Canada Nickel – 11th Largest Nickel Sulphide Resource Globally! (Transcript)

Canada Nickel
  • TSXv: CNC
  • Shares Outstanding: 57M
  • Share price C$0.47 (18.03.2020)
  • Market Cap: C$27M

Interview with Mark Selby, CEO of Nickel Exploration company, Canada Nickel (TSXv: CNC).

Selby tells us he already has the 11th largest nickel sulphide deposit from less than 20% of the structure that they are exploring. 260Mt with a higher-grade core running through the middle. And he claims they have an accelerated timeframe planned to get into production.

A PEA will be out in the next 3-4 months and then a Feasibility Study by the end of 2021. Canada Nickel Corp has hopes to time this nickel cycle right and therefore be able to fund the project into production off the back of the Feasibility Study.

Key take-outs are 1. This is a large project – elephant hunting territory – which is attractive to large Nickel Majors 2. The Nickel Resource has been added for only $1 per ton. Many projects cost spend $1,000 per ton to add to their Resource. 3. The PEA will be out in 3-4 months. Investor can understand the economics at this point. 4. The grade is relatively good and the company hopes to be able to mine a higher-grade core first to deliver a higher return in the earlier years. 5. It’s a Nickel Sulphide project which is preferred because of the significantly lower CAPEX compared to Hpal projects required for Nickel laterite.

CLICK HERE to watch the full interview.

We Discuss:

1:16 – Going Public: The Aftermath

1:46 – PDAC Conference: Low Attendance Rates

3:16 – Resource Numbers: What Do They Mean for Investors?

7:37 – Commercialisation: Possibilities and Timings

10:45 – Focusing on High Grade: How Will it Work?

12:22 – Coronavirus’ Impact on Market and Possible Outcomes

Matthew Gordon: Hi, Mark, how are you Sir?

Mark Selby: Good to see you again, Matthew.

Matthew Gordon: And we spoke last week; you went public. How did that go?

Mark Selby: It’s good. The transfer agent mechanics in the background took a little while to get people’s shares into account, but the nice thing is, we did trade a bit and the stock was up 250% on the first trading day, so that’s a great way to start. We’ll see what happens and we’ll see what happens today.

Matthew Gordon: Beautiful, beautiful, beautiful. Now you’re at PDAC; about to go through three days of marketing, shaking hands, meeting people, et cetera, et cetera. Tell me, what’s it like there? Because, I’ve heard various reports about attendance levels. What’s your sense of what’s going on there?

Mark Selby: Yes, I know what’s interesting, and again, there’s a lot less shaking hands and a lot more touching elbows!

Matthew Gordon: True, true, true!

Mark Selby: No, no, there really has been an impact. I know one of the guys who came in from out of town, you stay in a hotel in Toronto, he didn’t, he just asked them, he’s a consultant who wanted to just, just was curious. And so, yes, I think they basically had about a third of the people not show up, basically cancel the reservations from a few weeks ago. And I co-chair one of the larger introductory sessions at the conference. It’s held in the big room and I would say, yes, there’s probably 20-25% less people now than there have been in past years for that session. So yes, I noticed it. There’s definitely, definitely been an impact.

Matthew Gordon: So clearly coronavirus; people nervous about traveling at the moment. I think there’s a lot of news going around. Okay. So that’s having an impact.

Mark Selby: One of the speakers on the panel, she works for one of the big banks and yes, they were basically – she did it remotely because they have an only essential travel policy going right now.

Matthew Gordon: Right. Okay. Well I’m sure it’s going to impact some people’s ability to do business or a certain account chart with, whether it be strategic partners, funders, whatever. But I guess we’ll hear more of that as the week carries on. But let’s get down to business here: so we spoke to you last week, you went public – well done, 250% increase, but let’s see how that goes this week. You also released some numbers around your resource, so tell us about that.

Mark Selby: Yes, we were very happy. Again, we’ve been drilling since September. And so the resource results were the 12th largest Nickel Sulphide resource globally. The nice thing for that in terms of technically what’s there is, we’ve talked about this higher-grade core showing up in the drilling. And the nice thing is from a resource perspective, there’s a higher-grade core running right through the middle of it. So, again, Dumont is the closest comparison, and so this higher green core, we’ve got 260Mt out of 900Mt; that’s basically about 15% better than Dumont. And then we’ve got some additional grade shells. And we’ve got about 100M tons at 0.3, 0.4, so again, the key thing with that higher-grade core is that when you go to get this into production eventually, if you’re able to mine that material first, that means just a lot more cash flow right out of the gate, and that just helps the economics and helps you run the business.

Matthew Gordon: Well. Yes, for sure. So, yes, I guess you’re going to have to work out, are you going to be able to mine that first? And you’ll presumably be working on that over the next few weeks and months. And also some pretty big numbers out, right? So what does that actually mean? I mean, how should investors interpret that? I hear the numbers, but so what? What does it mean for me?

Mark Selby: Yes, no, the key thing again, because a lot of mining companies just add ounces or pounds for the sake of adding ounces or pounds. , the key thing here and that what I said the other day is that in the market today particularly is you see, companies that have elephant scale projects that can attract major mining companies or attract downstream partners to come into it. So a lot of companies in Columbia and Ecuador right now, with Copper and Copper Gold discoveries, being a Nickel Sulphide project of this scale, I believe right now in the market we’re in for EVs, and the majors wanting to get exposure to battery metals, that kind of a scale deposit should get BHP’s attention, should get Teck’s attention if they want to get meaningful exposure to battery metals: Nickel and Cobalt that we have.

Matthew Gordon: What do you mean? You talked about elephant hunting before, but where are you in the scale of things? Give me a sense of it. Is this like number one in the world or in the top 100?

Mark Selby: Yes, right now, we are basically around the 11th largest and we’ve only explored, that’s off less than 20% of the structure that we have at Crawford. So we think we’ve got potential to make it larger. And again, where we’re going to focus is on those areas where we’ve seen the higher grade. And so we’re going to take what we learned about where the high grade is at the one place we drove off and see if we can find some more of it. We’ve got some ideas in terms of where that may be sitting in the rest of the structure. And so, because again, the thing that I’m also quite proud of is our team added that resource for about a dollar a ton. You literally, because the scale of most Nickel Sulphide deposits is quite small, yes, they’re high grade, but you don’t find many tons for a lot of drilling and for a lot of companies, they are spending literally almost USD$1,000 per ton to add resource and reserve.

Matthew Gordon: Is that an extreme example or what was sort of average?

Mark Selby: No, no. I would say like I think in Western Australia you’re looking at $100 per tonne of exploration costs to define Resources. It’s okay because they’re trying to find little small Nickel lenses, that might be today quite deep. So you’re drilling again, you might be drilling 500m holes, 800m holes, hoping to hit 10m of massive Sulphide Nickel, where we get to drill a 500m hole, 450m of it have assets that end up in a Resource model.

Matthew Gordon: Right. Okay. So that’s going to give you, again, as investors, we’re all going to be interested in, at what point do you start being able to, and I know it’s early days, but at what point do you start being able to put some numbers or thoughts around the economics of this. So I’m hearing it’s large, you’re finding in terms of they contain Nickel Sulphide, 11th largest in the world. I mean that’s pretty good, straight out of the gate. It’s cheap. But at what point does that start converting into meaningful numbers for us as shareholders?

Mark Selby: Yes, so that’s the key. I mean, what we wanted was, again, we wanted to work this on an accelerated timeframe, given our understanding of this type of deposit. And so this Resource and the results we have are of the scale and are of the potential that we’re going to move that Resource right into PEA stage. I’m literally meeting today with one of the leading engineering firms to start scoping out to kick off that work. And we’d look to kick that off in April and have a PEA done for the fall for this coming year, which again, we’d roll right into a Feasibility Study from there. So again, from 6-months from drilling, we’re going to be able to start putting numbers around this which is very fast.

Matthew Gordon: Okay. And then how quickly, you mentioned the Feasibility Study as well, clearly, but what’s your timeframe on that? Because the more you do, the more notice people take. And when you say accelerated timeframe, I’m interested in, do you mean it? Or is this the usual long drawn out process and you guys are…

Mark Selby: …are we’re talking 6-years from now, hopefully not the project because it’s construction. Yes, no, we’re looking to have the Feasibility Study target would be the end of 2021. And so, and then a 2-year build from there. So that’s the timeframe we’re going to be working towards.

Matthew Gordon: Well, you’re suggesting there that you could get financed off the back of a Feasibility Study?

Mark Selby: Yes. Again, in a kind of market we’re in now, in the market we’re expecting for battery metals, when you’ve the head of BHP saying, ‘We need more future facing metals, we need more Nickel and more Cobalt’, I think when we get to that point we should be seeing the interest from the major mining companies and from the industry downstream players.

Matthew Gordon: Okay. That’s pretty big statement you’re saying. And in 2021, you could have a Feasibility Study ready. You will have been having, and would hope to conclude financing discussions around that point – is that what you’re telling me? Okay. And then there’s a 2-year build out, so when you say accelerated, you do mean accelerated, and you’re hoping to hit the cycle. There’s a lot of ifs and buts between now and then, obviously, right?

Mark Selby: Oh yes, yes. Nothing’s guaranteed in this space. But again, my view is we’re going to be hitting a Nickel super-cycle sometime in the mid-2020s. And so, we want to make sure that we’re as ready as possible to take advantage of that that super cycle.

Matthew Gordon: Okay. And when we talked previously, you talked about this kind of, and I think you mentioned at the beginning; this high-grade core, which you would look to focus on initially just in terms of the ability to positively affect the numbers out of the gate again. What do you know today about your ability to be able to do that?

Mark Selby: Within the release and the presentation, there is a slide with a series of grade shells to show how contiguous that material is. And again, it starts up at surface. So we won’t know exactly how much we’ll be able to pull in early, but based on the geometry of where it’s sitting, it looks quite promising on that basis. So and again, when you’ve got 98Mt of 0.34, that’s basically 8 to 10 years of ore for a large, the kind of scale mill that we’d be looking at for this type of deposit.

Matthew Gordon: Okay. Exciting times. Well, Mark, thanks for that update. I just wanted to catch up on it because I’m always interested in, well I mentioned battery metals at the moment, and obviously these are the newest stories in the marketplace and there’s been a lot of debate which you’ve helped stimulate actually with your education series, Insights series. I do appreciate that. Let us know, I might just call you at the end of this week to see how PDAC has turned out because obviously, those sorts of numbers of non-attendees is huge and quite meaningful. What do you think the wider impact is? Is it going to be short term in terms of the whole coronavirus? Because obviously, last week was a huge reset in the market. I mean huge reset. Do you think that was always coming or do you think that’s coronavirus linked?

Mark Selby: Well we needed a correction in the market place. I mean, so many stocks have just done this for a continuous period. And so we are overdue for a correction. I think the Corona virus has given people an excuse to take some profit. It is having an impact; the Chinese PMI came out over the weekend and they were in the 25 and 28 range; sort of the lowest ever recorded. So it is having a physical impact today and I think it will continue through this quarter as it kind of rolls around the globe. We’ll see that. But I think as long as we don’t get some highly, virulent evolution of that disease, so it starts killing lots of people, it’s basically a really bad flu right now. So I think we’ll have a quarter or two of impact. There’ll be a lot of government stimulus, particularly with China to help sort of restart the economy after that shock. So again, from a Nickel perspective I think it pushes out the recovery I was looking for the summer to fall, it will be pushed out another 3 to 6-months, so maybe by the end of the year, early next year we’d be able to sort of see new prices come back at that point.

Matthew Gordon: Right. And what do you think are the other…I’m just interested because you always have an opinion on these things, is around some of the smaller companies that are perhaps struggling for cash, to attract cash, who were struggling in terms of share price, et cetera; they’ve been hit pretty badly. Do you think there’s going to be some joint venture activity? There’s some takeovers and M&A, some mergers, farm-in, farm-out. What’s the impact of what’s been going on recently? Because in the Gold space, you’ve got producers producing cash, making money, losing a third or 25% of their market cap, like in a week. What’s going on?

Mark Selby: It would be a good time for companies to make some acquisitions. And again, you do have a whole group of companies, both the major mining companies are announcing, BHP had the second largest dividend in its history recently. So they have the cash to make some moves. Whether they’ll be aggressive enough to take advantage of the selloff in the market, again, those are the times when you should be buying, but a lot of companies just don’t have the to step in there when the market’s falling. So again, I would like to think that’s going to happen. I think we might get one or two deals done, but we won’t get, I don’t think there’ll be much activity. People will want to see the market bottom, see the market recover, and at that point in time, it’s time to start to step in and look at asset acquisitions at that time.

Matthew Gordon: It will be interesting. I’m very keen to see what happens over the next couple of weeks or month or so. Because there’s a few companies, I think who were on vapor before this happened, so we shall see. Always good to have a nice Spring clean. Right, Mark, thanks very much for your time today. I do appreciate that. Good luck with PDAC this week. Hope you don’t catch anything.

Mark Selby: Nope. Thank you, Sir.

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