#5 Nickel Forecasts, Importance of Indonesia & Red Flags (Transcript)

Nickel Market Insights with Mark Selby, Nickel Market Commentator and CEO of Canada Nickel Company (TSX-V: CNC). Stay up to date by listening to our weekly market round-up on Nickel.

ARTICLE FOR THIS INTERVIEW IS AVAILABLE HERE.

So, what should investors make of what been going on in the world of nickel this week? It’s been something of a sideways week, with nickel price ticking up by c. 1%.

Big news this week was one of the more followed nickel analysts lowered prices by 6-7% from 2021-2025 – LT price intact

Why? 2 big drivers – current demand pullback combined with more NPI production from Indonesia

Nickel & Indonesia

– Why is Indonesia now such a big part of the market?

– Why didn’t it happen before? Nickel just didn’t magically appear or get discovered – deposits there all known since the 1970s

– What are the implications for the overall market?

– Where does it go from here

We Discuss:

  1. 1:58 – Quick Update on What’s Happening in the World of Nickel
  2. 3:21 – China Coming Back with Vengeance: Will the West Be Buying, Though?
  3. 7:43 – Impact of the Steal Market on Nickel
  4. 9:18 – A Look at Indonesia: Why Has its Importance Grown Recently and What are the Implications?
  5. 14:47 – An Investor’s View: How do I Make Money, What Opportunities are Out There?
  6. 17:19 – Sulfide vs Laterite: Pros, Cons, and Costs
  7. 26:31 – Reservations of Financing Expensive Projects in a Volatile Market: Comforting Factors and Blue Sky Possibilities
  8. 29:25 – Peculiarities of Nickel Investment: Parallels with the Uranium Market, and Credibility of Studies
  9. 34:24 – Self-Reliant Automotive Industry Ecosystems: What are the Implications and Opportunities
  10. 37:34 – Tiny Update on Canada Nickel Company

CLICK HERE to watch the full interview.

Matthew Gordon: Mark, how are you doing?

Mark Selby: Good, Matthew.

Matthew Gordon: We are here for our weekly catch up. We are going to do this weekly update. We are going to educate people about the world of Nickel. I’m excited.

Mark Selby: Week 2 to week 1.

Matthew Gordon: We have agreed to talk about a few things this week, because we’ve kind of, there’s a lot of ground to cover, most of us are starting from a fairly low base. What has happened in the world of Nickel this week?

Mark Selby: Yes. This week, as I thought last week, it was going to be sort of a sideways week, and that is really what’s happened. Nickel price has ticked up 1% since we last talked, which is within the margin of error. And yes, no, we haven’t seen any substantial moves with stocks prices, or anything sort of on the supply-demand side. The one thing that I encourage people to sort of keep an eye on is the price of ore from the Philippines, that is continuing to tick higher. So that’s a sign the Chinese are still a little bit nervous about, am I going to be able to have enough ore through the remainder of the year? So that’s the bull scenario. The bear scenario is the amount of, the increase in Nickel Pig Iron (NPI) in production coming from Indonesia.

And I think the key piece of news this week is, I think one of the more followed Nickel analysts took his medium-term forecast down by about USD$1000/t from 2021 through 2024. His long-term price is still untouched, but it’s a combination of the demand hit that we’ve seen from COVID-19 plus this continued ramp up in Indonesian NPI, which has caused them to sort of pull this price deck down in that intermediate period. And this is a person that a lot of people follow.

Matthew Gordon: That’s kind of interesting, isn’t it? Because China has kind of come back with a vengeance; they have said that they are getting back into production. They are ramping things up to get it back into production. The question was, would the West be buying the things that they’re making, right? That’s the kind of big unknown at the moment. What are the sorts of things that the analyst was concerned about? Was it just that big question or was there more to it?

Mark Selby: No, I guess in terms of the near term, right? China went through its big crunch in Jan, Feb, March. We saw indicators showing that the demand was going to come back and yes, one of the Chinese firms just published their May calculation of demand, and that’s actually up year over year. Where his concerns are, we’re now seeing the worst of the data come in from the rest of the world. So, the rest of the world went into lockdown in March and April. We’re seeing sort of the worst of that data. And, unlike China, there was not that sort of direct fixed asset investment, that they are going to start ordering steel next week. In Canada, the United States and Europe we are going to have, it’s going to be a slower process to get off the bottom. And I think we talked last week that what is going to happen is that they are going to have to do more stimulus packages to get the economy re-growing. We think a lot of that stimulus is going to help things like the EV sector. But we are going to go through this rally where Chinese demand is going to be up Year over Year for them, right through the rest of the year. But demand from the rest of the world is going to be down significantly: down like high single digits, and has been down double digits through March, April. But again, I think we’re through the worst of it now. Everything should be starting to move higher. But as I said, we won’t get back to Year over Year (YoY) increases from the rest of the world probably until the year end at the earliest.

Matthew Gordon: There has been a bit of setback. I’m just trying to understand the things that the analysts are concerned about. Obviously, the Indonesian ore ban, we talked last week about Tesla shifting the shape and design of the battery in terms of non-Nickel batteries. And was that in the conversation? Were those some of the factors quoted?

Mark Selby: Oh, yes, so the demand side was one aspect of it. And then the second aspect was this ramp up in Indonesian Nickel Pig Iron (NPI) production. So that, when you take Indonesia and China combined, it should double from 2018 through to 2025 and grow at a pretty healthy clip. You’ve got 3 or 4 very large-scale projects that are continuing to add pretty substantial amounts of Nickel production capacity. It’s that sort of better visibility about this pipeline of Nickel pig iron projects delivering Nickel into the market that was the other sort of key piece of concern for that analyst.

The thing, and I think I highlighted this on our discussion last week, the problem is that Nickel demand is higher than the other metals.  And analysts, he is better than most in terms of having realistic demand numbers, but even with the dropdown, you have to compensate for that – the market will rebound in a pretty meaningful way after that. You have to put some very high demand numbers when you come out of the rebound in future years. So that sort of demand growth over that period reflects kind of 300,000t to 400,000t from EVs plus 2% to 3% trend demand growth. And so that’s a good 1 or 2 percentage points slower than what trend demand growth has been for the past 10 to 15-years. So if you add that extra 1% or 2%, and then you get to deficits at the end of the year. I’m glad I don’t have his job of having to try and sort of guess what that 2023, 2024, 2025 demand is, but that’s really the two factors is, okay, Indonesian plus Chinese NPI, plus overall demand growth – where are those 2 lines going to cross or not cross, that’s when you move forward?

Matthew Gordon: Well, I suppose the good news about being an analyst is that you get to change your mind every quarter, quite frankly, when your data comes in, right? But let’s talk about something, again, we’ve talked about it a few months ago, which was the impact of the steel market on Nickel. It shows you, well, it gives you some clues. I saw some data, which said that China and Indonesia, which has been historically not a significant player in the market, and that represents 65%, I think it’s around 60% to 65% of global production for 2020. I mean, that’s huge.

Mark Selby: Oh yes, no, well, China plus Indonesia, maybe stainless steel would probably be close to that number. And I think by 2025, that’s where you’re looking at Indonesia on its own being close to 45% of global supply. I’ve got a chart that I use in my Nickel presentations talking about the fact that New Caledonia, Philippines, Indonesia, as a group, control just over 50%, which is as much as OPEC controlled at its peak. And given that Mr. Friedland’s ‘Nickel is the new gasoline’; sort of the theme here, they are going to have a lot of power over the market. When you then factor in that huge amount of growth coming from Indonesia, then their share of global supply is going to increase dramatically because literally Indonesia is the only place, we are going to have supply growth. Most of the other production for most of the other regions globally has been shrinking over time. And we don’t expect that trend to slow down dramatically for the foreseeable future.

Matthew Gordon: Let’s talk about Indonesia. It is becoming more and more important for Nickel, and therefore in the steel market as well. I’m trying to understand why now? Because those deposits have been known since the sixties and the seventies. This is not new news. What is driving that?

Mark Selby: Yes, so I’ve always referred to Indonesia as sort of, for a decade or so, as the ‘Saudi Arabia of Nickel’. The bulk of the sort of developed reserves in the world globally are in, and again, it’s not everywhere in Indonesia, it’s just in a few islands. It is in Sulawesi and then a few other islands nearby. And so on those islands you’ve got a bunch of large reserves, most of which were discovered back -in the sixties and seventies. Inco had concessions over most of the Island of Sulawesi at that time, and drilled a bunch of this stuff off. And then as well, anything else was discovered sort of in the early two thousands. So yes, the stuff has been there for a long time.

What has really shifted over 50-years is the importance of the stainless-steel market: so it has gone from being kind of one third of stainless, one third of Nickel demand in 1968, to being more than two thirds of Nickel demand going forward. And what the Chinese, sort of with the development of Nickel pig iron, what they realised is that they’re not in the Nickel business, they’re in the stainless-steel business. And what they needed to think about, and a company like Tsingshan from day one, was really smart about is, we need to make the lowest-cost stainless steel possible, starting with the resource in the ground. The guy who runs Tsingshan is, I think, one of the visionaries in this space, and he quickly realised, okay, math-wise, the best place to do is basically put a stainless-steel mill on top of a laterite deposit in Indonesia. And starting in 2007, when he first started talking about it, that had been the plan all along. And they realised that vision in 2015 and built one of their largest Nickel productions and integrated stainless steel facilities in the world. That one single plant produces more stainless steel than most countries other than China and Japan, to give people a sense of the scale of it. So that was the big driver.

Matthew Gordon: I’m wondering what are the implications of this? You’ve got the Chinese teaming up with the Indonesians – it’s about steel, it is not necessarily about Nickel. There is big money required to put these things together. What does it mean for the rest of the world?

Mark Selby: Yes. So it has reshaped a big chunk of the Nickel and the stainless steel industry during that timeframe, and it’s going to continue to do so going forward. So again, what he realised was that Nickel pig iron, Ferro-Nickel, that if you just add on AOD and a caster, then you have a stainless steel mill. He realised that it wasn’t much of a technology jump. And that’s where people, I think, think there is some mysterious technology. They basically took stuff off the shelf and put it in place. By doing that they became, you’ve seen stainless steel production in most other regions, parts of the world, shrink, because the combination of Indonesia and China is just that much more cost effective than in a bunch of other regions.

And now, so they’ve sort of squeezed the rest of the world during this process. Now the battle is actually going to be between Indonesia and China. The only mistake they made through the whole process is they failed to realise that a lot of incumbents, particularly even in China, wouldn’t be happy that their businesses would be squeezed by this new source of supply. You actually saw tariff barriers go up all around the world, including China, against stainless steel coming from Indonesia. They’ve had to shift so that they’re not producing nearly as much stainless steel as they have capacity for, and are going to shift Nickel pig iron into China rather than stainless steel. And so what the combination now of this continued growth in Nickel pig iron from Indonesia, with the Indonesian ore ban, which is pushing up prices from the Philippines, it means that the margins for the smaller-scale standalone producers in China are really going to get squeezed over the next few years.

The thing is, Indonesian production is going to grow, but Chinese NPI and stainless production, we may see that actually shrink over time as the higher-cost, smaller-scale producers get squeezed out of the market. And again, if I’m Ching Shan, and I can produce a lower cost Indonesia versus producing in China, I’ll just produce in Indonesia all day long. So that’s sort of the next dynamic that’s really going to happen in the stainless-steel market.

Matthew Gordon: If I bring it back to, as an investor. Because that is big. It is state-owned enterprise. There’s no way of getting involved with that. How do I, as an investor make money? Where does the market go from here and what are the opportunities that I’m looking for elsewhere in the world?

Mark Selby: The key thing is, given sort of, you’ve got this big block of production and costs that operate a certain cost in the Nickel space and in the stainless steel space, you need to look at where are the places around that where you can still generate massive free cashflow? Because having this large source of supply, if you’re to the left of it on the cost curve, then that gap on the cost curve means you’re going to make a lot of money. The steel business globally is, like just regular carbon steel is a zero-profit zone in most places, but BHP and Rio Tinto make the bulk of their profits from selling iron ore into that very low profit steel sector. The same thing in the Nickel space with steel and then EVs coming is, as a Nickel producer you want to find a way to produce the highest value, lowest-cost product to basically feed into that chain. So that again, before Nickel sulphide producers had one option you just had to sell to the smelter refinery. And because it was an oligopoly, you as a miner got squeezed. Now there are multiple channels between stainless steel, between EVs, and so if you can help your downstream partner make a little bit more money than they otherwise would, then hopefully you capture the bulk of that value. So that’s where you need to look for those mining companies that are thinking about that and are able to tailor their products a little bit to be able to just sort of fit into that arc of reality.

Matthew Gordon: Okay, well, let’s break that down because that’s really, really important here. Okay. Because again, we talked in the past about the way you insert yourself into a supply chain and where you maximize the value. If you are feeding into stainless steel, you’re slightly out of control here. And that’s why people are talking the language of, our Nickel is going to go into the battery revolution. That’s where we’re inserting ourselves, because that’s where the money is. That’s where the margin is. For the sake of people listening to this, it’s probably important to break down if we will. I know we, I think we’ve agreed to get into some level of detail next week or the week after on the vocabulary, but for the sake of today: we have got sulphide? Which is somewhere between 28%, 30% of the market>

Mark Selby: Yes.

Matthew Gordon: And then we have got laterites, which is the rest. Let’s break those down for people and the pros and cons of each.

Mark Selby: For laterites, they are very low cost to mine because it is basically dirt that you dig out of the ground. And a laterite mining operation in the Philippines and Indonesia is literally a few trucks to shovel and then you put on a barge which puts it on a boat and that boat goes to China. That is what is involved in laterite mining. Where the laterite gets tricky is where you have to build a big plant because you can’t upgrade the ore at all. You basically have to dump it all into a furnace to melt it and pull the Nickel out, or you have to dump it all into a vat and dissolve it all and then pull the Nickel out that way. And both of those steps require a big chunks of capital. And that’s always why these things were slow to develop; they required a fairly significant investment to be able to make that, they were in remote locations because laterite deposits tend to be found around the tropics to create the conditions to form, to make the laterite actually happen.

On the sulphide side of things, the mining tends to be trickier: again, higher-grade underground mines. You have to build the mine, dig a deep hole in the ground to get a larger-scale, open pit mine, like we have at Crawford where there is an open pit. The advantage is that you start out with a lower-grade material, but with that very, for not a lot of dollars, you can build, you operate a mill.  Again, the mills themselves aren’t cheap, but that’s the big chunk of the cost for a sulphide operation is you build the mill and then you can upgrade the ore. In our case, well, deposits like this from say, 0.3% Nickel, the 20% Nickel where a laterite deposit starts with around 1% – 1.5% Nickel. Dry with a third water, which makes their 1% product that you have to all dump into a furnace and you don’t get any upgrading initially.

So, those are the sort of the 2 sets of costs. The way the deposits are structured in 2 ways. And then, historically, it was either Ferro-Nickel for laterites or integrated producers for sulphides. But now the fact that you have these different market channels opening up, those companies that are able to find an edge to make another 5% or 10% of the price, and have that come back to back to them and back to their shareholders, then you’re going to have those operations should do well going forward.

Matthew Gordon: Let me get this right: laterites account for 70% of, in terms of volume globally. Those are, it’s literally, as you say, it is moving dirt, right? It is big, expensive, CAPEX-intensive projects typically, right? So, and again, we know there’s sort of a billion bucks minimum, but usually go on to be a lot more than that, depending on the scale, even where you are putting the operation on top of the ore body, they are seriously expensive in terms of CAPEX. Is that right?

Mark Selby: Yes. In most of the world, the one operation that the Chinese did with Indonesia is, the Western companies would always try and build the biggest furnace ever built. Every new plant had the biggest furnace ever. The Chinese kind of said, Oh, that’s nonsense. We’ve already got one that works. We’ll just make, we’ll just copy and paste that x20. Because we know the cost of the 20th is going to be a lot less than the cost of the first one. So they’ve kind of made it much more scalable. But it’s still a pretty hefty, it’s a multi hundred million dollar price debt for the Chinese ticket to get started.

Matthew Gordon: And that’s because, so it’s multi-hundred million, so it’s not necessarily $1Bn, but that’s because it is sitting on top of the body?

Mark Selby: Yes.

Matthew Gordon: So as an investor, I’m thinking, am I more likely or more unlikely to be investing in a laterite project if I am interested in Nickel?

Mark Selby: There’s one example: Nickel Mines has basically joint ventured with Tsingshan. They basically own a portion of Tsingshan’s plant in Indonesia. It effectively allows Tsingshan to give a market window on the economics of their business. That’s why it makes sense for Tsingshan to do that deal. So that is a way to get exposure to a market leader in that case. The other way to do it, you’ve got a few pure players like Inco where again, they’ve got a large resource and a pool of sunk capital. You, as an investor, benefit from the fact that they built that plant back in the seventies and expanded into the nineties and expanded again in the 2000s. There’s not as much, you actually see some free cashflow because they’re not having to continually reinvest it in the business. But then a lot of the other laterite projects are embedded into other larger companies. And, again, there aren’t a ton of new, there’s only a handful of standalone Nickel laterite projects as well. There are not a lot of ways for investors to play this space broadly.

Matthew Gordon: Because I guess the thing that terrifies me is that you have got to pay that money back. If you’re talking about hundreds of millions of dollars at best, and probably into the billions of dollars, and you’ve got to pay that back, it’s going to take a long time or you have got to have a big operation to do that. So me as an investor, I’m looking at that and that is the thing that makes me nervous.

But let’s come onto sulphide operations because again, there, companies that are building these things that they need to have access to a plant. Either they build it ,or they have access to it down the road. And margins are controlled there. So again, for sulphide companies, if I’m thinking of investing in sulphide companies, what are the things I should be looking out for in terms of their ability to control costs?

Mark Selby: Yes. The key thing there, you’ve got sort of 2 groups: there are basically people who either just mine, or mine with no operations that feed into a chain. And there are a number of companies in Western Australia who operate there. The key thing there is you just need to be able to see what their operating costs are relative to where Nickel prices are, and are they able to negotiate terms with the downstream person that they have to supply to, to actually earn any profit? The thing that is changing, and I think that is what’s going to be somewhat appealing to sulphides in general, is again, for the electric vehicle sector, you’re going to see a bunch of processing capacity develop to convert Nickel, in whatever form it is in, into a product for the battery sector. The oligopoly will start to break down over the next three to five years. Nickel sulphide resources, in my view will, as that oligopoly breaks down and more value flows back to the miner, the value of the sulphide resource in the ground will increase significantly relative, as those options become available to the market.

The other part, even a lot of sulphite operations, Nickel is a fairly capital-intensive business all the way around. And one of the challenges of investing in a laterite versus sulphite, is just happens to be where these deposits are typically located. Again, there’s nothing wrong with, if you have to make a significant capital investment. In iron ore, BHP, Rio Tinto, those are hugely profitable businesses, but they have to make that upfront investment, but they’re able to do that because they’re operating in Australia. They have 50-years reserve, and they’re going to just mint a huge amount of free cash flow over that time period, without any risk that that project will be either physically or economically confiscated by the local government or the country.

Sulphide deposits, you tend to find them in lower-risk political jurisdictions. In Gayton in Canada, you can spend $1Bn knowing that the government is not going to change the rules on you and make it impossible for you to realise that cash flow. I would caution people; when you’re looking at laterite projects, just look at that jurisdiction to see, okay, if they are able to raise the billion dollars to build the plant, is there any risk that the government is going to do something to confiscate some of the value there. In the Copper space, those companies that tried to operate in the Congo and Zambia for many decades, it has been pretty challenging during that timeframe. And there are other jurisdictions where there are Nickel laterite deposits that are almost as challenging as those countries,

Matthew Gordon: But it’s still a lot of money. You mentioned it’s a billion dollars, right? That’s a lot of money. So, as a lender, in a market like Nickel, which is quite volatile, what are the comforting factors? How do I know I’m going to at least not lose my money, let alone be able to expect to be repaid the, whatever coupon I’m charging for it? What are those comfort factors? I mean, you’ve been in negotiations all through your career. Bankers don’t understand Nickel like you do. They can look at the numbers and that’s it. What are the questions they ask you? What questions should we be asking companies?

Mark Selby: It is really about where you are on the cost curve. Like again, you don’t fear big producers who are to the right of you on the cost curve, as long as they’re willing to turn that production off, then if you’re to the left of them and lower cost, then you’re going to continue to make money across the cycle. So that’s where, as a lender, they look at cost curves and they’re going to say, okay, we know we’re going to assume that prices will drop to a point somewhere on the cost curve for a period of time. And we need to test your project to see how much cash comes out of it if that sort of worst-case scenario happens on the cost curve. So that’s what you need to look at. You don’t want, in today’s market with the China-Indonesia going on, you don’t want anything that’s in the same spot on the cost curve or to the right of that. That’s not going to get funded in our lifetime. But if you are to the left there, and if you’re sufficiently to the left there, then those become very, very, very attractive investments.

What helps make iron or such a profitable business is that you have a big chunk of iron ore production in China, which is relatively high-cost, and continues to sort of come in and out of the market. And what that does is okay, at USD$85 p/t, at $85 or $80 or $70 or $65 p/t you have this Chinese production that kicks in or kicks off. And it keeps iron ore prices at a relatively high level to say, if I’m producing in Western Australia for $20 p/ton.

I know, as BHP, as long as that production is helping sort of buffer changes in supply-demand, then I am going to print money all day long. And it’s the same thing in all the commodities; you just want to make sure that you understand where that swing capacity is, what the cash costs look like, and then where you stack up relative to that.

Matthew Gordon: Mark, I want to ask about the current Nickel market. I think it would be quite easy to talk about the generalities of the risks in mining here, but with Nickel these are such big projects. We’ve talked about billions of dollars, or at the very least, hundreds of millions of dollars projects. There’s not that many of them. It’s not like Gold mining, getting into the first pool with the goldmine. It’s not like Copper. These are well understood. Well-trodden. Lots of them. There’s not that many people in Nickel, involved in building Nickel mines and plants, et cetera. And it touched on something that we were covering in the Uranium space recently where some of the old hands were saying, there are skills being lost in the market because there aren’t that many new mines being put into production. Is that not the case with Nickel?

Mark Selby: Yes, there’s stuff outside of China, Indonesia. There are thousands of new engineers in China who understand Nickel, but in the rest of the world, because rest of the world production has been shrinking during this timeframe, that’s definitely the case. As an investor I really pay attention to the people involved in the project. It is not like Copper and Gold where I can find 25 people who have done it, and just grab one of them and they can help build this mine for me. In terms of processing Nickel, and there have been some huge disasters in the past that have made big, real money investors, a little more cautious in the space. So that is something I would definitely, definitely zero in on as you are going through, looking at the different opportunities for Nickel investing.

Matthew Gordon: So, been there, done it before, built a plant, got into production: very important. Because not many people outside of China and Indonesia who have done that. So that’s a great point to make. And just sort of on a similar theme here when we’ve looked at some of the Nickel companies, the publicly-listed Nickel companies, we’re looking at, they’ve got their PFS, they’ve got their Scoping Study, the PFS, the PEAs; they look great on paper, but I’m seeing them sitting around and no one’s putting the money in. Why?

Mark Selby: Yes, I know that’s the toughest part. Again, people see 43-101 or JORC and think that, okay, it’s been approved by somebody, again, at the end of the day, it’s whoever is comfortable to sign off on those numbers and accept the payment as a third party engineer on that report to sign off on it. That’s it. As long as they meet the minimum standard to be someone who can sign those reports and they can sign those reports, it has no real comment on the validity of the numbers that are in there. Particularly on the engineering side, the Resource stuff, there’s a bunch of very rigorous standards that have to be followed, but once you get into the operating and capital costs then it gets very fuzzy very quickly.

I would really encourage people, when you’re looking at a company and you see a technical report, look who did the technical report. Is it a company that just does studies? Or is it a company that does studies and builds actually builds projects? Because those companies that actually build projects, they know they may be on the hook for them, or someone’s going to compare another project of theirs to the one they just wrote about. You get a much more realistic capital and operating cost numbers out of those really good quality engineering firms. Again, if you really want to do your homework, just Google that engineering firm and just see what other projects they’ve done and how they’ve gone relative to those numbers. Because again, it’s a red flag. Market conditions may cause a project to get delayed for a period of time, just because the pricing is nowhere near where it needs to be to allow new projects to get going. But then the other part of it is, if you see a project, ‘Geez, it’s 50% after tax return projects. Why hasn’t it been financed? If it has been sitting on the shelf for a while, there’s probably some real issues with both the capital and operating cost numbers that the real money people just go, ‘Oh, I don’t want to take away that.’ Because the reality is, there has been a working range of mining companies. It is quite clear – if you get an after-tax return on a reasonable price stack for a large-scale project in the mid-teens, that’s a good number, these 25% – 30% after tax. You do get some of them and they can be smaller high-grade ones. But again, once you start to get to any kind of scale, you very quickly get down into kind of typical, mid- teens type returns, unless there’s some sort of either deposit breakthrough or technology breakthrough that is a step change in operating costs relative to the rest of the sector.

Matthew Gordon: Okay. So, like management; been there, done it before, track record. You need to know that the person signing this off knows what they’re talking about. It’s not just theory. They’ve done it. Got it. Good.

Let’s talk about, if you don’t mind, we’re just going to finish off on this one, which is the around the automotive industry. We’re looking at different ecosystems being built around the world. There’s the China ecosystem. Europe is building an ecosystem system. The US is building up its own ecosystem. And this there’s a little bit of protectionism in this, but whatever we all think of that in terms of trade wars and so forth, it is what it is. It exists. We’ve got to deal with that. What I’m seeing is that these different ecosystems don’t necessarily want to rely, for any component, outside of their own ecosystem. European automotive manufacturers don’t want to rely on China or Indonesia necessarily for their Nickel. There’s a great opportunity outside of China for producers and owners of Nickel to actually feed into these different ecosystems. What is your sense of what is going on there? Do you see opportunities?

Mark Selby: Oh yes, most definitely. from discussions in a past life, when we were advancing, looking at Dumont, the battery supply chains are outside of China, very much access to non-Chinese supply. And so, again, part of the reason I’m here with Canada Nickel is this is one of those real true market opportunities because the United States has no Nickel mines. Europe has one significant Nickel operation. East Asia, outside of China, has been squeezed out by China in most of the key supply regions. The ability to provide Nickel supply into one or more of those ecosystems is a huge benefit. So again, being in Canada we’ve got access to both Europe and North America, and it’s not too far from Korea and Japan as well.

So, you know, I think that’s a massive opportunity to be around the edges in a low-risk jurisdiction to be able to provide that supply to the market needs. And another dimension of this that we’re going to be talking about some more in the coming months is again, is the environmental footprint. Indonesia is this massive new source of supply, but it takes a lot of coal to turn that soggy dirt into a piece of Nickel. And so again, as the EV markets starts to matter more how are people going to be starting to look at those kinds of dimensions? We think they are. I think that’s one of the key things that people are going to have to start thinking about in another 3 to 6-months out.

Matthew Gordon: That wraps up another week. It has been a quiet week, but I think there is a lot to discuss there. And I think what you’re going to help us with as well is just, again, just getting used to this vocabulary, the terminology, the things that are important, the things are not important. And maybe give some clues, as investors, the things that we should be pointing at and going, okay, that looks good, or not good. Looking forward to it.

Mark Selby: It will be good.

Matthew Gordon: And how are things at Canada Nickel? We caught up with you last week. Sounds like you got exciting a few months ahead of you.

Mark Selby: Yes. Drilling is going well; metallurgy work is going well. And then on track for a PEA by the end of the year. And again, to my point around the engineering firm, we are working with the Asanko. They built up a bunch of large- scale sulphide processing mills, and their team was involved in the ramping up Mount Keith in the mid 1990s, which was sort of the breakthrough in terms of these larger-scale, lower-grade operations. And it operated successfully for 25-years. Having tapped into that experiences is what we want to be able to, again, to build a project we can actually build and get financed.

Matthew Gordon: Beautiful, Mark. Thanks again. Appreciate your time. I’ll speak to you next week.

Mark Selby: All right. Thank you, sir. Take care.

Check out another interview with Selby here.

Company Website: https://canadanickel.com/

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