Canada Nickel – Nickel is the New Gasoline. Growing at 5% a year. (Transcript)

Former RNC Minerals CEO Mark Selby called us to talk about his new venture Canada Nickel Company which owns the Crawford Nickel-Cobalt sulphide project. He is excited about the scale of the opportunity but the simple corporate structure that they have been able to put together. With a c.$12M valuation and around $5M it’s certainly the clean start he was hoping for. It’s early days but with 4 drill holes and an electromagnetic survey he feels that there are strong parallels and technical learnings from his time at Dumont which give them a strong indication of what they may have.

Nickel forecasts make extremely good reading at the moment and with very few mines capable of coming online in the next 3 years, investors are clambering for big, solid deals which can get in to production. Could this be one?

Interview Highlights:

  • Overview of the Press Release Announcing the Creation of Canada Nickel
  • Leaving RNC: What Were the Reasons Behind the Decision?
  • Structure and Management
  • $5M Private Placement: What Will it Be Used For?
  • Business Model and Strategy
  • Nickel Market and Equities
  • Crawford and Dumont: What Are the Similarities?
  • How Do Investors Get Involved?

Matthew Gordon: It’s been it’s been a while, but we saw the press release earlier this week and delighted to get your phone call this morning. So what’s going on?

Mark Selby: I’m very excited. We announced the launch of Canada Nickel yesterday. I’ve been in the Nickel business nearly 20 years between Inco and my time at RNC. And during that time, spent a lot of time looking at Nickel opportunities around the world. And to be honest, this is one I’m most excited about. It’s at the right stage. It’s an early exploration play. But given our experience of Dumont and unlocking the value of that asset, there’s a lot of parallels for this new project that we can take all of the learnings that we had at Dumont to unlock the value added at the Crawford Nickel Project.

Matthew Gordon: So if you don’t mind, if I ask, and I do want to get onto the structure of this because there’s a lot of moving parts. But before I do. Obviously, you were at RNC, where were the Dumont asset resides. You left. What happened there?

Mark Selby: It was the right time for me to step away, I needed to deal with the personal issues at that time. And then over the course of the summer, I was approached by an investor group, that’s one of the parties in the transaction, who felt they had a very Dumont like opportunity and thought my experience with RNC and Dumont would make me the ideal candidate to be able to drive this forward.

Matthew Gordon: I appreciate that. And I don’t mean to pry. But we talked about the structure because, we have Spruce Ridge involved, we’ve got Noble Minerals involved. And you’ve got this new vehicle, Canada Nickel. Can you tell us how that looks?

Mark Selby: On paper, I’m sure if you read through the release it looks like a fairly complicated transaction. And it was. There‚Äôre three different parties that we needed to bring together. But one of the things I’m excited about, in addition to the potential of the project itself, is just that we’re going to put it out in the right corporate structure. So at the end of the day, Canada Nickel is going to be dividend out of Noble. It’ll be a clean brand-new company. It will have 50M shares outstanding after the financing. And I’ll be putting together a new management team, a new board to drive it forward. When I joined RNC, it was already a company that had been in existence for 3 years. And we had to deal with legacy shareholders, and legacy structure and so forth. So I’m really excited about what I think best team and having the ability to create value for shareholders and a structure that’s designed specifically to do that.

Matthew Gordon: So you got a nice clean structure. You’ve also announced a private placement of circa $5M. Where are you in that process?

Mark Selby: Yes, it’s fully subscribed. It’s a friends & family around at this point in time. So if anything, we know we’re cutting people back a bit. Given the interest, there’s really very few ways to play nickel. And for those people who have got the nickel story are keen to get some exposure to this asset.

Matthew Gordon: Let’s come onto the nickel market in a minute. So what’s $5M going to allow you to do and over what timeframe?

Mark Selby: The nice thing with this is that this is a very large structure, large geophysical anomaly that we’ve outlined. And the nice thing with a big bulk deposit is you can very quickly, without a lot of drilling, define a fairly substantial resource very quickly. So this will allow us to do that first stage of drilling to really have a proof of concept around how big is this resource? What the potential support source could look like and to do the mineralogy work to understand to make sure there’s recoverable minerals there. They’ve already done some initial work, which was attractive to me to say, ‘hey this does look like Dumont in terms of the minerals that are there’, the ability to recover the type of minerals that can be recovered seem to be there. So again, it’s early days, but it’s very, very compelling. And the fundraiser will allow us to get to that stage one.

Matthew Gordon: My next my next question is around what is the business model and probably goes neatly into your perception of what’s happening in the nickel market. Because for most people, I think you alluded to earlier, outside of Australia, there haven’t been too many options for people to get involved in nickel. So what’s your business plan? How are you going to deliver it?

Mark Selby: The Go Forward Strategy here is, Crawford itself has tremendous exploration potential. We want to unlock that value for shareholders. Obviously, the team we’ll build will be, I hope the leading nickel sulphide team in that space. There’s a couple of other opportunities that we have our eye on that will build the portfolio of assets that we think will be that go to nickel sulphide investments play in the market.

Matthew Gordon: Well, that’s interesting to me. What you’re saying is potentially is you’re looking at roll-up, acquisitions, M&A activities, is part of what you want to do. That’s the business plan?

Mark Selby: Not a long list. The focus is Crawford right? We’ll pick up another one or two assets, because I think we’re innings one of what is going to be a good 5-7 year bull run. I think for your listeners there really hasn’t been, and you alluded to this, there’s been very few ways to invest a nickel outside the ASX over the last 10 years. So I think a lot of investors have forgotten names like. Diamond Fields, Lion Ore, FNX, Jubilee Mines, DynaTech. In the 90s, you had Diamond Fields taken out as a new nickel discovery. You had FNX, Jubilee, Lion Ore taken out as development stories through the last cycle and in the mid 2000s at between $1Bn – $3Bn. Unlike copper and gold, where there’s literally dozens, if not hundreds of ways to play those particular metals, in every cycle there’s really ever only a handful of real Nickel projects to get exposure to. So because of that, those projects that tend to command a pretty premium valuations in the marketplace. And while we’re in inning one, we want to make sure we’re positioned with a couple of the best assets. Just a couple of the best assets going forward.

Matthew Gordon: So a lot of those things are dependent on timing, finance and what the commodity prices doing, clearly nothing new there. So your view on the nickel market is what? In terms of where you’re coming in?

Mark Selby: Too many investors get caught up in think that prices are just going to go up in a straight line. That never happens. For investors today, I think we will see a roll over nickel prices by year end with the big spike in nickel prices. We’ll see slug of scrap come in the market, a slug of NPI come into the market. We’re just going to have to chew through over six months. But within six months a year, we’ll be sort of back on our way up again. The reality is as Robert Friedland coined it nicely at the BMO conference. Nickel is the new gasoline. In terms of an EV economy, Nickel is the primary metal in the cathode of that battery. And that’s on top of robust Nickel demand growth, at 4% or 5% a year. So you go out to 2025 to 2030. You’re looking by 2030, we need 2Mt more Nickel per year in a market that only generates 2.4Mt of supply today. There’s literally almost no projects in the pipeline.

Matthew Gordon: That’s fascinating. So you’re saying come the end of this year, some prices spike, but more scrap in the marketplace.

Mark Selby: Prices rolled over.

Matthew Gordon: Yes. What’s going to be for Nickel equities?

Mark Selby: That that may have a little bit of a dampening for new people to get on this story. If you look at Nickel, it goes through these cycles. At the end of 2005, nickel prices had rolled over off the peak and they bottomed at $11,000 a tonne. 6 months later, they were at $54,000 a tonne. So it was a x5 in 16 months. That’s the kind of explosive moves that Nickel makes. Nickel is the best performing base metal this year by a wide margin. I would say if there’s any weakness in the Nickel prices, use that as an opportunity to position yourself in these names. Because, if you look back at Nickel’s history, you see in the late 60s, we got to $8 a pound in 1968, which is about $50 a pound today. We had a big spike in nickel prices in the late 80s. We had another big spike in nickel prices in the mid-2000s. So every 15 to 20 years you tend to get this super cycle in nickel. I don’t know when it’s going to come, but in three, four, five, six, seven years from now as the EV demand comes roaring in on top of already strong stainless-steel demand. I think we’re going to see some pretty exciting Nickel markets come the next decade.

Matthew Gordon: It will be interesting for you guys. You should be getting to production about then shouldn’t you?

Mark Selby: Well, we’ll see. The nice thing is because we spent 10 years and a $100M advancing Dumont, we can take all of that learning and apply it to what we’ve got at Crawford.

Matthew Gordon: It is that much of a parallel? Is the geology the same? Are the rocks the same?

Mark Selby: Both of them are serpentinized dunite that contains three different nickel minerals of varying proportions. And the scale of the resource… if you look at the geophysical anomaly, that’s Dumont. And you look at where Crawford is. One of the big findings for us is we did a pile of very complicated minerology and metallurgy work to understand how to solve that puzzle for Dumont. But by the end, we realized the geophysics that you do on day one gives you 70% to 80% of the answer. I can look at Crawford today, and get a pretty good feel for how this may play out again. Four holes in it so early days. But the scale of the potential is clearly demonstrated by the scale of that anomaly, which in total dimensions is bigger than what we had at Dumont.

Matthew Gordon: What’s next? You are fully subscribed with your private placement.

Mark Selby: Yes.

Matthew Gordon: That’s great. How would investors wanting to look at the story get involved?

Mark Selby: So as of right now, if you haven’t let me know, and I can talk to you, because the placement is fully subscribed. Both Noble Minerals and Spruce Ridge as part of the transaction will be getting Canada Nickel shares and Noble will be dividending out 10M of the 12M shares to their shareholders. So between now and when we’ll probably trade later this year, the only way to get access to it is to buy shares of either Noble Minerals or Spruce Ridge. The other thing that’s exciting about this opportunity in general, 1. I talked earlier about the structure and how it’s a nice target type structure 2. Just the potential, the deposit itself and 3. Getting in at the right valuation point. The full formal market cap, including the financing is $12M dollars. We will have a nice chunk of change in the bank, with that $12M market cap. So again, if you look at peers in the marketplace today, they’re trading anywhere from $20M to $180M. And again, in the long run, if you’ve seen what happens what happens to new nickel discoveries and buyer cycles. They’ve exited about a $1Bn plus valuation. It’s still very early days here. And then we’ll see how everything unfolds. But that’s the deal. That’s really the upside potential here in terms of getting into a nickel story.

Matthew Gordon: And then with regards to the Canada Nickel itself, you’re starting to tell that story. Get the private placement closed off and then you can start telling that story in the market once you’ve got the team on board.

Mark Selby: One of the advantages of structuring everything this way is that we can talk about the story from day one, and see that value reflected in the Noble and Spruce Ridge share prices. Fundamentally, it’s just outside of Timmins. You’re in an established mining camp. I’ve talked about the scale of the resource already. You’re sitting next to a highway and all the infrastructure in place, very similar to Dumont and you’re in a jurisdiction where you can actually permit a mine. So, if you look at Crawford versus the other handful of nickel opportunities that are out there, that may be in a remote location, that might be in a place that’s challenging to permit, that might not really have the scale to support a very large-scale operation, Crawford ticks a lot of boxes. And that’s why I was so excited about the opportunity.

Matthew Gordon: Mark, that’s fantastic. We’re glad to see you back. And I’m glad all is well, and you’re back doing what you love best, which is Nickel. And bringing a great story to market. Do stay in touch, Thanks for the phone call. Really appreciate it. And let us know how things progress.

Mark Selby: Thanks Matt. The drills are turning right now, so we’re going have a pretty steady news flow. So hopefully we’ll have regular updates over the next couple of months.

Matthew Gordon: Wonderful. Looking forward to it.

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