Elon Musk wants Green Nickel – What Does This Mean for Investors?

Canada Nickel Co Inc.
  • TSX-V: CNC
  • Shares Outstanding: 68M
  • Share price C$1.78 (17.08.2020)
  • Market Cap: C$121M

I just finished writing an article about Mark Selby’s recent interview with Crux Investor. He discussed the nickel market fundamentals a market dynamics that dictate nickel market behaviour and require the attention of investors if they want to make informed decisions. I’ll put a link to that article here.

I mentioned at the end of that article that I would be looking at a unique element of Canada Nickel’s Crawford Nickel-VMS Sulphide Project, which plays nicely into the green energy/ESG thematic. I’ve also decided that, while we’re at it, why not weigh up most of the nickel players in the space to give investors some perspective on the extremely volatile space?

We recently spoke to Selby about NetZero. Canada Nickel has really started talking it up this week; why? If you remember Elon Musk’s statement in his recent conference call, he appealed to producers to immediately start producing as much “green, efficient and sustainable nickel as possible.”

Matthew Gordon talks to Mark Selby, August 2020


Let’s put some emphasis on the “green.” Courtesy of environmentalists and the scientific community, enormous pressure has been placed on battery metal supply chains in recent years; the Responsible Cobalt Initiative is a great example. Institutional investors have been paying attention and for good reason. It makes no sense creating a green solution to our transportation problems, in EVs, if the front end of the process is occupied by environmentally detrimental mining practices and dirty nickel. Why would we create a large environmental footprint to contradictorily ‘solve’ climate change, requiring individuals to drive the EVs for years before they can offset their carbon footprint? Neometals’ Li-ion battery recycling project is a great example of a company creating a coherent, clean green circuit for batteries. Battery recycling resolves the end of the battery production cycle, but how will the front be resolved?

Away from the Class 1 (battery-grade) and Class 2 (NPI, etc.) debate, investors need to compare nickel sulphide and nickel laterite: the two most common nickel projects globally. There has already been an article on the Crux Investor website regarding the key differences between these two categories. Essentially, sulphide is high-cost to mine but low-cost to process via conventional smelting methods. On the other hand, laterite is cheap to mine but is extremely expensive to process and requires expensive HPAL plants that have only been built commercially for a CAPEX of over US$1Bn. However, I didn’t touch on a key consideration: environmental factors. Is laterite dirty nickel?

Musk’s demands for clean, green nickel will be followed by the large funds and automotive manufacturers; there is no doubt about it. Canada Nickel recently created a wholly-owned subsidiary, NetZero Metals. It aims to begin the research and development of a processing facility that would be located in the Timmins, Ontario region with the goal of utilising existing technologies to produce zero-carbon nickel, cobalt and iron products. The company has applied for trademarks in the US, Canada and other jurisdictions: NetZero NickelTM, NetZero CobaltTM, and NetZero IronTM.

Canada Nickel already has the scale to be attractive to majors, considering Crawford is the 11th largest nickel sulphide resource in the world after just 6 months of development. Now, it appears to have the green credentials that Musk and other major institutions will demand. However, Selby was keen to explain that laterite projects may now have moved to the back of the queue when it comes to financing. Who is going to foot the bill for a US$1Bn+ HPAL plant when it will be producing dirty nickel with a high carbon footprint? I imagine that many CEOs of companies with laterite assets will be sweating right now.

This image has an empty alt attribute; its file name is Canada_Nickel_Company_Inc__Canada_Nickel_Launches_Wholly_owned_N.jpg
SOURCE: CNW Group/Canada Nickel Company Inc.
Y-axis = tonnes CO2/tonne of nickel produced

Crawford is a relatively low-grade bulk-tonnage nickel sulphide operation, and Selby believes he can get that carbon footprint down to net zero.

So, with this in mind, and with an emphasis on the green side of things, how is the rest of the nickel market shaping up?

Cassini Resources

  • The company made a great decision to return value for its shareholders by selling its 30% remaining interest in Nebo-Babel.
  • Promisingly, its land position is on the same set of discovery as Chalice Gold’s discovery.
  • Its flagship West Musgrave Project is in the early stages of exploration. The first few drill holes haven’t exactly thrown up any sexy high-grade numbers, but there is still lots of room to go.

St. Georges Mining

  • Many investors have been excited by some really impressive shallow high-grade intersections at its Mt. Alexander Project on multiple targets on the same set of structures that host multiple nickel deposits.
  • However, the company has yet been unable to continue extending these structures much, predominantly because it is busy talking about new targets.
  • I actually took a look at the company’s website, and this is where things get confusing. The company is already talking about mining, but I can’t even see if it has defined a resource.

Glencore

  • It is obviously a massive nickel trader, but like most of the majors involved in the nickel space, the nickel component of the company is not large enough to provide investors with meaningful exposure to rising nickel prices and demand.

GIGA Metals

  • GIGA Metals’ flagship Turnagain Project is a massive nickel and cobalt resource in Northern BC. It is a low-grade, bulk-tonnage operation like Canada Nickel’s Crawford, but it does appear to be in a much more remote location. GIGA Metals is likely to have to shell out cash on infrastructure.
  • The company has previously had issues with lower grade concentrates, but it has now found its footing and seems to have come up with better grade concentrates.
  • GIGA Metals has zero carbon potential, which means it could fulfil some of Musk’s appeal for green nickel.

FPX Nickel

  • The company’s PEA-stage Baptiste deposit has the potential to become one of the largest nickel deposits in Canada.
  • It is a large, low-grade awurite deposit, and it has suffered from being the first of its kind. The market doesn’t seem to fully understand the value proposition.
  • The management team has done well to keep the share structure tight and intact.
  • Baptiste is in quite a remote location, but not as remote as GIGA Metals’ Turnagain project. It would require cash for infrastructure and plant development/construction.
  • FPX Nickels needs to do large-scale met testing in order to confirm the recoverability of the nickel product. This will take time and cost money.
  • It also has zero carbon potential, so could plug some of the gap for Mr. Musk and other battery/automotive manufacturers

Talon Metals

  • The Tamarack Nickel-Copper-Cobalt Sulphide Project is an exploration play that is actually really promising. However, it is situated in Minnesota, US, a horrible mining jurisdiction. The company is likely to take at least a decade to be permitted, if not longer. If one wants to see evidence of this, they only need to check out what Polymet/Glencore have been through with their Minnesota-based project
  • Moreover, the project is a JV with Rio Tinto, so investors won’t even receive access to all of the upside. The original deal was poor. It has since been renegotiated by it is still far from ideal. Talon Metals doesn’t appear well-positioned for a takeout by a major.

Garibaldi Resources

  • Its Nickel Mountain discovery was originally drilled in the 1970s, and the company has discovered a really exciting 3 massive sulphides in 3 years.
  • The company has hit some super high-grade sections and has been talking up its ‘global’ potential. However, most of its 3 years of drilling has been in the same little patch of ground.
  • This isn’t to say that the company won’t find some more exciting prospects in other parts of the property; it just doesn’t seem in a hurry to do so.
  • At one point, the company was valued at c. $300-400M. The value has since tailed off to $85M today, which still looks a little overpriced to me.
  • Feel free to check out some of the Angry Geologist’s blog posts about Garibaldi Resources.

Chalice Gold

  • A new Aussie discovery. It is in a brand new region for nickel and appears to have good potential.
  • It is very well-funded.
  • There has been a huge run up in the share price on the back of several good drill holes, but it appears the company is struggling a little with the continuity of higher grade material.
  • In fact, Chalice Gold is morphing into more of a palladium story with a nickel by-product.

Legend Mining

  • Like Chalice Gold, Legend Mining is a new mineral explorer based in Australia. It is a brand new discovery in the same region as the Nova Bollinger nickel operation.
  • It is backed by famous West Australian explorer, Mark Creasy (27%).
  • Again like Chalice, the company hit several good holes, had a massive run in the share price, but now it is tailing off because it is struggling to get continuity. It is tough to enough to get a high-grade nickel hit, but it is even more difficult to get any continuity.
  • Legend Mining is quite early-stage, but it seems to be valued like it already has a sizeable nickel resource.

Centaurus Metals

  • Centaurus Metals has one of the best nickel sulphide projects. I’d say it looks like one of the best chances for a new nickel mine in the next 5 years.
  • It is located in Brazil’s world-class Caraj├ís Mineral Province, which is a great mining jurisdiction if not as stable as Canada.
  • The company has a sizeable 1% resource with potential for higher-grade areas with plenty of exploration potential.

What is your nickel stock pick?

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.

Leave a Reply

Your email address will not be published. Required fields are marked *