Queensland Pacific Metals Ltd (ASX:QPM) has been kept as a Speculative Buy with a price target of $0.38 by broker Foster Stockbroking after the company signed an MoU with Transition Energy Corporation and the North Queensland Gas Pipeline.
The MoU is seen as the first step towards securing gas supply to QPM’s TECH Project in Townsville.
There is also potential for the TECH Project to be a zero-carbon nickel producer, as the company is targeting a “significant reduction in carbon emissions”.
Potential for zero-carbon nickel
Foster Stockbroking noted that should QPM successfully secures gas from this MoU, it has the potential to see carbon dioxide emissions further reduced and have net negative carbon dioxide emissions if the gas supply is derived from vented and flared gas at existing Queensland coal mines.
QPM had previously disclosed that its TECH Project had better than industry average carbon dioxide emissions for nickel sulphide production.
EV sales “regain its mojo”
The broker also noted that the thematic tailwinds of electrification of vehicles are stronger than ever, saying that electric vehicles (EVs) sales have “regained its mojo”.
Further, US President Joe Biden has announced a target of 50% of new cars on the road in the country will be electric from 2030.
Favourable sector trends
The broker also noted that environmental and sustainability demands from both original equipment manufacturers (OEMs) and investors are fast becoming the determinant of who receives funding, purchase orders and integration into supply chains.
There is also well-documented and a growing disconnect between nickel-for-battery projects coming online and the pace at which EV adoption is taking place, which is causing shortages.
Foster Stockbroking also pointed out that the lithium market is staring at deficits but the question is “when?”
The lithium sector on the ASX has bordered on euphoria this past week with Pilbara Minerals Ltd (ASX:PLS), Galaxy Resources Ltd (ASX:GXY), , IGO Ltd, Orocobre Ltd, Liontown Resources (ASX:LTR) Ltd all touching all-time highs, however, the nickel space, although strong, has not shared the same response.
Not all nickel created equal
The broker said the market needs to distinguish between nickel-in-battery demand in contrast to the old-world stainless demand.
It noted that not all nickel “is created equal”.
It also highlighted BHP Nickel West president Eddy Haegel’s projection that over 2020 to 2030, overall nickel demand will grow at a 5% compound annual growth rate and that the nickel-in-battery demand will graw at a rate of 21% compound annual growth rate (CAGR).
Foster Stockbroking acted as the sole lead manager both for the $4.4 million placement in November 2020 as well as the $15 million placement in March 2021.