Glencore-Chinese deal with Centaurus speaks volumes about big boys’ bullish nickel outlook

When the world’s biggest commodities trader and a fast-growing and tech-savvy Chinese end-user signs on the dotted line for binding offtake agreements, it is time to take a look at the company and the project involved.

That is even more so when the commodities trader and end-user also kick in pre-development equity into the company at above market prices in a further demonstration of confidence in the company and its project.

And things enter the remarkable realm when the underlying commodity involved is sulphide nickel where prices have been trading sideways at depressed levels since the Chinese-backed laterite nickel industry in Indonesia swamped the market with supply.

Having said that, it helps when the project being backed by the commodities trader and end-user has projected all-in sustaining costs of production in the first quartile of the global industry cost curve.

All of the above swept over Centaurus Metals (ASX:CTM) during the week with the news that Glencore – the commodities trader par excellence – and China’s CNGR Advanced Material – the end user that supplies precursor battery materials to the big name battery producers – had emerged as major backers of its Jaguar nickel project in Brazil.

The pair have signed new offtake agreements which, when added to a pre-existing one held by Glencore, give Centaurus 100% contract coverage over the first five years of operations equating to 22,500tpa of nickel-in-concentrates.

Interesting for sure and welcome stuff for Centaurus as it gets busy pinning down the overall project funding package for Jaguar, one of the world’s biggest undeveloped sulphide nickel resources at 1.2Mt of contained metal.

But more telling on how the market should be thinking about Centaurus and the value of Jaguar was the new offtake agreements being paired with the US$20 million that both Glencore and CNGR will each inject into the company at 42.5c a share.

Glencore is both a big nickel producer and trader of the stainless steel and battery material and its involvement presumably reflects its call on the market and Jaguar’s robustness, and what that could mean for Centaurus with its current modest market cap of $220 million (33.5c a share on capital expanded by the placement shares).

Meanwhile CNGR knows what its forward order book looks like and why locking in a long-term supply of sulphide nickel with its “green”’ credentials is a smart thing to be doing while nickel is in the dumps.

Nickel was last quoted at US$7.10/lb which is an improvement on the CY2025 average of US$6.88/lb. Moves by the Indonesian government to stop the industry there from shooting itself in the foot by over producing did see the price get to US$9.07/lb in May.

Centaurus at the time traded at 75c, highlighting its extreme leverage to nickel price movements. At US$9/lb, Jaguar’s NPV was put at US$735 million or $1.04 billion in Aussie dollars.

Canaccord said the Glencore/CNGR support materially strengthens the pathway towards completion of the overall funding package and the final investment decision for Jaguar.

“Securing two credible downstream/commodity partners across 100% of initial production, both investing alongside their offtake commitments, represents a meaningful further de-risking of Jaguar’s development pathway,’’ Canaccord said.

The firm retained its spec buy rating on the stock and a price target of $1.05. Argonaut has a $1 price target on the stock.

Interesting stuff for a stock trading at 33.5c and seemingly without friends, other than Glencore and CNGR that is.

Develop (ASX:DVP):

Talking about the market intelligence edge big commodities traders have, there was an interesting snippet on when the lithium market could bounce back passed on by Develop (ASX:DVP) boss Bill Beament on the company’s September quarterly investor call yesterday.

Beament recently returned from LME week where he met up with operatives from the commodities trader Trafigura, a major backer of Develop, and others at the metal industry’s major gabfest.

Apart from its new copper-zinc mine at Woodlawn in NSW and the development of its Yitirrti copper-silver-zinc mine in WA, Develop is close to sending out its first shipment from its Pioneer Dome lithium mine in WA.

It is a direct shipping ore project based on an open-cut operation for a year followed by a longer-lived underground operation. Just seven weeks ago, the initial open-cut was good for $150m in free cash cashflow.

But lithium prices have fallen sharply since. Develop’s modest $18m investment in the project is protected by floor pricing in its offtake contracts. But it would nice for a rebound in prices to make the project sing again.

On that score, Beament reported that the view of the traders at LME Week is that inventories in China are being drawn down quickly.

He said the view was that every time that has happened in the past and inventories get to critical levels, prices can V-shape back up very quickly.

“The expectation is that's probably the June quarter next year,’’ Beament said. “That's the view of the major trader (Trafigura) in the world.

“Outside of that, we're protected with a floor price . . so we can get our capital back and reassess as that price comes back.’’

Beament added that Trafigura wanted Develop to keep mining Pioneer and had offered finance to make it happen.

“That probably gives you a bit of confidence about a recovery in the second quarter of 2027,” he said.

Market doubts about Pioneer’s cash flow capability in the wake of the lithium price retreat has been the major factor in Develop’s sharp share price retreat of late. It was $3.94 a share in Thursday’s market, which is down from a 52-week high of $7.68.

The beaten up share price is despite Woodlawn and the coming Yitirrti enjoying the revenue benefits of historically high metal prices, particularly for copper.

It has the look of a disconnect between the share price and near-record prices for copper and the upside that lithium might just deliver from the June quarter next year if the tea leaf readers at LME Week are proven correct.