A nickel play inks lithium targets in WA, the market doesn’t buy it – why?

Microcap nickel explorer Nickelsearch Limited (ASX:NIS) has found new lithium drill targets at its Carlingup play in WA, the company reported on Tuesday.

But the market hasn’t responded with too much interest, and what interest it’s shown has been negative.

Nickelsearch shares were down -2.78% to 3.5cps just before 11am AEDT on Tuesday.

Advertised as part of WA’s “battery belt,” Nickelsearch’s Carlingup landholding finds itself a prized asset for the company at a rather unfortunate time.

Both lithium and nickel prices have tanked over the last year (though, it’s worth noting nickel’s actually up over 9% MoM).

Still, this surprise jump in nickel prices hasn’t proved enough to prompt BHP to consider re-starting shuttered plants.

Nor has it been enough to prompt IGO to consider reinstating nickel miners’ jobs; Panoramic Resources to re-open its nickel mine, or Andrew Forrest’s Wyloo to recommence nickel activities with gusto, any time soon.

And when it comes to lithium, well. Need I even go into the downturn in lithium prices?

Any of my regular readers would probably convulse violently if I started writing about the sheer oversupply of lithium the world currently sifts through, yet again.

In both instances – nickel and lithium – the downward pressure comes from a supply-side story.

Indonesia is producing too much nickel, and – I’ll keep it short – the entire world is producing too much lithium. (Chile, for instance, wants several more major lithium projects online by 2026.)

Perhaps Nickelsearch isn’t far off from finding a uranium anomaly.

At any rate, both nickel and lithium remain fairly ambitious prospects at this current time for any microcap explorer – and that is reflected in the stock’s price movement today.

(To be fair, we’re also having a red day on the ASX.)

But a look at Nickelsearch’s recent performance lends itself to the broader view more closely tied to the macro headwinds facing its namesake commodity.

• 1 month performance is down -16.67% at 11am AEDT
• YTD performance is down -52.05% at 11am AEDT
• 1 year performance is down -56.87% at 11am AEDT

So what did Nickelsearch find?

The 14 lithium drill targets Nickelsearch reported on Tuesday are situated nearby an existing quarry where geotechs have reported uncovering “boulders of spodumene-bearing pegmatite” onsite – something management was quick to highlight in commentary provided to the market.

“Our work at the Quarry … encouraged us to explore further afield in our tenement package,” Nickelsearch chief Nicole Duncan wrote.

For full clarity, the company’s comments on discovery of pegmatite boulders is effectively unrelated to today’s news, but, both occur within the same permit boundary.

These new targets, however, come by way of soil sampling and an analysis of historical data – typically, not the kinds of things that catch investors’ interests. So that’s also a reason why we’re seeing a lack of enthusiasm for NIS’s announcement today.

However, with nickel prices up 9% MoM – could we be at the start of something more interesting?

There’s nothing fundamentally stopping the company from achieving its goals – just a whole lot of uphill battle against macro.

Nickelsearch (ASX:NIS) shares last traded at 3.5cps.