Canada Nickel (CNC) - 8 Bagger Accelerates into 2021 with Glencore Deal

January 23 2021, 11:44 GMT

Canada Nickel

  • TSX-V: CNC
  • Shares Outstanding: 80.02M
  • Share price C$2.28 (22.01.2021)
  • Market Cap: C$183M

RCanada Nickel 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.

Following on from the news of the Canada Nickel MOU agreement with Glencore, we had a thorough catch up with Mark Selby, CEO of Canada Nickel for a review of 2020 to understand what the company did and what they set out to do, and all their plans for 2021 going forward. Mark Selby has often talked about an accelerated time frame for delivering the Crawford project into the Nickel super-cycle and have a Feasibility Study completed by the end of the year, so we are keen to hear more about those objectives.

Company Overview

Canada Nickel has one of the 10 largest Nickel Sulphide resources in the world today with a huge amount of additional exploration potential. The Crawford project is based just outside Timmins, an established mining camp with all the infrastructure in place. The experienced team is aiming to accelerate the development of this project very quickly and from first drilling in September 2019, they are targeting having the Feasibility Study completed by the end of this year. The industry believes that Nickel is going to enter one of its super-cycles that come round every 15 to 20-years, and Canada Nickel wants to be well-timed to take advantage of that super-cycle, which creates massive upside for all their investors and shareholders. Canada Nickel’s shares are up 8x over that time period and they're looking to continue to repeat that performance going forward.

Canada Nickel (CNC) - 8 Bagger Accelerates into 2021 with Glencore Deal

Luck VS Data: History & Potential Seen from Day 1

When Mark Selby joined the company, the first 4 discovery holes had been made at Crawford and he saw the potential fairly clearly through what those 4 holes had shown. They founded the company in September 2019, started drilling then with one drill and raised CAD$6.5M privately. After that they ramped up the drilling and built up the team. They now have 90 drill holes, have put out 2 Resource updates and have completed the first phase of the metallurgy work. 

The early-stage geophysics at the Crawford deposit helped the team understand the geology and the mineralogy of the deposit and it was very clear early on what the deposit could be. The 4 holes had large widths of 400m or 500m of drill intersection, some of which had ended in Nickel mineralisation. They also showed the right amount of Sulphur as what is needed is enough Sulphur to soak up all the Nickel as it becomes available, but not too much Sulphur that it ends up creating Iron Sulphides. The 4 holes looked as if they had potential for a very consistent higher-grade core running through the centre of the ore body.

The Market "Needs All the Nickel it Can Get"

The demand for Nickel is going to increase dramatically and with very conservative assumptions, Tesla alone will need 1Mt - 1.5Mt of Nickel per annum. The entire market today is 2.5Mt and most of the market just doesn't realise how much Nickel we're going to need to meet demand. The EV sector will want to lock in large-scale production that can be expanded as the EV business grows, so deposits like Crawford with large, low-grade deposits of close to 3Mt of contained Nickel are exactly the kind of scale asset that these companies will be looking for.

Canada Nickel (CNC) - 8 Bagger Accelerates into 2021 with Glencore Deal 

Relations with First Nations

Relations with First Nations are fundamental to the future of mining companies like Canada Nickel as all the territory belonged to the First Nations and companies have to acknowledge and work with those communities. Canada Nickel is pleased that they have both their agreements in place and in particular their agreement with the Taykwa Tagamou nation, who want to go beyond a traditional Impact Benefits agreement, where they want to deploy their capital into the Crawford project. Canada is a "mining-friendly jurisdiction" but there are several projects that have been closed down for years, decades and in some cases entirely because the mining companies haven't had the First Nations agreements in place. If the mining companies are working on territory and resources that are owned by a First Nation's group, they need to make sure it works for everybody, all the different communities they are working with locally. If you don't have the cooperation of the First Nations, the project will not get through the permitting process.

Canada Nickel (CNC) - 8 Bagger Accelerates into 2021 with Glencore Deal

To get through the permitting stage when the various political levels need to engage to make that happen as quickly as possible, it's easier when they recognise there is local support and vocal support for the project. The Crawford project has support of the First Nations groups locally and Canada Nickel is pleased with the relationship at this point as they want to get the project permit as quickly as possible.  

"Accelerated" Approach: MOU with Glencore & PEA Timeline

At the end of 2020, Canada Nickel finished off with an agreement, an MOU, with Glencore for the Kidd Creek plant, which is great news. The company has now decided to delay the PEA until the end of the first quarter so as to incorporate those numbers into the PEA. The reason is that with this scale of deposit, Canada Nickel wants to show that they have a project with low capital cost. 

The announcement at Kidd Creek allows Canada Nickel to use an existing mill site with an existing tailings facility and provides them with an opportunity to get started and prove that everything works with a small upfront capital cost. It becomes a far more attractive investment proposition in terms of the pool of potential investors and includes a whole range of strategic investors and they can get going at a fraction of the capital cost. Canada Nickel will retrofit an existing mill to get started versus building a big new mill, which will take less than a year versus the predicted 2-years. 

In terms of permitting, they still have to permit the big project. They hope to be in production sometime in 2023/early 2024 as opposed to the original timescale of late 2024/early 2025. Glencore has idle capacity at the mill and the Crawford tailings potentially help remediate the Glencore tailings due to the difference in pH between the 2 sets of tailings.  

Amended Technical Report on the Mineral Resource Estimates

Canada Nickel has put out a new resource update. They had previously disclosed that their resources weren't pit-constrained and that they were going to put that out with the PEA at year-end. Now the PEA is delayed they’ve been asked by the regulator to restate the resource adding the pit-constraint, which will reduce that number. They had a model on the deposit about 6-weeks in which they used to guide their drilling, so as expected, have ended up with a 0% impact on the measured and indicated resource in the higher-grade core, which is the bulk of the value of the deposit. They're less than 0.1% on the overall measured and indicated resource for the entire deposit, and have designed it so that any impact would be just added in the third level.   

2021 Goals: Upside, Financing, Timing

They are doing a PEA on part of the deposit but they've got step-outs within Crawford that are going to continue to make it much larger. They will start the geophysics on their 5 option properties this autumn and also have some other targets so have potential for multiple Crawfords. These deposits do appear in clusters so they are hopeful of unlocking an entire Nickel district here.

The other key piece is that they’ve delivered great numbers and they’re going to see upsides in terms of the met work as they move forward. Now that they've got the concentrate from the lock cycle tests at the end of the year, they can do some lab work, the results of which will be published during the first half of this year. There are some significant milestones to come during the latter half of the year, in terms of financing solutions to be able to bring the project forward. Then they will put out the Feasibility Study by year-end that will include a very low-capex starting point utilising the infrastructure at Kidd Creek. 

Potential Partners & Preferred Model 

As the Kidd Creek option has a much lower capital cost, it opens up a huge range of potential financing options and the more options you have, the lower the cost of that capital. 

By the second half of the year, there will be some interesting developments as they approach the completion of the Feasibility Study. Then in terms of being able to unlock that district-scale potential, they have created one of the top 10 Nickel Sulphide resources with less than CAD$10M of exploration dollars. The drilling will be focused on getting to that district potential for the lowest dollar potential amount. They've got a good amount of cash in the bank and will be in good shape to do the balance of what they need to do in 2021.

Canada Nickel completed a lot of work on the PEA and Feasibility Study and their various components which will feed the strategic investor side of the investment equations. In terms of exploration around Crawford and then exploration step-outs around the option properties, they hope to provide the market with some pretty significant news as the year goes on.

Canada Nickel is keen on getting a strategic investor involved for possibly 5% - 10% of the company. They would like to keep 100% ownership of the asset at the moment as that maximises any value in an auction, which could happen at some point in time.  

2020 was a great year for Canada Nickel and is confident that 2021 is going to be even more exciting as they take some concrete steps moving the project forward. Hopefully, they will have delivered on the Glencore Kidd Creek MOU by early 2021 and have followed that up with the PEA in line with our expectations and delivered the test results that prove that they can hit the Net Zero Nickel and Net Zero Iron which is an exciting development in this kind of market. The Feasibility Study should be complete by the end of 2021 on Crawford and the option property potential of this area as they have the potential for having multiple Crawfords. 

In a market that's desperate for large amounts of Nickel to be able to meet the demand coming from the EV sector, Canada Nickel is eager to hit all these milestones in a year. At this point next year, people will be even more excited about the Nickel market as it is predicted to be a huge year for the EV market. 

It was great to have an update from Canada Nickel and valuable to remind ourselves where they came from by going back over some past material. They have delivered the accelerated part of the plan in 2020 and we hope they can hit some of their targets for this year in an accelerated manner as these could be very exciting times for Canada Nickel.  

To Find out more, go to Canada Nickel's Website.  

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