THE gold price may have hit $US800 an ounce last week, but there's no question that nickel was the hottest commodity in the Australian market. Xstrata's surprise $3.1 billion bid for Jubilee Mines put a rocket under the sector, which has been consolidating rapidly since BHP Billiton's $9.2 billion purchase of WMC Resources in 2005.

"We are bullish on stainless steel," Xstrata chief executive Mick Davis said. "We see no reason why that should change."

Jubilee had long been regarded as one of the world's premier independent nickel companies given its repeated exploration success surrounding its Cosmos mine in Western Australia.

Like platinum, the nickel sulphide game is all about controlling the smelters and refineries.

The world's top five nickel sulphide producers - Russia's Norilsk, Brazil's CVRD, BHP Billiton, China's Jinchuan and Xstrata - control 80 per cent of production, giving them increased pricing power.

The nickel price, which reached more than $US50,000 a tonne in May, has taken a severe hit in recent months. Last week, it was trading near $US32,000 a tonne.

But analysts expect the nickel price to improve over the remainder of the year since the makers of stainless steel will be forced to restock after taking a breather over the last few months------------------------------...

drill it and they will come

griz