[Ferro-alloys.com] THE 37% surge in nickel this year means some of the world’s biggest metals companies may finally be able to sell as much as $14bn in unwanted mines they’ve held for years.

Diversified mining companies such as BHP Billiton and Anglo American don’t see the metal as strategic because it generates less cash than other commodities and requires more investment. With nickel prices improving and companies looking to cut costs, Norilsk Nickel, the largest producer, last month agreed to sell two mines in Australia. BHP, valued at $174bn, said it is holding talks to sell its Australian nickel unit, and London-based Anglo said it may consider shedding its Brazil mine.

Private-equity firms and smaller companies such as $12bn First Quantum Minerals could be potential buyers, said Sanford C Bernstein. Should nickel prices continue to rise, BHP’s assets could be valued at as much as $9bn and Anglo’s at $5bn, Macquarie Group said.

Nickel is rebounding from three straight years of declines as Indonesia, the biggest nickel ore miner, banned ore exports in January in an effort to boost domestic processing. China depends on the ore for its low-grade nickel used in stainless steel and, with the ban disrupting supplies, Macquarie estimates China’s output will fall 25% this year, tipping the global market into deficit.

Analysts are divided on how long the rally will run. Nickel for three-month delivery at the London Metal Exchange rose to $21,000 a ton on May 13, the highest since February 2012, and was trading at $19,000 yesterday morning. Goldman Sachs Group sees prices dropping in the next 12 months as the Chinese build processing capacity in Indonesia to skirt the ban, Macquarie forecasts rising prices for years.

"The Indonesian ore export ban is a game-changer," both for the nickel markets and for asset disposal, said Jeffrey Largey, analyst at Macquarie, London.

At current prices, Bernstein estimates the BHP nickel assets would be valued at $3bn-$4bn and Anglo’s Barro Alto nickel project at $1bn-$2bn. Surging prices would mean the estimates more than double, based on a long-term price of $24,000 per ton, Macquarie said.

Among the potential buyers are private-equity funds, such as X2 Resources, and smaller mining companies, such as First Quantum, which has bought struggling assets and turned them into producing ones in the past, said Bernstein. Russia’s Norilsk agreed on May 21 to sell its Australian Avalon and Cawse nickel deposits and processing plants, which have both stopped operations, to Wingstar Investments. The company hired Citigroup last year to help sell its Australian portfolio, which includes two mines.

Analysts have been speculating BHP would sell its Nickel West operations in Australia since at least 2012. The company said last month that it is reviewing the unit for a sale as a way to simplify its portfolio and focus on iron ore, copper, coal and petroleum. BHP’s profit margin from its nickel, aluminum and manganese unit has been shrinking, reaching 1.8% in the 12 months ended June 2013. That compares with 41% in 2007, according to filings. Low metal prices also led the world’s largest mining company to book impairment charges of almost $1.6bn on the Nickel West assets in the past two fiscal years. The unit includes three mines, concentrators, a refinery and a smelter.

BHP also controls the Cerro Matoso nickel mine and ferronickel smelter in Colombia, which RBC Capital Markets, a unit of Royal Bank of Canada, estimates is valued at $3bn and may be sold with Nickel West.

A possible buyer for BHP’s assets is First Quantum, Bernstein said. The Vancouver-based company bought the Ravensthorpe nickel project from BHP in 2010 for $340m and developed it to start production two years later. In China, closely held Jinchuan Group and China Minmetals Corporation may be looking at BHP’s Nickel West project, said the Australian Financial Review. "It’s a good time to buy the assets when the majors think it’s not strategic and into a rising price environment that generates the cash you’ll need to invest in the project," Bernstein said. "You then turn it around operationally and a couple of years later, having taken about 30% out of the cost base, you create billions of dollars of value."

X2 Resources, a private-equity fund set up by former Xstrata CEO Mick Davis, is considering a bid for BHP’s thermal coal and nickel assets after raising $3.75bn from investors.

Anglo American CEO Mark Cutifani started a review of worldwide assets after joining the company a year ago and said last month that nickel is among the "least optimistic" commodities in the company’s portfolio in the long term. Anglo American wrote $700m off the value of its Barro Alto nickel unit in February, and Mr Cutifani said he may consider selling it.

Even as rising prices make sales easier, the estimated values are a fraction of those during nickel’s peak in 2007, when Norilsk paid more than $6bn for LionOre Mining International and BHP spent $2.2bn to build the Ravensthorpe mine and sold it for $340m.

• [Editor:Yueleilei]