstra0ng Gorham & Partners’ recent work on nickel market and product strategies
Summer 2013
Gorham and Partners Nickel Case Studies
What Gorham does
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• Over 20 years’ experience • 10 years focusing exclusive on mining and metals
Global metals and mining consultants
• We supplement engineering-‐led evalua>on projects with • Data-‐driven compe>tor analysis • Deep understanding of end-‐users and other par>cipants in the value chain (gained through face to face mee>ngs and economic modelling)
Focus on strategic ques0ons
• For junior miners, securing finance post the global financial crisis is the key challenge • Gorham has a twofold approach to assist in the search for funds • Through our rigorous work down the resource value chain, we are able to iden>fy and introduce non-‐tradi>onal investors who will directly benefit from the development of your project
• We also have a rigorous process to introduce exci>ng mineral projects to a wide range of high net worth global investors, currently struggle to iden>fy higher risk/return opportuni>es for their porMolios
Alterna0ve paths to funding
Evalua0ng the product and commercial op0ons for nickel and the cobalt by product from the Alpha mine
May 2012
Gorham and Partners Nickel Case Studies 1 1
What we set out to deliver
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Accurate and detailed analysis to support detailed feasibility
study
1. Market analysis for nickel hydroxide
precipitates (NHP) vs nickel market 2014-‐2018
2. Customer tes0ng and development for
NHP and cobalt (10-‐20 interviews for NHP, 5-‐10 for cobalt)
3. Op0mal strategy for commercialisa0on of cobalt by-‐products
4. Price outlook NHP/nickel metal/selected
cobalt product op0ons
5. Recommended strategy for Alpha
6. Sales forecast for Alpha, 2014-‐18
How we went about it
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What we found
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Drivers of global
Ni market
Ni price outlook 2014-‐21
Market impact of non-‐ferrous Ni alloys
Impact of nickel pig iron on
ferronickel market
Economics of direct feed vs. intermediate products
Customer preferences
for intermediate Ni products
Economics of alterna0ve cobalt
products
Op0mal product/market
strategy for Alpha
Price forecasts for
chosen strategy
Resultant sales
forecasts for Alpha
What we wrote
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What happened
• Reframed Alpha’s view of the market for intermediate products
• Opened possibility for radically different go-‐to-‐market op>ons, with huge implica>ons for feasibility study • Increased price forecasts for contained Ni and Co metal • Improved compe>>ve outlook • Changed geographic focus for marke>ng effort • Opened doors to new sources of partnership and finance
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Evalua0ng the product op0ons for laterite nickel from the Sigma mine
December 2012
Gorham and Partners Nickel Case Studies 2 2
What we set out to deliver
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Evaluate alterna0ve product op0ons for new laterite nickel project (Sigma mine)
1. Quan0fy degree to which stainless steel producers will shi] towards lower grade
Ni feeds
2. Evaluate feedstock alterna0ves for relevant stainless steel producers
3. Outline latest view of global nickel
outlook and client’s posi0on within that, including compe0tor
analysis
4. Price for nickel based on refreshed understanding of
supply and demand
5. Compara0ve evalua0on of product op0ons for the Sigma
mine
6. Evalua0on of strategic op0ons for
Sigma’s parent company
7. Recommended course of ac0on for
Sigma
How we went about it
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Ni NPI FeNi STS Scrap
Associa0on + Expert 9 9 8 9 9
Ni Producer 2 1 1 1 0
STS Producer 13 7 9 13 9
Trader 2 2 1 0 1
Recycler 1 0 0 0 1
Product Info Value
Chain Level
Structure of the inves0ga0on
Interviewing 5 experts on the G&P nickel expert panel
Market inves>ga>on • 8 Interviews in China
• 8 Interviews in India
• 5 Further Asian interviews
• 5 Interviews in ROW
Desktop research
Quan>ta>ve and qualita>ve analysis
What we found
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1. Will STS producers switch feeds?
2. Alterna>ve STS feeds:
2a. Stainless steel scrap
2b. Nickel Pig Iron
2c. Ferronickel
2d. Nickel Oxide
2e. MSP and nickel metal
3.Nickel supply, demand
compe>tor analysis
4. Nickel price
forecast
5. Evalua>on of op>ons for Sigma project
5. Strategic op>ons &
rec.s
What we wrote
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What happened
• Sigma project is under development for one of the top 5 global Nickel producers
• Clarified product op>ons available to Sigma, highlighted importance of considering end user economics and preferences in final decisions
• Established framework for client to make that decision when needed
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Evalua0ng the Commercial and Processing Op0ons for the Lambda Nickel Project
October 2008
Gorham and Partners Nickel Case Studies 2 3
What we set out to deliver
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Evaluate alterna0ve product op0ons for new laterite nickel project (Lambda)
1. What markets/applica0ons should Lambda aim at?
2. Which products/process routes should
Lambda make/follow?
3. What compe00ve environment will
Lambda be facing in 2015 onwards?
4. What price structure will Lambda be able to achieve for its full product range in 2015 onwards?
How we went about it
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Forecasted costs for the duration
of the investment Revenue stream from
selected product - market combination (s)
NPV of each product - market combination
Sales forecasting Demand forecasting
Benchmarking the forecasted sales
(Competitor Analysis) Price forecast for Ni
products in their selected markets
Expert interviews on the forecasted sales
Interest rate forecast
Nickel price forecast
Market characteristics Supplier power • Company size • Financial strength • Resource bank • Potential for
differentiation • Specific customer ties • Power of suppliers’
suppliers
Customer power • Customer concentration • Financial health • Ability to switch materials • Ability to switch suppliers • Sensitivity to price • Access to captive supply
Strength of Ni Product • Availability of substitutes • Relative price of
substitutes • Range of substitute
application • Environmental regulation • Technical vulnerability
Degree of rivalry • Strength of competition • Potentially realisable sales • Sustainability of sales
Market & sales evaluation model - Porter’s 5 Forces or
Product market dynamics analysis Competitor analysis Demand supply price
analysis
Client’s task G&P task
• Size • Growth • Stability • Geography • Demand - supply balance • Uniformity of product • Barriers to entry
Value chain and process option analysis
simplified versions of the Porter model
What Markets/Applications should SNP aim at ?
Which Products/Process Routes should SNP
make/follow?
What Competitive Environment will SNP
be facing in 2015 onwards ?
What Price Structure will SNP be able to achieve for its full product range in
2015 onwards?
What we found
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1. Which are the most aerac>ve
products and markets
2. How compe>tors
will be posi>oned
3. Impact of new wave of
laterite producers on produc>on op>ons
4. Medium term price outlook and scenarios
5. Outlook for sulphur
6. Outlook for Cobalt
7. Strategic evalua>on of
product op>ons for Lambda
8. Recommended
ac>ons
What we wrote
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What happened
• Lambda’s owners subsequently sold a controlling stake in the project to one of the global nickel majors, beeer posi>oned to exploit the market opportuni>es iden>fied
• The project remains on track for development
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About Gorham and Partners
A specialist consul>ng prac>ce with a successful 20 year track record advising the global metals and mining sector on strategic, commercial, financial and marke>ng issues. In addi>on
to the nickel, we advise clients across all the main metals and precious metals sectors including copper, zinc, lead, chromium, molybdenum, cobalt, steel, stainless steel, gold,
pla>num and diamonds
We address the big strategic issues faced by nickel businesses,
especially product mix and market strategy. Our insights into rapidly changing markets have
led to a new approach to seeking finance for early stage projects
Demand/supply and pricing studies not just for Ni and Co metal, but all alterna>ve intermediate products | In-‐depth understanding of end-‐user demands and trends | Customer segmenta>on and alterna>ve ‘go-‐to-‐market’ strategies |
Analysis of the product and market strategies of compe>tors | Commercial and marke>ng
sec>ons of pre-‐feasibility and feasibility studies | Market entry strategy
Successful consul>ng projects for our nickel and base metals sector clients which add value to their
businesses
Including Rio Tinto | Sherrie | ENK | BHPBilliton | Corus | Rotex
Minerals
Deep experience advising and managing strategic projects in the sector – we partner you to find the answers you
need
Alec Campbell – 25+ years advising senior management with special focus on metals
and sales and marke>ng strategies J-‐P Mar0ns -‐ 20 years advising senior
management, ex senior strategic manager in Rio Tinto
Khush Nathadwarala – 6 years consul>ng exclusively to the mining and metals sector
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Contact us
A | 104 Lancaster Gate London W2 3NT
P | +44 (0)20 7298 5180
F | +44 (0)20 7298 5189
E | consult@gorhampartners.com
W | www.gorhampartners.com
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