Canada Nickel (CNC) - Big Just Got Bigger

Canada Nickel Corp. is advancing the next generation of high quality, high potential nickel-cobalt projects to deliver the metals needed to power the electric vehicle revolution and feed the high growth stainless steel market. The company possesses industry-leading nickel expertise and is focused on low-risk, well-established mining jurisdictions.

Matt Gordon caught up with Mark Selby, Chairman, CEO, and Director, Canada Nickel. Mark previously served as the President and CEO at RNC (Royal Nickel Corporation) Minerals where he successfully raised over $100M to advance the Dumont nickel-cobalt project. Mark has been a leading authority in the nickel markets since 2001. He has served as a board member for several mining companies.

Company Overview

Canada Nickel is advancing the new 100% owned Crawford nickel-cobalt sulphide discovery with large-scale potential located in the established Timmins mining camp adjacent to major infrastructure. The company was founded in 2019 and is headquartered in Toronto, Canada. The company is listed on the Toronto Stock Exchange (TSX-V: CNC). It was one of the best performers on TSX in 2020, as its share value jumped from $0.25 to $3.0 within a short timeframe.

Canada Nickel is advancing aggressively the Crawford nickel-sulphide project. The project’s drill operations were initiated in 2019, the company is looking to conclude the Feasibility Study in 2022. In addition to Crawford’s nickel sulphide discovery, the company has assembled 18 targets on a district-scale nickel package in and around the Timmins Camp. The company anticipates that the Timmins Camp has the potential to be one of the world’s largest nickel-producing regions.

Assay Results

Canada Nickel recently published a press release highlighting the assay results for previous spring’s drill holes. The results were well in-line with the company’s expectations. The company has 4 different targets, namely Mahaffy, Dargavel, Kingsmill, and MacDiarmid properties. The Dargavel property was initially expected to carry average grades, however, the assay results showed that the property featured a large interval of 0.3% nickel, including an interval with 0.34% nickel. This interval was found on a non-prospect part of the target, but since it was situated on the company’s claims, it was drilled last spring. The company had to apply for permits on the mining claims to the north. 

At the northeast corner of the Dargavel property, the company has identified a very large magnetic target. This target was queued along with the 13 other high-prospect properties. The highlight of these drill results was a single hole that featured dunite from top to bottom. The company believes that this dunite is the first step towards unlocking the district-scale potential of the targets at the Crawford Project.

Dunite is the type of rock that hosts mineralization. The company employed geophysics to identify 18 targets. It was found that a certain type of magnetite lights up within a certain magnetic range, leading to the identification of dunite. This strategy helped the company in identifying 13 additional targets.

The hole featuring dunite had decent mineralization, just 2m down from the surface. A challenge with conducting operations at Timmins is that the company has to deal with 30m-50m of the lake bottom, the result of a historical glacial lake. The company expected the hole to hit around 400m, however, it hit at 480m. Notably, this hole was at the midpoint of the deposit. The company anticipates that it will be a fairly-large intersection heading in the opposite direction. The geophysical footprint has given the company a fair idea of the size of these targets.

The targets were drilled by the company in April-May 2021. The company has employed multiple drill rigs for the past 6-7 months. It is looking to get all the assays through. It is working with 2 bigger labs as it works towards building one of the largest nickel resources.

The assay results will be included in the company’s upcoming Feasibility Study which is expected to conclude by next fall. One of the labs moved some of its assays offshore to ensure a faster turnaround time for Canada Nickel. The company observed a 7 month assay turnaround time for these drill results. The last of the Dargavel assays were received in the previous week. The company plans to release assays to the market when it represents meaningful data. 

Canada Nickel anticipates that its larger low-grade nickel assets have a significant potential for scale. As per the company, these are the only set of nickel sulphide assets outside of Indonesia that would interest Majors. The company is looking to achieve a scale at the deposit that would attract larger investors.

For nickel, the company estimates a $300M-$500/year EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), with a yearly free cash flow ranging between $200M-$400M. It is important to note that these large low-grade ultramafic sulphides can produce the entire EBITDA with a significantly low carbon footprint. In a scenario where the company’s tailings and waste rock work proceed according to expectations, the company can effectively generate all the cash flow with zero carbon. In fact, it could further improve the EBITDA through the sale of carbon credits.

The company’s deposits are large disseminate ore bodies. This enables the company to carry out relatively wide-spaced drilling. This allows for resource development at a significantly lower capital cost.

Canada Nickel believes that given the potential of its Crawford nickel-sulphide discovery, it is undervalued in the market. The company currently has 6 drill rigs, and it plans to utilize one of the rigs to explore the targets.

Deloro is one of the 2 targets where the company has patented land. This ensures that the company does not have to worry about mining permits. The Deloro property exists within the company’s First Nations agreement framework. The company is currently working towards acquiring exploration agreements with the First Nations. It plans to carry out wide-spaced drilling at the deposit to define the scale of the resource. These deposits have a distinct magnetic threshold that led to the identification of mineralization.

The Deloro deposit is a 1.4km target with a 450m width and 300m depth. This comes out to a density of 2.6 kg/m3 that represents 0.5Bn tons with a 0.25% deviation. Based on the historic drilling data, the company has found that the edge of the deposit features higher grades. The Deloro deposit alone features 0.5Mt of contained nickel.

The company anticipates that if the actual results match the estimates, Deloro alone could be one of the largest nickel-sulphide discoveries in the past 2 decades. The company has a total of 18 targets, out of which 13 are newly acquired. 

Feasibility Study

Canada Nickel is working with Ausenco Ltd, one of the top 10 engineering firms for its Feasibility Study. Ausenco is working in tandem with SRK Gold. The company is looking to work with companies that not only carry out studies but build projects as well. It is looking to advance the project as far as possible.

The company is working on adding new team members to increase its engineering capabilities. It is also recruiting new hires to improve its environmental bench strength. The company intends to file permits in the current quarter which will be an ongoing process for the next 2-3 years. Following the completion of the Feasibility Study, permitting will be a critical path for the company. It is working towards the aggressive advancement of its project. The company currently has ongoing discussions for bringing a strategic partner on board. 

In the past, Canada Nickel had multiple technical due diligence carried out through Karora Resources (formerly Royal Nickel Corp). via a large company’s internal technical team or a consultant hired by a big financial investor.

Canada Nickel carried out detailed due diligence multiple times with RNC. Canada Nickel is looking to carry out due diligence and replicate the success of the Crawford project. The company is in ongoing discussions with strategic investors for the same.

The company is currently conducting detailed technical reviews. It has a competent technical team that is supported by first-rate technical advisors. It anticipates that the resultant data will help generate interest in the company’s project.

Value Addition

Canada Nickel is looking to add value to its assets through 2 major strategies. First, it is looking to aggressively advance the Crawford project. Notably, the company’s PEA (Preliminary Economic Assessment) was carried out with hole 65. It is now closing in on hole 200 for the Crawford asset. The company is looking at a 50%-100% higher resource in the Feasibility Study compared to the PEA, leading to a significant jump in value.

The company had originally expected a 4%-5% improvement in material recovery. However, it was able to demonstrate 6%-16% better results. It anticipates that once all the data is added to the model, a substantial value improvement will be evident. Furthermore, this will help de-risk the project while demonstrating a significant increase in value from the PEA to the Feasibility Study.

The majority of the world’s nickel is produced by half a dozen regions. Canada Nickel’s asset offers a district-scale opportunity. Canada Nickel currently has 18 separate targets, it is confident that it can develop a resource that would be even larger than Crawford.

Canada Nickel anticipates that over the course of the next 5-10 years, the district will be a part of the world’s major nickel providers. The company is looking to get nickel into the market through low-grade ultramafic. There’s an increasing demand in the market for low-carbon nickel outside of Indonesia.

The company is looking to be a low-carbon nickel supplier that is close to the US and European automotive markets. Its Timmins project is situated in an ideal location to function as a large supplier of nickel for the automotive industries in both markets.

The company is looking to ensure that its market value is high relative to the value unlocking of its assets. Canada Nickel’s Feasibility Study is planned for mid-2022 and over the next 12 months, the company is doubling down on demonstrating the district-scale potential of the asset.

The Nickel Market

Canada Nickel expects the nickel market to have a similar run as the previous year. It anticipates that the nickel prices may drop below $10/lb for a brief period as a large influx of nickel supply comes to the market. 

Every major nickel super-cycle is driven by a new source of demand and it is often underestimated how quickly it can grow. In 2021, analysts predicted that the nickel market will have a 3%-5% surplus. However, the market ended up with an 8% deficit. This was the largest absolute percentage deficit ever observed in the nickel industry. The company believes that the demand for nickel in the stainless steel market is also underestimated.

Despite people being bullish on EVs (Electric Vehicles), the estimates are highly conservative. As per Canada Nickel, the nickel market is currently on an S curve of adoption, which leads to a 100% growth. Notably, the nickel demand from the EV sector grew by 100%, while the predictions were at 50%. The company forecasts that the next year’s growth for EV will be in the 50%-100% range.

By mid-2022, the demand for EVs is expected to rise further. The market will be in a sustained deficit position once again, leading to an increase in prices that are $1-$2 higher than current levels. According to the company, as the end of 2022 approaches, there will be another panic in terms of sourcing a sustainable nickel supply for the next 2-4 years because the nickel market at its current state appears to be squeezed.

The Auramet Loan

In December 2021, Canada Nickel announced a $10M secured loan facility with Auramet International LLC. This deal was closed on 5th January 2022. The loan ensures that Canada Nickel is well-funded to carry out aggressive advancing of the Crawford Nickel Sulphide Project through Q1 2022. The company is expected to conclude its strategic investor process by the end of March. Although the conversations for strategic investors are under progress, the company has the option to extend the facility further if required. 

To find out more, go to the Canada Nickel website