Canada Nickel (TSX-V:CNC, OTC: CNIKF) announced an MOU with Glencore Canada for the potential use of the Kidd Creek concentrator and metallurgical site. CNC has completed an initial high-level assessment and will now proceed with a detailed study on the potential for upgrading excess capacity at the Kidd Concentrator and/or utilizing the existing infrastructure in place at the Kidd Met Site for milling and further processing the nickel-cobalt and magnetite concentrates that are expected to be produced from Canada Nickel's Crawford Cobalt-Nickel Sulphide Project.
This news offered a good opportunity to speak with Canada Nickel Chairman & CEO Mark Selby as he begins his second year at the helm of one of North America's biggest nickel exploration success stories. We discussed the Glencore announcement, what we can expect from Canada Nickel over the next few months, the potential scale of the opportunity available to investors today, and the amount of nickel the world needs in order to meet surging electric vehicle growth.
Goldfinger: Congrats on an exciting announcement this morning Mark! Why don't you tell us about this announcement on the MOU with Glencore Canada. What does it mean for Canada Nickel and what can we expect from CNC over the next few months?
Mark Selby: Yeah, today is a tremendous announcement and is a huge step forward for the project. Anytime you have the potential to be able to start a project at a fraction of the capital cost that you were originally expecting, and be able to get started into production likely a year or so earlier, because again, retrofitting a mill is much faster than building a big brand new mill from scratch, is a huge step forward.
So we're very glad. We still have a lot of work here to go with Glencore, but the fact that they're choosing to spend the time with us to complete the technical work that we need to do, to be able to confirm that this is as big an opportunity as our initial work on it suggested is, I think is a great endorsement for the company and for the project as well.
Goldfinger: Glencore doesn’t just talk to anybody, especially a company that's not even at the feasibility stage. You guys are just entering the economic study phase Crawford. So how did this happen? Did they come to you? Did you go to them? How did this come about? The synergies seem pretty clear to me, the relative proximity and the fact that Glencore is only using ½ of its capacity at Kidd Creek right now.
Mark Selby: Yeah, for sure. So in terms of that first question, in terms of how do we get connected, I've been in the nickel industry for about 20 years, and I know the Glencore nickel team very, very well. So when it looked like we had the potential for a real project, obviously they keep tabs on most of the project developments around the world, so we connected at that time. Now, the Kidd Creek asset is part of Glencore's zinc business. So the nickel team introduced this to the zinc team. And again, in mining, there's a lot of times because you're physically tied to the ground, unlike a lot of businesses, it's sometimes tough to find some real synergies. But in this case, the ability just like you said, to take a mill that has excess capacity right now, and look to redeploy some of that to process our material, and then as well look at the potential.
Our tailings are slightly basic as opposed to being acidic. And again, they have a tailing, and any sulphide mine has a tailing facility that generates acids from those tailings for a period of time. So the potential to use our tailings to help mitigate some of that acid generating potential of their tailings is also a massive synergy that we're going to be looking at over the coming few months here as well.
Goldfinger: That's very interesting. The last time I wrote about Canada Nickel was back in October and I did some back of the napkin math, and I believe I used 30,000 tons per day for the mill throughput rate. In the next two to three months, you're going to come out with a maiden PEA. And in that study, are you going to have a few options? You're going to have to start with a lower rate of mill throughput, 5,000 tons or 10,000 tons, and then scale up. Will you show the economics of a few potential scenarios?
Mark Selby: Yeah, the advantage of having a scoping study is that you have the ability to present more than one option. That's why we went to a scoping study as opposed to jumping right to a pre-feasibility study with the project. So, we'll have two options. One will be getting started utilizing the Kidd facility for that 5000 to 10,000 ton a day startup. And again, our view is as we continue to use that smaller facility to process higher grade, higher PGM content ore over the life of the project, so it'll have a very long useful life. And then we continue to build the big scale mill that we had initially envisioned in the center of the ore bodies, large, low grade deposits. It makes sense to try not to transport that ore very far.
And then we'll also show a second option that if there's sufficient capital and interest, you can dive right in and build the bigger mill right out of the gate - what those economics look like, as well as the sensitivities around, depending on how quickly you want to expand this deposit, how big could it get and what that does for the NPV. So you'll have two base options and then some sensitivities around accelerating some of the expansions that we envision to happen.
Goldfinger: What did you learn last year and what were some of the accomplishments that you're especially proud of in terms of advancing a junior mining company during a pandemic and all the challenges that came about?
Mark Selby: I guess in terms of the key things we accomplished and things, most proud of at this point is that number one, we've been able to deliver a top 10 nickel sulfide resource with over a million and a half tons of contained nickel in a measured and indicated category. So this isn't just a pile of inferred. That we've been able to add those tons at less than a penny a pound in terms of exploration costs. Again, a lot of nickel deposits and a lot of other competitors in the space are spending multiples of that to be able to delineate a resource. But because of our team's knowledge of working with Dumont in the past, and then our real focus on making sure that we're not just drilling for drilling sake, but really focusing on adding value. To be able to get to two resources done in just over a year of drilling is tremendous.
I think the next big opportunity was the release of the Met results at the end of December. Again, in just six months, again, leveraging our team's work done in a past life with Dumont.
There's a number of deposits that are out there that have been around for literally decades, and they've spent decades trying to get the metallurgy right. So the fact that we were able to achieve the 46% and 51% recovery in line with what we were expecting relative to Dumont at 43%, into very good concentrates – with the higher grade concentrate in line with Dumont’s 29% grade which is the highest grade nickel sulphide concentrate ever produced. Given that we are just getting started on that front, we expect to be able to deliver additional improvements to it as the year goes on.
And I think the last area, but probably the most important for a real development project, is our relationships with the local community and First Nations groups, where we made some important announcements during December. We announced MOUs with both Taykwa Tagamou Nation (TTN) and Mattagami and Matachewan First Nation from Wabun Tribal Council. I think its just not the agreements themselves, but I encourage people to see the comments in the releases from each First Nation to see how well we are working together already, their support for the project, and their positive view on our overall approach. Additionally, the agreement is truly groundbreaking – they will be deploying their capital to help build part of the project (site electricity distribution) where they want to build a sustainable, competitive business that build their core competencies and will create value for the community well beyond just Crawford itself.
Goldfinger: We are seeing the electric vehicle revolution gain steam by the day and Tesla’s valuation soared above US$700 billion last week. Are there enough battery metals being produced to meet the demand that’s coming?
Mark Selby: This is an area where investors, I don’t think realize, just how much nickel the market is going to need to meet EV growth in addition to historically strong trend demand growth from stainless steel. A key takeaway from Tesla’s battery day is that Tesla, to meet its 3 TW of annual battery production it is targeting by 2030, will need at least 1-1.5 Mtpa of nickel. This compares to an ENTIRE nickel market of 2.5 Mtpa today. This number is equal to what most analysts have for the ENTIRE EV industry by this time which shows how much they are underestimating demand.
There are two other key aspects that people don’t really appreciate about the ability of nickel industry to meet demand from EVs:
One – more than 100% of the supply growth over last 5 years has come from a product called nickel pig iron produced in Indonesia – because this is very energy intensive process and they use coal to produce that power, they use 25-30 tonnes of coal to produce just 1 tonne of nickel – this generates nearly 90 tonnes of CO2 per tonne of nickel – not the kind of nickel Elon Musk is looking for !
The other part that I don’t think most investors realize is how few nickel projects there are that could come into production this decade particularly outside Indonesia.
And not only is Crawford the largest sulphide discovery since the early 1970s and an open pit project which we expect could be expanded multiple times to keep pace with the growth from the EV sector. It has the potential to produce zero carbon nickel and cobalt and iron from the mine because the host rock which makes up 90%+ of the deposit spontaneously absorbs CO2 when exposed to air – a very valuable property today ! It’s located in a great location with all of the required infrastructure in place. We have great relationships with the local First Nations and community who are very supportive of advancing the project.
Goldfinger: Most investors are focused on making money, how much and by when are two key questions. What is the size of the opportunity here for Canada Nickel? The current market cap is about C$170 million and it’s not a stretch to envision a scenario in which Crawford is generating a few hundred million dollars per year in operating cash flow.
Mark Selby: In our investor deck, we have examples of other new large sulphide discoveries over the last several decades. The last transaction on one of those was $1.8 billion of the Nova Bollinger deposit by Independence Group. The deposit contained 300kt of nickel – we already have a multiple of recoverable nickel of that amount, we have a massive amount of exploration potential which we will start to unlock in the coming year. Nova Bollinger was a higher grade deposit – but deposits like Crawford done at the right scale can be very low cost, profitable operations. I would encourage investors to look at Dumont feasibility study to see the kind of operating costs that are possible and we’ll demonstrate that in our PEA at the end of March.
Goldfinger: As CNC enters the feasibility stage many investors are probably thinking about the Lassonde Curve and where CNC sits in the mining life cycle. Why should an investor own shares in Canada Nickel as it enters this typically treacherous feasibility/permitting stage of the mining life cycle?
Mark Selby: I’d be worried about the Lassonde curve if we were a single deposit with no exploration potential, but Canada Nickel is effectively a multi-project company with only one deposit going into PEA/FS stage. We have most of Crawford still to explore and we still have five other option properties with targets as big as Crawford that we are only STARTING to drill, and they are at the best part of the Lassonde curve. 2021 is going to be a very exciting year for the company.
Canada Nickel is uniquely positioned to bring a maiden PEA on its Crawford Deposit to the market while at the same time stepping out with exploration drilling across its option properties (Kingsmill, Nesbitt-North etc.) located in the heart of the prolific Timmins-Cochrane mining camp in Ontario, Canada. Investors will receive additional drill results from Crawford (including from the new North Zone discovery) over the coming weeks, in addition to exploration results from option properties. The release of the Maiden PEA, which will include a detailed study incorporating Kidd Creek, is now scheduled for the end of March 2021.
Disclosure: Author owns CNC.V shares at the time of publishing and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Canada Nickel Company Inc.
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