They say modern problems need modern solutions, and Queensland Pacific Metals (ASX:QPM) appears to have executed a fairly nifty escape from collapsing nickel prices.
For the uninitiated – QPM used to be Queensland Pacific Nickel, which was a company that did what it sounds like.
Then, of course, Indonesian-backed nickel supply hit world markets, and it’s been a bloodbath for nickel players across the board (and offshore) in the higher cost jurisdiction of Australia.
It was not without raised eyebrows that following this palaver, QLD Pacific pivoted into natural gas.
The company has now improved the terms of two existing contracts that QPM expects to deliver $30M through FY25 (based on its comment that the improved terms would have brought it that sum in FY2024.)
Helping matters is that the company will now be selling electricity into the sometimes controversial national power market. The story is worth re-telling, given it’s fairly unusual for an ASX junior.
QPM had been busy developing a chemicals processing facility to deal with nickel in Townsville on Australia’s east coast. It already acquired a gas project last year, Moranbah, with which it intended to power its plant for processing nickel.
This was a fortuitous move – because it enabled QPM to pull off its pivot into energy.
Despite the QLD government chucking in $8M to the Townsville project back in July, QPM has stayed locked in on its plans to become a gas player. To be fair, $8M probably isn’t enough to make nickel prices go back up.
To say that risk-off thinking has been present in the QPM investing community can be supported by a look at the company’s 1Y chart.
This time last year, the company was worth 7cps – it’s now at 3.5cps. For context, at that price it has a $90M market cap on over 2.5B shares.
However, we’ve seen small gains on Tuesday, as the company inks two new updated contracts to cover the Townsville Power Station (TPS) dispatch rights, and, North Queensland Gas Pipeline (NQGP) gas transport and storage services.
This ultimately sees QPM able to both supply gas to the TSP – but more lucratively – then on-sell power into the National Electricity Market (NEM). A third party, RATCH Australia Corporation, was also part of Tuesday’s dealmaking.
QPM last traded at 3.6cps.