EV Nickel - Why is Ontario Government Backing Clean Nickel Strategy?

• EV Nickel is a Toronto-based nickel exploration and development company with assets in Northern Ontario. The company recently attended PDAC, where the sentiment was positive and the focus was on battery metals.
• The company has released maiden resource updates on the CarLang A Zone, indicating a substantial deposit. Initial results suggest they have identified over a billion tons of mineralization, which could power approximately 37 million EV batteries.
• The Ontario provincial government has invested half a million dollars into the company's project to support their exploration of bioleaching and vats. This could potentially allow for the production of nickel sulfate directly at their site, aligning with the government's clean nickel strategy.
• EV Nickel has been discussing potential collaborations with major companies, exploring alternative financing options, and is adamant about not giving away future upside.
• The company's primary focus remains on delivering its commitments and spending time with the local communities, rather than solely focusing on the financial market.

Clean Nickel Producer in Northern Ontario Sees Major Upside

EV Nickel (TSX-V: EVNI) is a Toronto-based nickel exploration and development company focused on becoming a clean nickel producer in Northern Ontario, Canada. In a recent video interview, President and CEO Sean Samson highlighted the company's large-scale low-grade deposit and high-grade deposit, which together position EV Nickel to be a key supplier for the electric vehicle battery supply chain.

With supportive federal and provincial government backing, EV Nickel is also working to develop an innovative bioleaching process to produce nickel sulphate directly from concentrate at its mill site. This would allow EV Nickel to bypass traditional refiners and produce the exact nickel products demanded by EV manufacturers.

Despite EV Nickel's promising assets and process innovation, the company's current market valuation significantly lags peers. As EV Nickel continues to advance its projects and demonstrate the potential scale of its deposits, the valuation gap should narrow. For investors looking to capitalize on the battery metals supercycle, EV Nickel offers excellent upside exposure to nickel, with minimal downside risk at current prices.

Interview with President & CEO, Sean Samson

Favorable Backdrop Fuels Nickel Demand

The broader backdrop for nickel remains very favorable, with demand forecast to surge over the next decade driven by EV adoption. Although pandemic disruptions muted attendance at this year's PDAC conference in Toronto, the overall sentiment was positive, particularly for battery metals.

EV manufacturers had a significant presence at the conference, underscoring their urgent need to secure nickel supply chains. With demand skyrocketing, nickel supply is expected to tighten, likely leading to higher prices. This supply-demand imbalance benefits emerging nickel producers like EV Nickel.

Large Scale Assets Offers Upside

EV Nickel's flagship asset is the Carlin nickel deposit, located just 50km outside Timmins, Ontario. The northeast-trending deposit stretches over 10km, as confirmed by historical drilling and surface grab samples.

In 2021, EV Nickel drilled just the first 1.4km section of the CarLang deposit. Even with this initial shallow drilling, the company outlined an impressive maiden resource of over 1 billion tonnes grading 0.24-0.25% nickel. This equates to 2.4 million tonnes of contained nickel, enough to supply approximately 37 million EV batteries.

Importantly, this resource only covers the first 20% of the total CarLang trend. Based on the extensive strike length and exploration work, the deposit could potentially be 5 times the current size. EV Nickel plans to continue delineating resources along the trend through further drilling.

For context, EV Nickel currently trades around a $25 million market valuation. Canada Nickel, which has a comparable large-scale, low-grade nickel deposit also located in the Timmins region, has an approximate $500 million market cap - over 20x larger. As EV Nickel demonstrates the immense scale at CarLang, its valuation should move significantly higher and close this gap.

High-Grade Asset Provides Optionality

In addition to the large-scale CarLang deposit, EV Nickel also owns the high-grade W4 deposit, located just 7km from a nickel concentrator. Previous drilling at W4 intersected exceptional nickel grades over 1%, with mineralization starting at the surface.

This near-surface high-grade material is expected to support a low-cost, 3-4 year initial mining operation. The close proximity to an existing mill and infrastructure provides optionality for a fast production start.

High-grade nickel assets are in strong demand by EV manufacturers looking to shore up supply chains. EV Nickel's W4 deposit should attract strategic investors and suitors looking to lock in a local Canadian source of nickel concentrate.

Bioleaching Innovation Attracts Government Support

Rather than relying solely on its underlying geology, EV Nickel is also focused on process innovation to produce the cleanest nickel products demanded by EV makers. The company has developed a proprietary bioleaching process to extract nickel from concentrate at its mill site.

This avoids smelting and enables EV Nickel to directly produce nickel sulphate. The process also facilitates carbon capture, helping minimize greenhouse gas emissions.

EV Nickel has successfully attracted government support to test and optimize this bioleaching technique. The company recently received $500,000 from the Ontario government's Critical Minerals Innovation fund, complementing previous federal backing.

The ability to produce nickel sulphate, carbon capture potential, and strategic location within Canada position EV Nickel's assets as ideal "clean nickel" projects. This has garnered significant interest from officials and EV manufacturers alike.

Valuation Disconnect Presents Buying Opportunity

Despite EV Nickel's promising assets and innovation, the company's current valuation severely lags peers. The recently released maiden resource for CarLang and the potential to significantly expand the deposit size have yet to be reflected in the stock price.

As EV Nickel continues advancing both the large-scale CarLang trend and high-grade W4 deposit over the course of 2023, the valuation gap to comparable nickel developers should narrow considerably. For investors, EV Nickel offers leverage to the nickel price, which fundamentals suggest is heading higher. The company's exploration potential, strategic Ontario location and process innovation provide potential upside. However, its size and balance sheet detract from the story, so the company must address these issues or bide its time until nickel prices/market sentiment for nickel return.

At current prices, EV Nickel presents a compelling risk-reward opportunity. As the world transitions towards EVs, it's only a matter of time before the market recognizes EVNI's potential to become a major clean nickel producer.

Conclusion

With the Carlin and W4 deposits plus its bioleaching technology, EV Nickel is primed to capitalize on surging nickel demand from EV adoption. CEO Sean Samson sees a clear path towards production, with federal and provincial support. As the company continues to derisk its assets and demonstrate scale, the large disconnect between EV Nickel's fundamentals and valuation could converge. For investors seeking nickel exposure, EV Nickel offers an upside, but beware the downsides too.

Capital constraints

With limited cash reserves, EV Nickel has restricted funding for exploration and development. Additional financings could lead to dilution for current shareholders.

Early stage assets

EV Nickel's deposits are still in the exploration and resource definition stage. There is no guarantee they will reach commercial production.

Operational risks‍

As a small company, EV Nickel has limited technical personnel and experience to advance the project on the ground. Delays or cost overruns are common risks.

Metal prices‍

Nickel prices are out of EV Nickel's control. A prolonged downturn could impact project economics.

Financing risks‍

EV Nickel likely requires external financing from investors, partners or lenders before reaching production. Access to capital is not guaranteed.

Government/permitting

Operations require various permits and regulatory approvals. Delays could stall development plans.

Competition

Numerous nickel projects are competing globally for investment and buyers. EV Nickel has to stand out.

Scaling risks‍

The company aims to significantly expand deposit size. Growing too quickly can be challenging.

While EV Nickel has promising assets, investors should be aware of the substantial risks facing small, early-stage natural resource companies before investing. Proper due diligence is warranted.