Deep-South Resources (DSM) – Copper Player needs Capital to Deliver Growth

Deep-South Resources Inc
  • TSX-V: DSM
  • Shares Outstanding: 80M
  • Share price C$0.11 (04.08.2020)
  • Market Cap: C$8.3M

Interview with Pierre Léveillé, President & CEO of Deep-South Resources (TSX-V: DSM).

Deep-South Resource is a copper/VMS exploration company. Its flagship Haib copper project is potentially large and is situated in the deep south of Namibia (who would have thought). Haib has both a 43-101 Resource and a PEA with 5Bn lbs of copper indicated and inferred resource). Let’s take a look at the key figures.

Haib 43-101

Resource ClassMillion TonnesCu(%Contained Cu per billion lbs
Indicated456.90.313.12
Inferred342.40.292.19

Haib PEA (at various copper prices)

Financial Metric$3.00/lb Cu Price$3.30/lb Cu Price$3.60/lb Cu Price
CAPEXUS$191.8MUS$191.8MUS$191.8M
Total Operating ExpenseUS$1.41/lb CuEqUS$1.42/lb CuEqUS$1.43/lb CuEq
NPV(7.5%), post-taxUS$463.1M (CA$578.9M)US$567.4M (CA$709.3M)US$671.3M (CA$839.1M)
IRR, post-tax23.0%26.1%29.1%
Payback Period, post-tax5.7 years4.9 years4.4 years
Throughput (Mtpa)8.58.58.5
Annual production lbs / CuEq47 million47 million47 million
Strip ratio2:12:12:1
LOM55 years55 years55 years

So, a potentially large resource with a reasonable CAPEX and acceptable payback period.

The company also has another project called Kapili Tepe in central Turkey. It is a copper, nickel, cobalt and gold asset, and Deep-South Resources acquired 75% of it from Baltic Investment Group ApS in June 2018. It comprises of 1 mining license and 2 exploration licenses over 50km2.

Management and Directors hold 24% of shares, and Teck Resources holds 23% rising to 27% after the debt restructure, with the rest as a free float. Deep-South claims it is actively involved in the acquisition, exploration and development of major mineral properties in Africa. Léveillé says the growth strategy is to focus on the exploration & development of quality assets, in significant mineralized trends, close to infrastructure, in stable countries.

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Deep-South holds 100% of the Haib Copper deposit in the south of Namibia. Haib is arguably the oldest porphyry deposit in the world and one of the largest in Africa. Deep-South is actively seeking other precious and base metals projects in Namibia and in other stable countries.

With copper prices on the up, Deep-South Resources has the potential to time its entry nicely. The company will commence a financing this week to the tune of US$2M. It will use these proceeds to drill in the high-grade section of the deposit. It believes these results will add value and it will be able to conduct a subsequent raise on better terms. This is expensive money, and shareholders will be hoping Léveillé knows exactly what he is doing. He appears to be drilling for both geology and the market, but he will need to focus on adding value if he hopes to continue receiving support from the market. Will he be able to drive liquidity into the stock? That is his intention.

What did you make of Pierre Léveillé and Deep-South Resources?

Company Page: https://www.deepsouthresources.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Elemental Royalties (ELE) – Classic Royalty Story: Start Small, Grow Big!

Elemental Royalties
  • TSX-V: ELE
  • Shares Outstanding: 754,000
  • Share price C$1.75 (04.08.2020)
  • Market Cap: C$1.32M

Interview with Frederick Bell, Managing Director of Elemental Royalties (TSX-V: ELE).

The management team at Elemental Royalties set out to create a royalty company with “good quality producing assets from day 1.” How has their plan unfolded?

Elemental Royalties is a newly listed gold-focussed royalty company. It is the latest of a new wave of gold royalty juniors to emerge onto the CVE, which have been helped by a soaring gold price, now sitting pretty at US$1,975/oz. It was formed out of a reverse takeover of Fengro Industries by Elemental Royalties. It aims to provide investors with leverage to the exciting gold bull run we are currently on while minimising the risk factor and monetising ‘royalty revenue, future exploration and low operating costs.’

The company aims to secure a portfolio of advanced gold and precious metals assets with seasoned operators in established, secure jurisdictions. Ideally, royalty assets will have exploration upside, optionality, production increased and direct exposure to commodity prices. Bell tries to avoid projects with a high CAPEX, operating costs and excessive in-country management. Elemental Royalties will be sticking to 70-80% precious metals at all times.

This is pretty much the total archetype of a royalty company: start small, grow big. So, why invest in Elemental Royalties over the many other precious-metals focussed royalty players?

Matthew Gordon talks to Frederick Bell, 31st July.


Elemental Royalties has already been trading privately for the last 3 years. In this time, it has acquired a portfolio of 6 royalties spanning across North America, South America, Africa and Australia. Bell saw this 3-year period as something of a proving period to generate a substantive track record. 6 negotiated royalties in 3 years is a solid figure, but now the company has completed its over 2x oversubscribed IPO, to the tune of C$24M, investors will expect the next 12-month period to bear more fruit. The aim is to continue to diversify the portfolio and minimise risk.

The North American market loves a good precious metals royalty story, and this is likely why the UK-based Elemental Royalties chose to list on the CVE rather than AIM; the royalty market is understood to a much more advanced level in Canada and North America. It is now Bell’s responsibility to capitalise on this regional favourability. He’s smart, young (33), ambitious, and he made all the right noises. There may be some question marks posed against his age. He came into mining “by accident.” Numerous internships at junior mining companies captured his interest, and he began his own venture. He led a gold junior onto the AIM with gold assets in Ghana but soon moved on. He recognised that the risk/reward profile, especially for someone of his age, wasn’t desirable in the realm of conventional exploration. That’s when he decided forming a royalty company was the way to go.

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Elemental Royalties has established the team privately and could now be able to hit the ground running publically. There is some technically experienced knowledge within the company, with several key management members possessing specific West African mining experience.

Elemental Royalties has recently agreed to join the much-admired Discovery Group; this is a really positive sign for prospective investors. There are some big institutional names involved already: Haywood Securities, Sprott Capital Partners and Canaccord Genuity, and this comprises 30% of the company’s ownership. The management team still has plenty of skin in the game: c. 26%. The top 20 shareholders own 60-70% of the company. It remains to be seen if liquidity will become an issue, but it is still early days. Let’s hope the brokers don’t dump their stock in the market as soon as they can.

Elemental Royalties can draw on an acquistion facility of up to US$20M from Sprott, and this “compliments really nicely” the company’s ability to offer vendor equity instead of cash.

The only real concern with this story regards the company’s current royalties: they are secondary royalties obtained from companies that are climbing up the growth curve themselves. Royalty companies don’t tend to off-load the good stuff. Bell is confident in them though so we will follow him with interest.

What did you make of Frederick Bell and Elemental Royalties?

Company Page: http://www.elementalroyalties.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Neometals (NMT) – “We Will Recycle Every Tesla Battery For Free, Forever”… Elon Musk, ready when you are.

Neometals Ltd.
  • ASX: NMT
  • Shares Outstanding: 545M
  • Share price A$0.17 (03.08.2020)
  • Market Cap: A$92M

Interview with Chris Reed, CEO of Neometals (ASX: NMT), and Jeremy McManus, General Manager.

Feel free to check out some of our previous articles about the company and the battery recycling project.

Neometals is a project developer that has caught our attention. They segued out of mining after selling the Mt Marion lithium project and banked $200M. Neometals’ board focussed their attention on the inevitable rise of the electric vehicle ‘circular economy.’ What does that mean? Well, automotive manufacturers are looking to reduce the carbon footprint of their vehicle production. The entire supply food chain needs to be looked at, including recycling. So, how do they deliver that? Neometals believe they are part of that solution, and their JV with multi-billion dollar SMS group just put them front-and-centre on stage.

Neometals has quite the project portfolio, with projects ranging from a lithium refinery, a vast titanium-vanadium project and, most recently, a high-grade vanadium-bearing slag recovery project in Sweden with SSAB.

As part of this slag recovery project, the company arranged a conditional supply agreement with a huge Nordic steel company, SSAB, which owns nearly 2Mt of waste/slag spread across 3 steel mills in Sweden and Finland, and which grows at 200,000t pa. By making this deal and forming a JV with Critical Metals, Neometals demonstrated its credentials to forge deals with major strategic partners. This perhaps foreshadowed the latest development for the company’s flagship lithium-ion battery recycling project…

Matthew Gordon talks to Chris Reed & Jeremy McManus, August 2020


Neometals has entered into a binding deal with German metallurgical equipment supplier and plant construction company, SMS Group GmbH, to establish a joint venture to recycle lithium-ion batteries. This is exciting news and might be the first of numerous catalyst moments over the course of the next 12-to-18 months.

As you might already know, Neometals’ battery recycling project is based upon a green, proprietary solution to the battery needs of our EV-driven tomorrow. Neometals has a unique hydrometallurgical process to recycle Li-ion batteries, and it is more effective (in terms of recoveries) and environmentally friendly than conventional pyrometallurgical practices. Neometals is able to regenerate sustainably-produced secondary battery materials such as nickel, cobalt and lithium from spent & scrap EV Li-ion batteries and consumer electronics.

So, What Exactly Does This Deal Look Like?

It takes the form of an incorporated 50/50 JV called Primobius GmbH, and the intention is that it will be utilised to commercialise Neometals’ proprietary lithium battery recycling process.

This is now a formal agreement to follow on from the MOU agreed in October 2019. SMS Group has taken this time period to conduct due diligence on Neometals’ Canadian pilot battery recycling trial, SGS Lakefield.

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The next 12-to-18 months is a development runway, and there seem to be plenty of big catalysts on the horizon that may wake the market up to the value proposition on offer. With $85M in the bank, expect Neometals to move this battery recycling project forward at an accelerated pace. Phase 1 involves the construction and commission of a licensed demonstration plant at the SMS manufacturing facility in Germany. This will demonstrate that Neometals’ proprietary process can work economically at an industrial scale before an FID needs to be made. Looking towards commercial operations, Primobius intends to capture the emerging European market, which is regarded by many commentators as the second-largest Li-ion battery production hub in the world (behind China). The model is to build the first plant in Europe and then set up a spoke & hub operation globally using the financial access that SMS brings to the table.

There has been mounting pressure on battery supply chains in recent years, with an emphasis on ESG. We saw it with the Responsible Cobalt Initiative, with Panasonic, Tesla’s main battery supplier signing up, and Elon Musk stating that Tesla would eventually eliminate cobalt from its batteries. Pressure from environmentalists, like Greta Thunberg, has heaped scrutiny on the ethicality and environmental friendliness of supply chains in mining and industry, and both institutional investors and consumers have been paying attention.

Moreover, the “major confluence of regulatory initiatives to stimulate the electric vehicle sector to decarbonise transportation, secure battery material supply chains and support circular economies generally” has been the cherry on top of the carbon-neutral cake. Aggressive subsidisation packages across Europe have been actively implemented and European automotive manufacturers have invested heavily into their EV infrastructure. Germany is investing in thousands of EV charging ports across the country. France is close behind.

Elon Musk stated in his recent quarterly conference call that Tesla would need as much clean, green and sustainable nickel as possible. It is clear that individual battery metals need to have a cohesively green macro story if they are to form a major part of the EV revolution. Reed makes a call out to Elon Musk; he says, “We will recycle all Tesla batteries for free, forever.” Neometals has the cash in the bank and a financially and technically capable business partner. We think he is serious.

Moving on to the terms, Neometals and SMS will co-fund the construction and operation of the demonstration plant, in addition to an Association for the Advancement of Cost Engineering (AACE) Class 3 Feasibility Study, totalling c. A$6M.

If certain criteria are met, SMS will earn a 50% stake in Neometals’ proprietary technology subsidiary, and both parties will jointly finance commercial activities towards an FID on a commercial-scale battery recycling plant for c. A$1M.

What Next?

Primobius has commenced an AACE Class 4 engineering cost study for a 20,000t pa Li-ion battery recycling plant. As previously mentioned, it is based in Germany and the findings are based on Neometals’ pilot plant in Canada.

The JV will then begin construction of the demonstration plant, targeting early 2021 for commissioning.

After that, a feasibility study will commence, followed by commercial arrangements in relation to battery feedstock, product offtake, key reagents and project financing, and for future commercial preparations. The company is starting to show investors the scale of what their first non-mining project could look like; we think that with this clarity, more interest will be generated in Neometals.

This is a big story and could really shake up the way Neometals has been perceived by the market. What do you think? Comment your thoughts below; we’d love to hear them!

Company Website: https://www.neometals.com.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Dustin Garrow #05 – Mid 2021 before Term-Contracts Start Being Signed

Interview with Dustin Garrow, uranium market commentator.

What did uranium-expert Garrow have to tell us about the world of uranium this week? The US House Appropriations Committee has stated that it will not approve the funding of the $150M uranium reserve, though some uranium bulls think this judgement will be revised once the DoE can answer some of the committee’s pressing questions about how exactly the reserve will be implemented. While there have been meetings between uranium producers and the government representatives for years, they’ve not been able to push this over the line. It’s clear the government was already aware of many of the issues plaguing the uranium sector, so this decision isn’t impulsive or surprising, though it is very disappointing for uranium juniors who are crying out for a light at the end of the tunnel.

A red flag on May 11th should have been a clear indication for uranium investors that this was how things would pan out: the Nuclear Energy Department at the DoE stated that “within a year they hope to have (their) procurement process clearly delineated.” It was clear the conversations were taking the judgement well into 2021.

Has technology and R&D been a distraction? The US government has been focussing a lot on research, SMRs, and funding export reactors of late, and this has potentially taken much-needed attention away from a potential uranium reserve. Garrow thinks a lot of these issues are geopolitical, with the US “diligently” trying to fund its reactor sales outside of the country and penetrate the export reactor market. Expect some more challenges yet from China and Russia. And a lot of under-cutting. Not sure too many commercial companies are willing to take the risk.

The uranium producers are absolutely down to their barebones, and while Energy Fuels has stated it will ‘produce’ c.200,000lbs of uranium this year (via recycling, alternate feeds, by-products, spot purchases, etc,) this comes from the reclamation services and not mining.

Matthew Gordon talks to Dustin Garrow, July 2020


The Senate version of the appropriations bill continues to provide hope to North American uranium players. There is optimism that this version of the bill still contains the US$150M reserve. He thinks this may well be retained come the end of the process.

The decision regarding the Russian Suspension Agreement (RSA) has been pushed down the road to December 2020, until after the US elections, at which point it is likely to be extended. Is this the utilities’ lobbyists at work? Nice cheap Russian uranium is the prize. But it will come at a cost to US uranium producers if not resolved. The election is just that: an election. Garrow doesn’t think it will make too much difference to the uranium sector whether the Democrats or Republicans claw their way into the Oval Office. Bringing back manufacturing into the US has been a Trump doctrine since day 1, but Biden is now onboard too.

There is a broad spectrum of opinions around the RSA. Through the Ad Hoc committee, the US producers are pushing hard to have the agreement expired so that the limits would be lowered albeit in a staggered manner. Utilities would argue that the current levels are ideal. Enrichment contracts have been signed recently for post-2020, and some of them have been contracted for more than the 20% in anticipation of the limit on Russian enrichment going away. These have been “price suppressive” according to the Department of Commerce. They have recommended the agreement should be lifted and the underlying antidumping investigation from the 90s should be reinstated, placing very high tariffs on Russian enrichment. On the other hand, the Russians might not want to put up with another 10-15 years of paperwork and auditing for what is, essentially, a very small part of the global enrichment market (3Mlbs/yr in America, c. 53Mlbs/yr globally). The Russians have been held at the 20% level since conception, and they have publicly sought a rise to 30-40%. If it doubles to 40% and 6Mlbs, Russia might start being interested again. At some level, commercially, it would make sense that the Russians walk away, especially considering the anti-Russian sentiment that is currently rife in the U.S. administration. On another level, they would lose a relatively cheap lever in off-book negotiations with the US govt.

There is not enough inventory in the market right now because the more mobile, lower-priced inventory is being depleted, and COVID-19 has massively impaired production, especially for KazAtomProm’s partners. The volumes are down but the price has held relatively stable, which Garrow thinks is a positive sign. What a lot of uranium investors don’t realise is how long a process restarting production is; it is not just a case of flipping a switch. For example, KazAtomProm has completely halted its well-field development programme. Its production is coming from existing well-fields. Once it is safe to go out and mine uranium, Garrow expects it to be into the middle of 2021, even if the ramp-up starts before the end of 2020, until we are back to some semblance of supply normality.

In order to press the restart button, long-term contracts will be needed. Which makes Cameco’s decision to restart Cigar Lake intriguing. Have they negotiated term-contracts with utilities? If so what are the terms and when will the market find out. That would set the cat amongst the pigeons. For everyone else though, everything appears to be contingent on contracts next yet signed, and the solution could eventually take a phased approach: if KazAtomProm and Cameco are satisfied and start ramping up, then the producers that are one step down the ladder. We could be well into 2022 before some of the newer want to be producers get a shot; even if their projects are close to shovel-ready, there is plenty of work to do regarding financing the CAPEX, the multitude of licences and operational to knowhow put in to action.

There is only one nuclear conference this year which is “hanging by its claws” in Las Vegas at the end of October 2020, and while 2020 had originally looked like a year when utilities would be much more active, it could well take until well into next year for any kind of meaningful market engagement. Very few people are travelling to visit the utilities right now, and these sorts of deals simply aren’t going to be carved out over the phone. It doesn’t look like there is going to be a rapid take up in term-contracts. It could be very gradual, and Q3/21 is the date we’ve heard be earmarked by many experts. Uranium price discovery may start slowly this year but getting to levels which uranium juniors need for commercial decision making is some way off yet.

There has been a surge of M&A in the space recently, as North American uranium miners target Energy Fuels’ White Mesa Mill to toll their uranium. Garrow states that uranium companies need multiple mines to get anywhere near the volume needed to be a player that interests the utilities. And as for the assets that are being bought up, Garrow just sighs. And when Garrow sighs, investors should too!

What did you make of Dustin Garrow? What questions would you like us to ask him in the future?

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Energy Fuels (NYSE: UUUU) – Old Timers said, “You Own the Mill, You Own the District”

Energy Fuels Inc.
  • NYSE: UUUU
  • Shares Outstanding: 118M
  • Share price US$1.50 (01.05.2020)
  • Market Cap: US$176M

Energy Fuels is America’s leading producer of uranium. The company’s portfolio is unique within the North American uranium space, with more production capacity, licensed mines, licensed processing facilities, and in-ground uranium resources than any other US uranium producer. While it is small on a global scale compared to other companies, it remains a significant player.

Chalmers is quick to point out that they are focussed on uranium. That said, the cash flow opportunities available to them are not reliant on mining uranium. The company offers up some diversity of revenue in the form of vanadium production, uranium recycling/clean-up operations and REE processing (rare earths); more on that later.

We’ve spoken with Chalmers on many occasions and the uranium picture has become more and more bullish each time. There have been numerous catalyst moments in recent months, predominantly revolving around the destruction of uranium inventories and the tightening of production generated by COVID-19 lockdowns the world over. We were interested to hear what Energy Fuels’ latest update would entail.

Matthew Gordon talks to Mark Chalmers, July 2020


Let’s start with the commercial side of things. After a year spent strengthening its balance sheet, Energy Fuels has told holders of its floating rate convertible unsecured subordinated debentures that it will be redeeming 50% of the C$20.86M total. The remainder is due at the end of this year and the company will need to address this. Chalmers discusses the options available to them in the interview. This is a smart, decisive move that will allow the company to avoid c. US$350,000 in interest payments for the rest of 2020. This decision sets Energy Fuels apart massively from most other uranium juniors who are currently running up debts to fund exploration programmes or to keep the lights on whilst the market lurches from one catalyst to the next. Instead, Energy Fuels is on the front foot, logically and systemically managing its cash position as it prepares for the uranium renaissance, whenever that may begin.

The US House of Appropriations Committee recently took the decision to block the funding of a US$150M US uranium reserve. This is a setback for North American uranium bulls after several months of positive news, but Chalmers is pragmatic; he is anything but surprised. Moreover, he doesn’t see this decision as definitive. It seems likely that the topic will be revisited once the US Department of Energy can provide more clarity about how exactly the reserve would be implemented at some point in the next 180 days, about 90 days after the US Elections take place. Chalmers is under the impression that the DoE is hard at work to address these questions right now.

Let’s get back to what I mentioned earlier: vanadium and rare earths. This is when the White Mesa Mill, Utah, serves as a real trump card. The only remaining fully-operational conventional uranium mill in the US is the subject of much discussion, but some investors may not yet have recognised the full extent of its capabilities. It is licensed to process uranium, but it is also able to process vanadium and rare earths. Uranium, vanadium and rare earths are all potentially strategic commodities on the critical minerals list for the United States, and this can only be a good thing. Now, the question is can the US govt help? If the Section 232 fiasco is anything to go off, advancing their own agenda through partnerships would see them retain control of their own destiny.

In fact, based on what we are hearing, America is aiming to build a new US-based global REE hub to rival the status quote of Chinese dominance. Supporting a cause that could rival a monopoly is usually something to be quite excited about… Energy Fuels has recently been actively pursuing the rare earths processing capabilities of the business as it looks to further monetise the White Mesa Mill, driving capital into the company’s bottom line. What partnerships with Constantine Karayannopoulos and Neo Performance materials do for them? It feels like a new Mountain Pass in the making.

A total of 5 uranium juniors have told us in recent interviews that they will be using White Mesa Mill to process their uranium. However, Chalmers hasn’t heard even the faintest whisper from any of them, and he’d quite like them to stop making such claims. This exemplifies exactly what we have been saying about the White Mesa Mill all along: it gives Energy Fuels a monopoly over other North American uranium juniors. Uranium juniors face the choice to pay a toll fee, at Energy Fuels’ leisure, or ship ore more expensively to South America. It’s an incredibly competitive situation and it is clear that Energy Fuels holds all of the cards.

We recently discussed an intriguing topic with Brandon Munro and John Borshoff. As this deep uranium bear market has dragged on year after year, expertise has been attracted away from the industry. This means there is a shortage of technically-proficient, experienced uranium minds out there. Projects will struggle to get into this production without expertise. Moreover, with a flood of new entrants, there are currently too many uranium companies for too few high-quality projects. As a consequence, the utilities aren’t taking uranium producers seriously yet. Consolidation is absolutely necessary to swing the struggle back in favour of the producers, and Energy Fuels could be an excellent candidate for this. It has a dominant position and is surrounded by many uranium minnows. It could well look at M&A in the future and appears to be the best-positioned North American uranium junior to hoover up some smaller players.

What did you make of Energy Fuels and Mark Chalmers? Comment beow and we will respond.

Company Website: https://www.energyfuels.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Mark Selby #03 – Nickel On The Comeback Trail? (Flashback to May)

We regularly talk with Mark Selby. He’s become something of our resident nickel expert. He is a renowned nickel market commentator and CEO of Canada Nickel Company (TSX-V: CNC).

So much has happened surrounding the EV revolution/battery metals thematic in the last few months. It’s always useful to rewind a few months to remind investors of some dynamics they may have forgotten.

At the time, based on all the data available to Selby, he believed that global metals markets had bottomed out, and this has since been proven to be true, with battery metal prices and, in particular, nickel prices beginning to rally once again. If we can uncover the key indicators that led Selby towards the suspicion, we can perhaps uncover the market dynamics that investors should watch closely in the future.

One such metric that was up for consideration regarded the price premium of copper, the largest metal by market volume. The latest data on the Chinese copper market, the largest consumer of copper at 51%, at the time of the interview painted a bullish picture: +18-month highs for the premium price of Chinese copper purchases.

Selby is a big fan of using copper concentrate terms as a general reference point for metals markets performance, because at a potential inflexion point, when the market because to climb from rock bottom, the Chinese strategy is to buy as much copper as possible when it considers the copper price to be ‘cheap.’ Therefore, whether it is cathodes, concentrates or scrap, the Chinese just want as much copper as possible on its way in any form. Copper concentrate terms were at “multi-year lows,” and this was yet another signal that investors should look at today.

The strategy that Selby thought the Chinese were deploying at the time has undeniably manifested in a variety of ways. There have been YoY increases for all manner of metals and products, as the Chinese government looks to drive metal production via spending on infrastructure and construction. If in doubt, buy your way out? Cables manufacturers that feed into the Chinese supply chain were up over 100% capacity, and China’s blueprint for economic stimulus was making Selby feel upbeat. Even excavator sales are claimed by some to be up 60% YoY. This “big shove” to get the Chinese economy back in the swing of things has been very beneficial to copper, with the copper spot price on the LME skyrocketing from US$5,825/t up to US$6,52/t today.

Matthew Gordon talks to Mark Selby, May 2020


Historically, when copper performs well, nickel also performs well. Both are crucial in the manufacturing sector, and both will have major applications in the EV revolution. The nickel price on the LME has risen from US$11,853/t to US$13,215/t since this interview was conducted. Stainless steel, currently the primary growth driver for nickel, has increased in price YoY. Moreover, stainless steel inventories fell at the time, and this has continued to be a feature of the new normal we are living in. Production isn’t as hindered as it was several months ago, but there are still unavoidable issues that are necessitating inventory consumption. Production has continued to be restricted, with some mines in the nickel haven, the Philippines, staying offline (all of them were offline at the time). Selby remarked that nickel ore imports on the ground in China were hitting multi-year lows. This is likely to continue for the foreseeable future, and tightening inventories can only ever really mean one thing…

With nickel equities rallying significantly right now, this bullishness shows no signs of slowing down. Aggressive subsidies for EVs in Europe and mandated infrastructure could accelerate things even further. Investors are starting to pile into nickel, and it’s no wonder; these trends are becoming increasingly prolific.

Another nickel-specific indicator Selby took a look at was the price discount between nickel pig iron produced in China and general nickel; it had reduced a lot.

Investors should be aware that though copper market movements are useful, countries will sometimes take a gamble by speculating on a few thousands tonnes. Therefore, investors should also pay attention to bulk metals; speculation won’t happen for these. At the time, iron ore imports were rocketing in China, with iron ore price at “very. very, very solid levels.” Investors should pay attention to the cohesiveness of metals market behaviour. If everything is going in the right direction, from copper to nickel, and from bulk metals to general economic indicators, it might be time for investors to throw their hats into the ring.

What did you make of Mark Selby’s interview? How have his May insights held up against contemporary developments? Comment below and we will respond.

Check out another interview with Selby here.

Company Website: https://canadanickel.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Canada Nickel (CNC) – NetZero Nickel Sulphide Projects go to the Front of the Queue

Canada Nickel Co Inc.
  • TSX-V: CNC
  • Shares Outstanding: 57M
  • Share price C$2.52 (30.07.2020)
  • Market Cap: C$144M

Interview with Mark Selby, CEO of Canada Nickel (TSX-V: CNC).

Canada Nickel was already looking like a tempting proposition. Selby is a renowned nickel commentator and previously developed Karora Resources’ (RNC Minerals) Dumont Nickel-Cobalt Project from early exploration to advanced-stage development. He has a track record of creating accretive value with nickel assets by de-risking and developing them.

Moreover, Canada Nickel’s Crawford Nickel-VMS Project is a nickel sulphide project that has impressed the market with the company’s share price skyrocketing. It’s already the 12th largest nickel sulphide resource on the planet after just 6-months of development; imagine what it will look like after a further 6-month programme of development…

Matthew Gordon talks to Mark Selby, 27th July 2020

https://youtu.be/Q0r6Vfl2ynM

It’s a bulk-tonnage, low-grade nickel story, but we recently spoke to Selby about some high-grade drill results that had come up. He discussed how they carry the potential to create an even more exciting value proposition for the company.

Today, we spoke to him about a really exciting development for the company. Canada Nickel has created a wholly-owned subsidiary, ‘NetZero Metals.’ It will use this subsidiary to commence the research and development of a processing facility, located in the Timmins, Ontario region, with the goal of utilising existing technologies to produce zero-carbon nickel, cobalt and iron products. 

Canada Nickel has also applied for a series of trademarks: NetZero NickelTM, NetZero CobaltTM, and NetZero IronTM in the US, Canada and other jurisdictions. Canada Nickel will be looking to build downstream facilities in the area next to its mines. It will be able to take the gas produced by the processing plant and route it through the tailings and waste rock, making the carbon issue “disappear.” The tailings and waste rock will simply “soak up” the CO2. It will take advantage of existing hydro-electrical power in the region too. Should other companies be looking to do this? Should the mining industry at large be looking to engage in this process?

We’ve discussed on this platform with numerous battery metals producers about how there is a new wave of momentum behind the ESG component of mining. Both battery manufacturers and EV manufacturers are assessing their supply chain with much more scrutiny because of pressure created by consumers, environmental groups (thanks, Greta) and regulatory bodies. National governments, like the UK, have pledged for their countries to go carbon neutral by 2050, as have most large resource companies. Potential aggressive subsidisation packages for strategic battery metals companies and EV manufacturers are further incentives for individuals to clean up their supply chains. We have already seen it with the Responsible Cobalt Initiative with companies like Daimler, Panasonic and Tesla all pledging to reduce, or eliminate, cobalt from their products due, in part, to ethical issues surrounding child labour in the DRC.

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The most recent, and perhaps significant, development comes from Elon Musk’s quarterly conference call. He has called for nickel miners to produce as much green, efficient and sustainable nickel as possible. He has big plans to kick off the post-COVID EV renaissance with boosted production. The new mid-tier Model 3 is intended to be the bulk-sale cash cow for the company on the back of the success of the Model S and Model X. In order to make this a reality, he’s going to need a lot of nickel, and there are plenty of challenges surrounding this, especially given the pressure to keep it green.

We’ve previously discussed the differences between two different classes of nickel: nickel sulphide and nickel laterite. However, we didn’t discuss a crucial issue for investors: environmental footprint.

SOURCE: CNW Group/Canada Nickel Company Inc.
Y-axis = tonnes CO2/tonne of nickel produced

It’s quite clear then. Sulphide projects are expensive to mine but cheap to process via conventional smelting techniques. Laterite is cheap to mine but extremely expensive to process; it requires an HPAL plant, which has only ever been successfully constructed for over US$1Bn. With such a large CAPEX and a much more damaging environmental footprint, does this put nickel laterite projects at the back of the queue when it comes to getting financed? It certainly looks that way. Are you invested in a company with a nickel laterite project? What is your take on all of this?

How exactly will this all play out? Will the old boys throw their toys out of the pram? It would cost them billions in infrastructure after all…

Let’s hear your thoughts below! It’s both an exciting and controversial topic and we’d love to hear your take on it.

Company Website: https://canadanickel.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

KORE Mining (KORE) – Californian Permitting Holding Back Sprott-Driven Gold Play?

Kore Mining Ltd
  • TSX-V: KORE
  • Shares Outstanding: 102M
  • Share price C$1.46 (17.07.2020)
  • Market Cap: C$149M

Interview with Scott Trebilcock, President & CEO of gold-explorer, KORE Mining (TSX-V: KORE)

The Californian permitting process has always been a major nuisance, but there have to be more reasons that KORE Mining isn’t gaining traction with the market than this.

KORE Mining is a gold explorer with four 100%-owned gold projects in California and British Columbia. 3 of these projects are being geared up for monetisation to fund the flagship project, the Imperial Project. It recently announced an encouraging PEA on Imperial. Moving forward, it intends to grow its gold resource base, creating accretive value for shareholders. A slant to this story that is likely to get the market’s attention is the share registry: strategic investors like Macquarie Bank and Eric Sprott (26%) are major shareholders, and the KORE Mining management team has lots of skin in the game, owning ~38% of the shares outstanding.

Matthew Gordon talks to Scott Trebilcock, July 2020


Let’s take a look at the PEA numbers for Imperial assuming a base case of US$1,450/oz gold:

EconomicsPost-Tax
Net Present Value (NPV5%)US$343M
Internal Rate of Return (IRR)44%
Payback (undiscounted)2.7 Years
LOM avg. Annual Cash Flow (after tax & capital)US$90
LOM Cumulative Cash Flow (undiscounted)US$580M
Mine Life8 Years
Average Annual Mining Rate43.4Mt pa
Average Annual Gold Production146,000oz pa
Total LOM Recovered Gold1.17Moz
Initial Capital Costs (CAPEX)US$143M

These are some pretty good numbers, and the market has responded: the share price is up more than 5X from the start of the year. Having said that, if the alleged stature of this resource is true, and the company can establish itself as a meaningful mid-tier player, KORE Mining still looks mightily undervalued with a market cap of just C$137M. The permitting concerns are clearly a major discount factor, though Sprott appears unconcerned. He is buying into the bullish idea of a potential wave of M&A as major gold miners look to expand by acquiring the minnows.

The price uptick gained momentum courtesy of some results coming out of one of KORE Mining’s BC assets: FG Gold. 11m at 10 g/t gold and 52.5m at 1.1 g/t gold are some of the highlights. The company recently closed the first tranche of a US$7.5 million financing with Eric Sprott, and it intends to use some of the proceeds to conduct a 5,000m drill program to ‘further delineate the existing resource and test on-strike and downdip extensions along a strike length of over 2km.’ However, Imperial will remain the “number 1” for the use of capital. Trebilcock wants to systemically move each project along the path of development, aiming for district-scale assets that are worth developing infrastructure for. The “side objective” is making new discoveries and adding ounces in the ground. KORE Mining is in no hurry to find a JV partner right now because it has access to the capital it needs. This can only be a good thing for the company’s optionality.

To push Imperial over the line, Trebilcock will follow the “do it right” path, regardless of the option he takes. A lot is happening on the ground in support of KORE Mining’s permitting process, including engagement with the local community and politically. It is something of an impasse, and investors will are likely to be concerned. In an attempt to provide assurances to the market, Trebilcock explains that the company’s strategy is a “coalition of support”; he aims to obtain a support letter from mayors and chambers of commerce that support the project. He appears to be hoping for a Republican win come November because of the continuity it will provide. He believes that if one is to disregard the rhetoric surrounding the Californian permitting process, it is exactly the same as obtaining a permit anywhere else in the world. KORE Mining simply needs public support. Could a desire to create jobs in the aftermath of COVID-19 help sentiment towards the Imperial Project?

Whilst the development of Imperial isn’t accelerating, and this might worry investors given the gold bull market is unlikely to last forever, exploration is accelerating, especially at FG Gold. Trebilcock thinks this will make the asset much more attractive for a major to take it out. He says you can’t accelerate growth at an asset level… do you agree? He’s aiming to have Imperial sold inside 3 years. Let’s see if he can deliver the growth that patient shareholders will demand.

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The share price is up, but it’s still substantially down on KORE’s peers. Marketing appears to be a real issue. Are investors buying into the business model of slow and steady growth through the drill bit within a portfolio body? Whilst Trebilcock says he and his management team will be working really hard to push the share price up, it remains to be seen whether investors will be confident that this can be achieved or not. The management team is clearly high-quality and has achieved all of its deliverables on a tight budget. However, there simply aren’t enough monetisation events right now. Would M&A be a route that could completely change the value proposition? The company will continue to look for acquisitions, “things around the edges,” but only those at a district-scale that can add to the portfolio in a cohesive fashion. He doesn’t see the company stepping into a whole new project in a whole new jurisdiction. Is this a mistake? Only time will tell.

KORE Mining has no fundraising planned for the near future. It continues to have dialogue with Equinox Gold about future possible deals.

There is a lot to like about this story, but at the end of the day, a company is only ever worth what the market values it as.

What did you make of KORE Mining and Scott Trebilcock?

Company Page: https://www.koremining.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Neometals – Finding Value When The Market Has Lost Its Mind (Flashback to March)

Neometals Ltd.
  • ASX: NMT
  • Shares Outstanding: 545M
  • Share price: A$0.16 (29.07.2020)
  • Market Cap: A$85M

In this series of articles, I’m shining a light on the companies I feel have been given bargain valuations because of coronavirus-induced market sentiment. In the previous article in this series, I looked at RNC Minerals, a gold producer with exploration potential that has seen its share price slashed. It is worth noting that these drops have occurred without any operational frailties revealing themselves; this is pure sentiment at play as the market resets.

Today, I’m looking at one of my favourite stories that slots neatly into the EV revolution thematic: project development company, Neometals. Neometals already had a surprisingly low share price, but it was as low as A$0.14 in the last few days. In my opinion, this is incredible value, especially given the company’s incredibly strong cash situation. Here’s why.

Neometals: An Overview

In case you are unfamiliar with the Neometals story, Crux Investor has conducted numerous in-depth interviews with key management personnel over the course of the last few years. They have managed to paint an intriguing picture of a company with a variety of futuristically relevant projects.

Neometals’ management team has a track record of making shareholders money. Neometals made its money with a Lithium mining project, Mt Marion in Australia, and the team times their exit beautifully. They pocketed c.A$130M and have returned c. A$45M to shareholders in the shape of dividends. In addition, the team has managed to retain an option on the Lithium spodumene component; this will be a revenue stream for them at the point the market comes back.

So, with this strong management team, Neometals is off to a good start. Moving on to the projects, I am a fan of all of them. Neometals’ most advanced project, the battery recycling business, is a proprietary battery recycling process that allows for clean, cost-efficient hydrometallurgical (using acid) extraction of constituent battery metals from spent battery cells. This is a game changer because up until now, the green energy cycle hasn’t had a logical end; pyrometallurgical recycling is extremely expensive and causes a huge amount of pollution. It is also very wasteful, as the majority of the battery metals are lost during the process.

This business can allow companies to cut down on expensive and pollutive mining (currently responsible for c. 10% of global emissions). It also finally provides green/ethical investors the opportunity to invest in a solution to the conclusion of the green energy cycle. Institutions are thinking much more seriously about the impact supply chains have on the environment. We recently heard Cornish Lithium CEO, Jeremt Wrathall claim the EU is putting €3Bn into the EV supply chain. Blackrock, one of the biggest funding institutions in the world, has recently stated it now cares a great deal more about carbon footprint because of government and investor pressure. Automotive giants like BMW have also chimed in on the importance of an ethical supply chain. Neometals looks to be positioning itself very strong for a wave of green momentum driven by last year’s ESG, and Greta Thunberg’s many scathing rants.

Moving on to the titanium side of the company, Neometals has the Barrambie Titanium and Vanadium Project. The Barambie co-product, vanadium, fits into the futuristic thematic with VFRBs, but this is still some way off. However, it has fundamental, strong demand in the world of stainless steel. The primary focus, titanium, also adds to Neometals’ EV narrative, given its battery metal applications. However, the primary demand (90%) for titanium comes in the form of titanium white, a pigment derived from titanium dioxide and used in paints, protective coatings and plastics.

Paul Wallwork, General Manager Neometals, recently claimed in a Crux Investors interview that the Barrambie Project has the scale, longevity and grade to stand out from the competition. The ore body is forecasted to produce 9,235t of FeV80 and 6,337t of V2O5 a year, with an average plant feed rate of 2.66Mtpa, over an estimated mine life of 15 years. This looks like another encouraging project.

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Neometals’ final core project is cutting-edge lithium refinery; Neometals is evaluating vertical integration down the lithium value chain via future production of lithium chemicals. Neometals also has two non-core projects in the form of the nickel-focussed and wholly owned Mt Edwards mineral exploration project, and a category of research & development initiatives: the ELi Project, the Dexter Project, and a proprietary Lithium Titanate manufacturing process. It seems Neometals has covered every EV-related base imaginable.

So, what appears to be a great project portfolio, investors will be left scratching their heads at Neometals’ current market valuation. This is all without mentioning the most telling part of this situation:

Neometals’ Cash Situation

Neometal is currently sat on c. A$110 of debt-free cash, despite only being valued at around A$89M by the market. Does this mean that all of Neometals’ impressive projects combined are worth minus A$21M, or has the market lost its mind? I have a feeling you’ll be leaning towards the latter now you’ve been presented with all the facts.

In fact, this A$110M is worth $2 on the $ given the current COVID-19 crisis. This capital would be very expensive to raise right now, so the fact the company already has access to it puts it in a very strong position indeed.

The management team has managed to remove Neometals from our least favourite part of the mining space: mining risk. The company has some huge strategic partners. In addition, it is positioned smartly within an EV narrative that has exciting levels of potential. Neometals’ only rivals in the world of green battery recycling don’t quite cut the mustard. Li-Cycle looks interesting, but stacked up against Neometals, the choice is obvious. The different proprietary processes don’t compare, and the cash situation at Neometals, combined with the track-record of the management and existing strategic partners, puts Neometals in a league of its own.

We can’t quite work out what investors are missing, other than…

Lacklustre Marketing

For me, there is only one explanation for Neometals’ market performance: disappointing marketing. Neometals is not effectively communicating to investors the value proposition it can offer them, and the story is not being picked up or heard by the investors who need to hear it. Explaining such technical projects is certainly complicated, and we don’t doubt the articulacy of the management team, but Neometals is definitely missing a trick at the moment.

Neometals has all the makings of a high-value, modern project developer, but investors need to hear this story louder and much more clearly. However, some investors will be happy; the longer Neometals slips under the radar, the more discounted shares they can grab.

Company Website: https://www.neometals.com.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Brandon Munro #1 – Uranium Investors Need to Believe to Macro (Rewind to January)

We like checking in with Brandon Munro. He is a uranium market commentator and the CEO of Bannerman Resources (ASX: BMN). His insights into the uranium space are both compelling and revealing.

In January, after an incredibly disappointing 2019 for uranium, investor sentiment was at an all-time low. The Section 232 petition had failed to bear any tangible fruit, equities were tumbling away, and price discovery seemed an eternity away. Munro’s message to investors at the time was clear: believe in the uranium macro story, and look a little deeper. In hindsight, the mechanisms that were at work in January were accelerated by COVID-19, and they have led us to the more bullish sentiment we are seeing amongst the uranium community today.

Matthew Gordon talks to Brandon Munro, January 2020


The macro story for uranium is now better understood and for good reason. It is widely accepted that the world’s growing energy consumption necessitates a nuclear energy infrastructure. Fossil fuels are not as inefficient, and renewable energy is expensive and not entirely as green as initial publicity led us to believe or quite frankly our intuition suggests to us. Nuclear power is a (more) green solution to the energy needs of tomorrow. A global increase in the construction of nuclear power plants is evidence that the powers that be are fully aware of this. As of today, there are c. 440 nuclear power reactors operating in 30 countries (plus Taiwan), with a combined capacity of about 400GWe. In 2018 these over 10% of the world’s electricity. Moreover, around 55 reactors are under construction internationally, primarily in Asia, and there are big plans for Russia too. Further capacity has been added via nuclear plant upgrades, and plant lifetime extension programmes have been popular, especially in the US.

So, if investors are willing to accept this and put their faith behind the uranium macro story, it’s time to dig into the details.

Back in January, plenty was happening behind the curtain in a deep bear market. Industry insiders were claiming that UF6 reserves, held by utility companies, were all but gone. They also claimed the enriched uranium product (EUP) conversion price had risen by 400%, arguing that the price of uranium enrichment had risen from US$30 to a more sizable US$50. These are just some of the moving parts that were at play when we spoke, and they have continued to feature prominently in the discussions of the uranium investment community 7-months later. As the utilities’ reserves of EUP and UF6 have become substantially completely depleted, it has negatively impacted their optionality. The idea was that utilities would now need to look at their uranium supply chain with a greater sense of urgency, because without UF6 and EUP, long-term planning, and therefore contracts, would become a necessity.

Even with the significantly longer runway that utilities require to plug U3O8 in rather than UF6 or EUP, this hasn’t quite happened yet. While COVID-19 has been great for tightening inventories and restriction uranium supply into the market, exposing the supply-demand deficit, it has also thrown up all manner of problems for the utilities. As a consequence, long-term uranium contract discussions are currently a very low priority; they have much more urgent matters to attend to. It’s natural for uranium investors to feel frustrated at what appears to be another false dawn, but when looking more deeply at the fundamentals, like Munro did in this interview, and believing in the uranium macro story, there are still plenty of causes for optimism.

Munro dismisses the idea that U3O8 would return to its c. US$150/lb peak, and this is something we’ve heard consistently from some uranium brainiacs we’ve interviewed in the months since this interview. Specifically, Munro projected a sharp peak of US$90/lb, followed by a retreat to a sustainable US$50-60/lb. There simply isn’t the hype surrounding the nuclear space that was present 15-years ago, and it is unlikely this will ever return. The sentiment is still tarnished by nuclear disasters and the seething rants of purported environmentalists, and this is far from an easy reputation to shift.

Uranium investor requires patience and intellectual curiosity. Watch or listen to this uranium series with Brandon Munro and understand the space, the limitations, the opportunities and work out which companies will do better than others. Timing is everything. Gentlemen, start your engines.

Company Website: https://www.bannermanresources.com.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.