Power Nickel (PNPN) - High-Grade Canadian Nickel Project

Power Nickel Inc. (formerly known as Chilean Metals) is a TSX-V listed mining company focused on the acquisition and exploration of high-grade nickel deposits in Canada. The company’s flagship project is the NISK project, a high-grade nickel sulphide deposit located in Quebec. This project is positioned to be one of the greenest sources of class-1 nickel in the world. With access to abundant low-carbon hydropower and easy road access, NISK is well set up to supply the battery metals market with sustainably mined, environmentally-friendly high-grade nickel.

Matt Gordon caught up with Terry Lynch, CEO, Power Nickel. Prior to becoming a Director with International PBX Ventures in 2012, Mr. Lynch held the position of CEO of TSX-listed Firstgold Corp. Between 2005 to 2008, Mr. Lynch was a partner with Kingsmill Capital Partners, a financial advisory firm specializing in advising public and private early-stage growth companies. Before joining Kingsmill Capital, he spent 15 years operating startup companies in industrial products, oil and gas, and media. Mr. Lynch is also a Co-Founder of Cardiol Therapeutics, a NASDAQ and TSX-listed clinical-stage life sciences company focused on the research and clinical development of cannabidiol as an anti-fibrotic and anti-inflammatory therapy for the treatment of cardiovascular disease. His educational credentials include a joint Honors degree in Economics and BBA from St. Francis Xavier University. 

Company Overview 

Power Nickel is a mining company focused on the acquisition and exploration of mineral properties in Canada that offer the potential for high-grade nickel deposits. The company also has a mining investment portfolio that contains an 80% ownership position of Consolidation Gold & Copper. Consolidation Gold & Copper owns 100% interest in the Golden Ivan project in British Columbia’s Golden Triangle. It also owns 100% interest in three projects in Chile, namely Zulema, Palo Negro and Hornitos, and Tierra de Oro. Power Nickel is headquartered in Toronto, Canada. 

Power Nickel is focused on developing the NISK Nickel Sulphate deposit in James Bay, Quebec. According to the company, this is the best-undiscovered nickel story on the planet. 

Power Nickel was originally named Chilean Metals. The company is heavily invested in Chile as a copper-gold explorer. In the fall of 2020, the company was approached with some exceptional acquisition opportunities through networking within the sector. 

The company was able to acquire a sizable copper-gold asset in British Columbia, called Golden Ivan. This asset is based in the heart of the Golden Triangle. This project led the company to develop a dual focus between Chile and Canada. Shortly before Christmas last year, the company became aware of Critical Elements, a very high-grade lithium operator and development story in Canada. Critical Elements had the NISK project, a nickel sulphate asset with a historical resource of 3Mt. Currently, the resource stands at about 1.7% nickel equivalent ounces of 10Mt. Interestingly, it is quite rare to get such a head start in an exploration play. 

Cash Position 

Power Nickel has a current market cap of $15M. The company raised $2.2M in mid-May last year. It currently has $1M in cash flow. The company has 20M in outstanding warrants, that have an average price of  $0.22c. The warrants are expected to bring in about $4M in cash flow. 

Power Nickel has the financial resources to get through to the planned resource update. The company has been offered multiple opportunities for a capital raise, however, it is looking to publish the resource update first as this will help in changing the direction of the stock and, as a result, generate additional capital. This, in turn, will take off any immediate financial pressure. 

The company has plans to eventually raise capital. Its previous raise was at $0.25c and $0.40c by way of flow-through funds. The company is looking to double these numbers. Once it gets within the range, it will opt for flow-through funding. 

In theory, the NISK asset has a 3Mt historical resource with 1.7% nickel equivalent ounces. In case the company is successful in validating the resource and growing the overall resource to 4Mt, it would be considered highly positive from a market perspective. Nickel sulphate deposits are very rare. These are often found in pods. This means that if an asset has one resource, it’s likely that other pods that surround it. The company is quite bullish in this respect. It is looking to have a market cap that is based on per pound nickel present in the ground. The company anticipates that the resource update would definitely change the market’s interest in the project. 

Interestingly, Canada has 2 main types of nickel sulphide deposits. The first one is a massive, low-grade bulk-tonnage deposit such as Canada Nickel and Giga Metals, and the second one is a high-grade Nickel Sulphate deposit that carries anywhere between a 10Mt-50Mt resource such as Talon Metals. 

High-grade nickel sulphate deposits are significantly easier to finance. Here, the IRR (Internal Rate of Return) is also much more favourable. In fact, getting a $200M-$250M package into operation can generate up to $200M on a yearly basis. Such projects offer interesting payback opportunities for the developers and are likely to come to the table quicker. Meanwhile, high-grade nickel sulphate projects are valued at over $1Bn and are likely to last for decades to come. 

Nickel prices have gone from $5 to $12 within a span of a year. Due to the price spikes, nickel assets are expected to provide exceptional returns over time. In order to build the nickel cycle, massive industry participation is required. Given the rise in demand, Power Nickel anticipates that companies such as Tesla and Volkswagen would eventually step in and become part owners of a nickel mine. As per the company, there are several deposits that deserve to be built, however, the main challenge is to get the market support in order to advance and build the project. 

The NISK Nickel Sulphate project

Power Nickel made a deal with Critical Elements that would help monetize the NISK asset and create shareholder value. The former entered an 80% options agreement by spending $5M over a 5-year period. During this time, Critical Elements had almost 20% ownership of Power Nickel. The latter paid an additional $0.5M in cash. This made it a fair deal for both parties, allowing the dormant asset to once again enter operations. 

The NISK asset, at the time, was a near-term nickel asset. It served as a timely move for the company to move to a different level of risk-reward for its shareholders. The company realised that advancing the NISK asset would be the quickest and least risky way to advance the company. It announced drill results from the deposit last week. The company is looking to publish an additional set of drill results in the coming days. This would be the final set of results for the asset, enabling the company to work towards a 43-101 compliant resource. 

Notably, the resource at the NISK project hadn’t been drilled since 2006. The historical drilling was done by Monarch Gold. Power Nickel is looking to publish a 43-101 compliant resource by early Q2 2022. Following this, the company plans to publish a technical report. Compared to other nickel resources, Power Nickel believes that the NISK asset is grossly undervalued. As the market realises the value of this asset, the company’s outstanding warrants will help generate significantly more value. 

Consolidation Gold & Copper

Power Nickel has plans to spin off its copper-gold portfolio into a new company called Consolidation Gold & Copper. The company is looking to retain 80% ownership and put 20% for the shareholders. This new company will be used to fund the first drill program for the Golden Ivan property. The drill program has an estimated cost of around $1M. Power Nickel will focus on the nickel asset, while Consolidation Gold & Copper will focus on the Golden Ivan property and the Chile assets. 

In the initial stages, the management team for Power Nickel will maintain the management for Consolidation Gold & Copper. The company has always focused on a very lean workforce. One of the advantages of working with Critical Elements is that the company was able to tap into the former’s deep entrenchment in the Quebec geological circles to put together a highly-capable team that works externally to model and drill the deposit. The company is focused on putting money in the ground for drilling, advancing the scientific aspects of the project, and demonstrating the merit of the asset to potentially get mined. 

Consolidated Gold & Copper will be focused on advancing a drill program at Golden Ivan in the summer. The company worked with Apex Minerals on a Sampling Study, which led to the discovery of 2 new gold zones on the property. Notably, the 2 different sampling zones both had grades of 15g/t-16g/t. This portion of the property was never drilled before. The company’s neighbour to the south strike point is drilled on the border, leading to some of the best intercepts. It is highly bullish on finding something substantial in this area. The company is focused on a drill program in the summer and based on the results, it will determine the next step. 

Policy Changes

Given the ongoing nickel shorting on the market, the company is working towards getting a form of legislation in spring 2022. However, this legislation has been deferred due to the upcoming elections. 

Gabriel Boric, the new Chilean President is an advocate for a more progressive, Western-style approach to income taxes with a broader tax distribution. Chile currently is very hierarchical in this aspect, with the majority of the wealth concentrated at the top. Despite being a country that is well-off compared to other South American countries, the population could benefit from these upcoming changes. 

The President is looking to tax the wealthy and the companies more, and in theory, spread the wealth to the people. Power Nickel hopes that this change will help the Chilean people without breaking the country’s success story. 

Power Nickel has multiple high-prospect assets in Chile that are drill ready. As copper prices get more intense, the deposits become a lot more attractive. However, the company is currently sidelined and is awaiting the constitutional debate to be finalised, which is scheduled for August 2022. 

The company is holding off any new programs at the Chilean assets as it could be highly risky and would add political risk to the project. In the meantime, the company is looking to focus its energy and limited capital on the NISK and Gold Ivan assets. It plans to wait out the constitutional approval in August and determine the impact of the ruling on the economics of exploration in Chile. There are expectations that operating in Chile might require the company to pay higher royalties. However, the company believes it won’t be adversely impacted by this change. 

Ongoing Operations 

Power Nickel is currently in the development stage of step-out drilling for the NISK asset. It is looking to step out from the past drill holes in 25m-50m increments. This would enable the company to confirm the resource and eventually publish a 43-101 compliant resource. Additionally, the company is looking to demonstrate the extension of the ore body. In the first release, the company showed a 150m extension in one direction, which connected back to the ore body. This was a major achievement from a mine development perspective. The company is looking to achieve both its objectives through a very small initial drill program. Since there’s a possibility of discovering additional pods on the asset. An existing resource with an expansion potential provides a lot of optionality. 

Nickel Sulphate deposits are often found to have haloes over at big VMS (Volcanogenic Massive Sulphide) systems. The company is looking to test out the underground potential of the deposit, which can be done without spending excessive capital. 

Power Nickel is looking to drill holes up to a depth of 100m-300m. The majority of the historical drilling was at a 100m depth. Interestingly, the deposit starts at about 80m and goes up to 300m deep. This makes it possible for an open-pit operation, which could be a great way to kickstart the economic returns. The AISC (All-in Sustaining Costs) for the drill operations is estimated at $400. The estimations are based on the company’s previous program where it drilled 2500ft by spending about $1M. 

The Management Team 

Before joining the company, Terry Lynch, the CEO helped out a friend with Chilean Metals 10 years ago by purchasing company stock. The company’s Board has been consistent throughout its history. Greg McKenzie previously held the position of Managing Director at Hayward. He now runs a silver mining company. 

Peter Kent, the Chairman of the company, is a highly-experienced retired corporate lawyer. Les Mallard is a successful businessman. The company’s team has a strong working relationship. Notably, it was the company’s network that enabled it to acquire the Golden Ivan and the NISK assets. 

The company’s CEO is well-versed in the capital markets. He was able to successfully raise $100M for his biotech company in 2021. The company is looking to raise additional capital following the drill results and an updated 43-101 resource. 

Project Deliverables 

Power Nickel is looking to deliver the updated resource by early Q2 2022. Interestingly, the company responsible for modelling Power Nickel’s exploration program in the QC (Quality Control) is the same company appointed for a 43-101 resource update. It has already carried out all the required preliminary work on the asset. 

The company also benefits from the expertise of Critical Elements and JS. Both companies specialise in the type of terrain present at the NISK project. Power Nickel is actively looking for black peridot rock through its drill program. The 3D modelling carried on the deposit will assist the company in locating the target rock. 

To find out more, go to the Power Nickel website