Canada Nickel (CNC) - World Class Growth Story Continues

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. 

We met with Mark Selby, Chairman, CEO, and Director, Canada Nickel. He 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 market 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). They were one of the best performers on TSX in 2020, their share value jumped from $25 to $300 within a short timeframe. 

The company has reached a pivotal point as they have established one of the largest nickel sulphide resources in less than two years. They are aggressively working towards advancing the project and recently put out a PEA (Preliminary Economic Assessment) with over $1Bn NPV (Net Present Value). 

Canada Nickel considers itself a third-generation nickel supplier where the processing does not create a massive SO₂ or CO2 footprint. Over the course of the next 12-24 months, the company is targeting large low-grade sulphide deposits featuring waste rock and tailings to spontaneously absorb the excess CO2. 

The company has an IRR (Internal Rate of Return) ranging in the mid-teens. The company previously stopped the drilling operations on hole 65 for the PEA and recently drilled hole 155, and is expecting a 50%-100% higher resource base, which would be included in the planned feasibility study, scheduled in August 2022. This development will have a major impact on their NPV. 

The majority of the nickel projects were originally discovered in the 60s and 70s. Exploration is done on these sites every nickel cycle. The company performed a year-long metallurgical work until the PEA. They are speculating a multi-percent improvement in nickel, iron, and chrome recoveries. The company will also bring cobalt and PGM (Platinum Group Metals) into the feasibility study. Each percent raise in the value of nickel will increase the NPV by $100M, leading to a massive increase in project value. 

Canada Nickel has deals in place with First National, gaining access to low-cost capital which will enable them to build a nickel mine, further improving their NPV. 

Environmental Considerations

The first two generations of nickel supply had a significant environmental footprint where millions of tons of SO₂ was dumped on the ground, causing significant damage to the environment over the mine's lifetime. During the laterite nickel extraction process, 80t-90t CO2 is released into the atmosphere per ton of nickel produced. The extraction process utilized by Canada Nickel produces 2t CO2 per ton of nickel concentrate with the first percentile of the cost curve. 

The Timmins Operation will provide over 100 years of nickel supply without a massive airborne footprint. Since the tailings and the waste rock are capable of spontaneously absorbing CO2, the company will be able to produce zero-emission carbon, nickel, cobalt, and iron with minimal SO₂ emissions. This is being called the third generation nickel supply. 

Historically, every major supplier in a nickel generation has eventually become the leading company on the stock market. Each time a new source of nickel is discovered, a massive amount of value is added to the company. The company is focusing on highlighting its resources over the course of the next 12 months.

A Steep Rise in Demand for EVs

Although there has been an observed drop-off in the nickel price market, there are several indicators for a rise in the coming months. This is supported by the fact that the demand for EVs (Electric Vehicles) has grown by 100% on a YoY (Year-on-Year) basis. Following the announcement by Joe Biden that 50% of car sales for the 3 biggest US auto companies will be from EVs by 2030, there has been a major shift in the market. The EV market is quickly approaching the tipping point where the demand is expected to drive the market. 

Major Shift from Oil and Gas Companies

BHP recently announced the offloading of its oil and gas assets. BHP spent $300M to acquire a Canadian sulphide asset. There has been increased activity in the corporate space for lithium assets. Shibanier acquired a nickel refinery which led the company to become one of the world's largest producers of PGM within a short timeframe. 

There has been a fundamental shift in the portfolio of oil and gas companies lately as they continue to depart from their core portfolio and are focusing on future-facing metals such as copper, potash, and nickel. BHP made a $3Bn investment at the Jansen project in Canada to bring it into production. 

As per a discussion with McKinsey Consultants, Canada Nickel learned that within the next 12-24 months, there is going to be a shift towards EV as oil and gas companies acquire additional lithium assets. 

The Stainless Steel Operation

Canada Nickel's stainless steel operation is the most technically feasible highest-value path to the market through their PEA. Then plan to allocate half of their nickel supply towards stainless steel and the other half towards EVs. Given the scale of operations at Timmins along with the close proximity to Southern Ontario and the North-East US auto market, the company is in an ideal location to become a major lithium supplier. 

Growing Interest in Nickel Intermediaries

The market has seen an increased interest in the nickel market as countries like China are rapidly building capacity to process nickel and related materials. In the past few weeks, the pricing of nickel intermediaries from laterite projects has moved from 75% to 90% in the past 3 years. Additionally, the Ontario government and the federal government are actively working on mine-to-auto plant strategies, which can lead to a significant jump in nickel's market value. 

Capital Raised

Canada Nickel has a current market cap of CAD$300M. The company raised CAD$12M in July. The company is continuing to build the resource for the Feasibility Study and is looking to turn this asset into a district-scale operation. The company has identified a number of additional targets leading to a 50%-100% increase in the overall resource at the Crawford deposit alone. 

As per a recent press release, Canada Nickel announced ongoing discussions with strategic investors towards raising additional capital for the Feasibility Study and the permitting process.

The company is expected to put out significant news flow over the course of the next 12 months. Their current challenge is getting assay results into place. They originally had a 9-day turnaround time when the drilling program was initiated 2 years ago. Currently, they are 8-12 weeks in with additional numbers coming in nearing the 12-week mark.

The Timmins operation is being targeted as a multi-decade asset with a potential for expansion through multiple mines. This unique asset has incredible value potential and could reach Sudbury's scale of operations over the course of the next 100 years. This can bring Canada Nickel's market cap from the existing CAD$300M to $3Bn-$4Bn. 

Canada Nickel has found visual mineralization at the site and is looking to unlock the potential of its asset over the course of the next 12 months.

To find out more, go to the Canada Nickel Website