The Volatile Nickel Market: How Can Investors Make Money?

Nickel is a commodity with volatility at its core, but investors just want to know how to navigate this and make themselves a tidy profit. We recently interviewed Mark Selby; he helped shed a light on this.

Why not read a different nickel article once you’ve finished with this one?

History Of The Nickel Market

Nickel has always been much more volatile than other base metals. It is a large market, but not relative to copper, zinc or aluminium.

Since the 1980s, Nickel has been regarded as a boom/bust metal that moves in giant super-cycles:

A nickel price chart from 1989 to 2019.
A chequered history…
Source: InfoMine

In the late 1960s, nickel reached the equivalent of US$50/lb (in today’s dollars).

Contextually, nickel was a hot topic at the time. Rising demand, driven primarily by the Vietnam War, in association with a shortage of supply caused by industrial action at one of Canada’s largest suppliers, Inco, tipped the supply-demand scale of nickel into massive shortages and kicked prices into overdrive.

 This, in turn, led to the Poseidon bubble: a stock market bubble in which the price of Australian mining shares skyrocketed towards the end of 1969 before they crashed in early 1970. The peak was generated by the discovery of a purported promising nickel deposit by ASX-listed nickel producer, Poseidon Nickel, in September of 1969.

While the official Rae Committee report cited trading malpractice as the reason behind this bubble, it serves as a reminder to investors that nickel and volatility have always been joined at the hip.

In the 1980s, nickel went through another supercycle as supply from the Soviet Union dropped off and a new wave of demand emerged from the Asian tigers at that time, Korea and Taiwan.  Unfortunately, the collapse of the Soviet Union in the 1990s led to a complete drop in demand from a country that had been a substantial consumer, which was then followed by the influx of mass quantities of scrap into the market, generated by the collapse.

The most recent nickel crash had ramifications that remain active today. It came off the back off a price rise to over $50,000/t in 2006, as demand globally and from China outstripped supply; traditional nickel industry participants were slow to respond. This led to world warehouse stocks of nickel falling to an extremely low level. Nickel really did lose ‘touch with industrial reality’ during this period, as warned by the biggest nickel producer in the world at the time, Jinchuan Group Ltd.

The Outlook for the future

A picture of a vehicle being charged at a very modern looking EV charging port with a graphical interface in a parking lot. A future EV car concept.
The hype around the EV revolution is growing more and more rapturous.

With a decade of underinvestment in new nickel supply, in addition to the increasingly prominent electric vehicle (EV) thematic, investors can look towards a possible super cycle in the early-to-mid 2020s.

Selby himself believes we have completed “leg one, of what will be three or four legs” in terms of price increase.

But what does the evidence say? Here are some of the current market conditions Selby claims can occur before the dawn of a supercycle:

  1. A period where investment is lacking. There are several large mining companies that own a number of leading nickel assets, but they have chosen to allocate capital to non-nickel projects over the last decade. The majority of existing production has shrunk.
  2. Many of the existing nickel mines are deep underground mines or larger scale processing plants, which means they would not be able to rapidly ramp up production within a 12-month timescale. It would take multiple years to develop them. Projects need to be approved, production needs to begin, then it needs to be ramped up. In many instances, this can take at least 5 years (from announcement to full production capacity). Selby gives several examples of this.
  3. Selby says there needs to be a surge of demand, similar to what was seen in the 1960s when Japanese industry increased nickel consumption exponentially, and the 1980s, when Korea and Taiwan were industrialising. In the 2020s, EVs are the source of price-discovery-related hope. A demand growth of 4% (slower than the 5% growth seen in recent years) and a reasonable forecast of EV demand, nickel supply lead to forecasts that place nickel use between 2018-2030 at a 782000t increase on the previous 12-year period.

Now investors know some of the history, they can make more educated investment decisions in the future. You now know what you’re looking for in the market. If you buy the nickel macro story, it’s time to get busy.

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.

HPAL Plants & Nickel – The Facts

The case for nickel has been conveyed to the market well in the last few years. However, there are certain components of the nickel industry that are nebulous. In this series of articles, we seek to shine a light on the intricacies of a commodity with some of the most exciting projections around.

Feel free to check out some of our recent nickel-related interviews or one of our informative nickel-related articles.

HPAL  – What Is It?

High-Pressure Acid Leach (HPAL) is a process used to extract nickel and cobalt from laterite ore bodies. HPAL uses high temperatures, c. 255 degrees Celsius, elevated pressures, and sulfuric acid, which enables the process to separate both nickel and cobalt from the laterite ore.

A diagram of an HPAL extraction process.
Source: Caldera Engineering

Why Should I Care?

Investors should care for a variety of reasons. HPAL has numerous advantages over traditional leaching methods, chiefly of which is the significantly reduced timescale and largely increase percentage recovery rate; this is why it has become the most commonly used approach for leaching laterite ores containing nickel and cobalt.

That Sounds Great. So What’s The Catch?

HPAL is a much more complicated process to ramp up and operate than pyrometallurgical processes used to make nickel pig iron (NPI) or ferronickel.   Well, in terms of the logistics of an operational HPAL process, there isn’t one. HPAL is clearly the optimal solution for producers looking to get the best bang for their buck in the nickel space, but there are only a handful of successful HPAL operations globally:  Moa Bay in Cuba run by Sherritt, and the Coral Bay and Taganito operations in the Philippines operated by Sumitomo Metal Mining. Why?

Many HPAL plants have had massive cost overruns and have approached US$10 billion in costs: a multiple of their initial capital estimate.  Because of the challenges caused by trying to operate many plants at design capacity, unit operating costs also end up high in many instances. In a perpetual debate, it seems most industry experts claim a 30+ktpa HPAL plant can’t be constructed for any less than even the most conservative figure of US$1B, and that’s if things go well from the off. We recently interviewed widely heralded nickel market commentator, Mark Selby, and he reinforced this argument.

US$1Bn might seem a monstrous figure, but it’s actually quite optimistic. Taganito was constructed in the low-cost jurisdiction of the Philippines at a cost of ~$US 1.4 billion. Already, we’re looking at a scaled-up cost for companies who want to build in alternative regions, but we’re just getting started.

Taganito is only equipped to produce an intermediate product, which requires shipping to an existing refinery in Japan before going into the market. For a company to create an HPAL process capable of churning out the finished article, this would create another cost increase. Some unsuccessful HPAL plants have seen their CAPEX balloon to US$7-10Bn, courtesy of the difficult nature of optimising an HPAL process. One might think they’d have been better off not spending at all.

An HPAL flowsheet diagram
Source: Mascot Industrial

Lastly, there’s the complexity of the construction process itself. Because this technology is far from prevalent, it seems likely that issues could arise left, right and centre during the building process. Companies will need to source the right contractors, with the right experience, at the right price, and given the performance to date for many projects, this may be too risky for many investors.

The Big Problem

We’ve heard from the CEOs of some nickel companies in recent months, and without naming any names, several have touted a potential sub-US$1Bn HPAL plant as a near-term target for their business. This seems to be a worryingly common theme running through the industry and can mislead retail investors who perhaps appreciate the technical prowess of HPAL, without being fully informed of the cost.

To conclude, if nickel CEOs are telling you they can build an HPAL plant for some US$1Bn, they have a big question to confront: why do they have the capability to construct a plant better than market-leaders Sumitomo? We heard in the Horizonte Minerals investor call that they feel that it is possible with new technology, citing that the Sumitomo technology is 30-years old. Hopefully, they will expand on this and give clarity to the market.

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 Corp. (TSXv: CNC) – Accelerated Returns, Delivered By Experts?

The Canada Nickel Company Logo.

We recently interviewed Mark Selby, CEO of Canada Nickel Corp. (TSXv: CNC).

Selby has previously weighed in with his expertise on the nickel market on three separate occasions. His general insights have been very informative for nickel investors, but now it is time to talk about Selby’s latest play in the nickel space: Canada Nickel Corp.

Canada Nickel Corp. recently closed its IPO. This comes a few months after it obtained the Crawford Nickel Sulfide project from Spruce Ridge.

How exactly does Selby and his team plan to expose investors to the EV revolution in a safe, accelerated fashion?

We discuss:

  1. The IPO
  2. The Financial Situation
  3. Exploration at Crawford: Big Potential?
  4. Plans For 2020
  5. The EV/Nickel Market Outlook

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.

The Canada Nickel Company Logo.

Anthony Milewski Talks Nickel

The Conic Metals company logo.

Crux Investor recently sat down with nickel market expert, Anthony Milewski, the Chairman of Conic Metals Corp.

Investors might want to check out another nickel investment article. They may also want to watch our recent interview with fellow nickel expert, Mark Selby.

Milewski gave us a fascinating insight into all the moving cogs within the much-confabulated EV revolution, including some nickel investment advice that nickel investors will likely find of great use.

We discuss:

  1. The Technical Side Of Nickel: Educating Investors On The Intricacies
  2. Nickel Investment Strategy
  3. Nickel Investment Red Flags
  4. The Best Nickel Tips

Company Website:

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.

The Conic Metals company logo.

RNC Minerals – To Infinity And Beyon… No. No. Let’s All Calm Down.

A screenshot of Sheriff Woody pointing at a proud looking Buzz Lightyear.

If you’ve been following the topsy-turvy fairy-tale of RNC Minerals, you probably couldn’t help but notice this West Australian article. The contents will provide any prospective or existing RNC investors with more excitement than a late-night extra-terrestrial visitor: RNC is going to make us all rich tomorrow!

The interview cited in the article is with VP Exploration, Steve Devlin, who seems to be very upbeat about RNC’s current affairs, “We have a pretty good idea of what’s controlling this specimen gold now.” He followed up with, “From what we understand, we expect to continue to find coarse gold”

I’ve been attempting to discern whether these statements are new information or if they merely overstate what we already know; either way, it doesn’t seem to marry up with a recent interview with CEO, Paul Huet.

Consequently, some gold bugs are excited and are now claiming RNC knows the location of all its future Beta Hunt Mine coarse gold resource. That’s a monumental statement with nothing backing it up, other than a geologist stating they now have an idea of the geophysical controls.

Some shareholders are likely thinking of purchasing a red carpet for an extravagant Hollywood-esque celebration as the ‘Beta Hunt Fairytale’ churns out even more ‘whopper coarse gold specimens;’ after all, as Devlin says, “I’ve never come across a mine that has got so much coarse gold.”

I can feel the market’s excitement swelling. So, let’s suit up, and get ready to blast off, because… NO. NO. NO. Just STOP for a minute. Sorry to be a Buzz (Lightyear) kill, but you don’t seriously believe this utter exaggerated nonsense, do you?

Let’s get our feet back on the ground.

It’s incredibly important for people to understand the reality of RNC’s drilling program. RNC does not have any certainty when it comes to hunting down coarse gold at the Beta Hunt mine. As RNC drill, they are building up an understanding of the structures and the potential contact points of the coarse gold. Let’s say it again slowly… They have a better idea of what’s controlling the specimen gold now… No more. No less. It’s time to calm down a little. Just breathe. Breathe.

What RNC DO know.

It’s not all doom and gloom though. There are lots of reasons to be optimistic and hopeful of RNC’s future success; reality can sometimes be just as exciting. Consistent, robust success is no less glamorous than more lucrative coarse gold.

RNC is profitably mining 3g/t gold, at 8,000oz per month and processing it through their mill. As they process the 3g/t gold, there is a possibility they will come across large veins of coarse gold with a much higher grade. However, it’s important to remember RNC’s business model works well at 3g/t. Huet has been trying to temper and manage expectations in the market. RNC’s management are pragmatic, grounded, and calculated. The operation is currently operating exactly as it was intended to. The magic fairy dust comes with the reasonably regular large specimens of course gold; that always makes investors tingle with excitement.

A photo of a large pile of coarse gold.
High-Grade Gold From Beta Hunt Mine

Huet has made a lot of changes and has refocussed the company on gold. He is reducing costs, improving productivity, and renegotiating supplier contracts and royalties. Not to say that their Dumont nickel asset doesn’t have value, it does. He has briefed Johnna Muinenon, President of Dumont, to monetise Dumont. We are less clear about the timing of that, but one gets the sense it is coming.

Moreover, talking of nickel, Beta Hunt has a history of nickel; it used to be a nickel mine. Nickel is hot at the moment and people are getting excited about this.  There is a possibility of getting some nickel credit from Beta Hunt again, but there is a long way to go and an abundance of studies to be carried out before the company knows if the nickel component is even economic. So again, I like what the company is saying and doing, I like where it is going, but we need to reign in the speculation and attribute value to what we know and not what we hope.

One factor I believe could change the dynamic slightly would be if an ore sorter was added at Beta Hunt (just one for now). Engineering is required to work out the size, scale, economics, timing and cost. This could improve the productivity of the mine 20-30%, but it takes time. Huet is clear that RNC is not committing to anything until the engineering is done. However, some peer analysis suggests the payback is less than a year and the cost could be funded from cashflow. I’m going to allow myself to get a little but excited about this as it is within the company’s control and not hidden underground.

Business As Usual?

So, where does this leave us? Disappointed and downtrodden? No, not one bit. RNC is starting to provide moderate excitement to the market via its consistently impressive results. We need to see the Q4 results though. There is always a chance that somewhere down the line, RNC could locate more coarse gold which is great. However, there are no guarantees, and we have enough to be excited about without getting carried away. Let’s not be greedy, but my bet is that RNC Minerals delivers 27,000 oz of gold in Q4. Any takers?

CLICK HERE to watch the full interview.

Company website:

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.

A screenshot of Sheriff Woody pointing at a proud looking Buzz Lightyear.

RNC Minerals – Has The Scale & Returns That Strategic Partners Need (Transcript)

A group of four mining workers stand proudly in front of a huge hunk of gold ore.

Interview with Johnna Muinonen, President of Dumont Nickel (TSX:RNX).

Production-ready, shovel ready, development-ready. Dumont Nickel has been positioned as a free ride for shareholders, but the reality is that Dumont may hit the market at just the right point in this cycle for RNC Minerals shareholders. Completing their upgrade of the PFS means that strategic partners will look at Dumont as a shovel ready project which is fully optimised say Muinonen.

We ask what the brief is from the board. What is the timing? What do you think about what you heard? We also discuss the timing and nickel market forecasts. How relevant is the EV revolution to estimates and at what point Dumont and RNC makes decisions about the timing as to when the company monetises this asset for RNC Minerals shareholders.

Let us know what you think about Johnna Muinonen. Does she make you confident? Does RNC Minerals know what it is doing?

Interview highlights:

  • RNC & Dumont: What is the Situation? Best Way Forwards: How Much Control Have They Got Only Owning 28%, What Will They be Able to do?
  • Analysing Dumont: What is There and How Expensive Will it be?
  • Market Dynamics, Nickel and Gold Cycles: How Does One Affect the Other?
  • Opinions on EV’s
  • Value Creation for Shareholders and Dumont Potential
  • What Can They Do in This Cycle and How Will it Affect RNC Shareholders? Financing Talks: Why Invest Now and Why are People Hesitant?
  • Production Values and Cash Generation Potential

Click here to watch the full interview.

Matthew Gordon: Hi Johnna. You are here in London.

Johnna Muinonen: Yes, for LME week.

Matthew Gordon: A lot of Nickel people here for that?

Johnna Muinonen: A lot of nickel people here for that. So, it’s always a good week to come to London because everybody’s here so you get to meet everybody.

Matthew Gordon: RNC is moving to be a gold focus business, but it has this very large nickel play in the shape of Dumont. So, how’s that panning out? Because if I look at some of your presentations from June, you have about 15-20 pages on Dumont. But if you look at the presentation today, 4. What’s happening?

Johnna Muinonen: With Paul coming in as CEO we are really a gold focus company. No question about it. However, what I’d like to talk to you about today is that we own 28% of one of the largest undeveloped sulphide projects in the world. And we feel that we can add value to RNC shareholders by looking at various options for Dumont moving forward.

Matthew Gordon: That’s 28%. Waterton own the balance. What do they do?

Johnna Muinonen: In 2017, we sold 50% of Dumont to Waterton. They’re a private equity firm. They are now our partners and Dumont. Dumont is fully 100% owned within the JV. We are now 28% and Waterton is 72%. RNC remains the operator and manager of the JV. We do all the technical work for Dumont as well and then work with Waterton in terms of looking at strategically moving the project forward. Financing and marketing.

Matthew Gordon: What does that actually equate to? You mentioned a phrase ‘for shareholder value creation’, as directive from Paul. Is there a time line on that? What are the options on the table? What are you thinking about doing here? You’re only 28% shareholder.

Johnna Muinonen: We’re not getting a lot of value for Dumont in our share price. We do feel that we want to make sure that we maximize that value for our shareholders. We are looking at strategic options. That was my directive from Paul on the board when I took on the role as president Dumont Nickel that we need to look at, what could we possibly do to actually get some value for Dumont to our shareholders, to RNC. And that could really involve several different things. We’re looking at options around spin outs, potentially a sale, potentially we hold it until nickel prices come up a little bit. So, everything’s on the table.

Matthew Gordon: The G&A is quite low. Not a lot of overhead associated with it right now.

Johnna Muinonen: So, let me explain a little bit the way the JV is funded. When we got into the JV with Waterton, Waterton funded our portion of the holding costs for 5-years. So, they funded a portion of the costs. Currently, all the work that we have planned that we’ve done to date, we pay 28% from within that funding. So, currently the work that we have planned for the next, say 18 months to 2-years is currently fully funded within the JV. So, it is a bit of a free carry for RNC right now.

Matthew Gordon: Waterton is dependent on you to inform them as to what to do. They’re a private equity firm, they’re not miners. They’ve stumbled across mining assets or they’ve funded mining assets, but they’re not by any means experts. How does that relationship work?

Johnna Muinonen: It’s been a bit interesting and we’ve been doing it for almost 3-years now. We’re getting pretty good at it. What it really works is the JV is structured, it has a board. Waterton has two seats on the board, RNC has two seats on the board. We have a technical committee below the board, which is made up of, again, two people from Waterton and two people from RNC. Essentially, the way it works is we look at the work that we believe needs to be done. And generally, this is in concert with Waterton. We don’t show up one day and say, hey, we need this amount of work. We do talk through and we meet regularly to talk through what work do we think would be value added? The feasibility was one of them, about probably close to a year and a half ago, we started talking about, OK, we have a feasibility study from 2012. It’s getting a bit stale. Costs are getting a bit old. We all believe in the nickel market eventually starting to rise and we wanted to get ready for it. And so, between them and us, we discuss what would the scope of it be? How would we run it? Who would be the engineer? And then once we sort of decide that the budget and the scope and get that approved through both the technical committee and then into the board, we then go off and execute.

Matthew Gordon: That’s the dynamic between you and Waterton. What about Paul Huet, the CEO of RNC. He’s a gold guy. You guys have also got to agree about the best way forward. So, it’s great giving you a directive saying maximize shareholder value. But, as you say, this is dependent on price of nickel now, when you believe the next cycle is and what you can do in this cycle, right?

Johnna Muinonen: There’s a lot of moving parts. And right now, we’re just starting to work through that, because the reality is there isn’t a lot of benchmarks out there about value for development nickel projects, because the reality is there aren’t a lot of development nickel projects out there. it’s not like copper or gold where you can go out and benchmark a whole pile of sales purchases. So, it does become a bit more difficult to sort of really quantify Dumont’s value.

Matthew Gordon: We know it’s a big project. It’s going to require a lot of money. You’ve got to bring in strategic partners. They’ve got to bring a lot of money, maybe technical knowhow, but maybe you guys got that covered. Give us an overview.

Johnna Muinonen: Dumont is a very large scale, low cost, long life asset. It’s a billion-ton reserve. It is going to produce in the first phase, which is seven years above 33,000 tons of nickel annually, expanding in year seven to 50,000 tons of nickel annually and over the 30-year life will produce 39,000 tons of nickel annually. We are located in the Abitibi region of Quebec in a very active mining region. We have lots of local support. So, we have all of the pieces in place to be ready for the next boom. If we look at what work needs to be done to get us into production, we’re talking about a 30-months to 33-months, both engineering and construction. So, from financing, the reality is that’s the lead time. But if you look around the world and you look within sort of low risk jurisdictions, there isn’t a lot out there of scale. There’s lots of smaller operations that will produce sort of say 10,000-15,000 tonnes of nickel a year in Australia, in Brazil, in smaller mines in Canada, in Europe. However, there’s really when you look at sort of the world landscape of sulphide deposits, there really isn’t anything or a lot that’s out there in a development ready, production ready, shovel ready type build like Dumont, which is what I find exciting about it.

Matthew Gordon: Dumont’s got that. There aren’t too many others, or if there are you can count them on one hand. What are the numbers involved? Because large scale means large cost.

Johnna Muinonen: We are looking at building a 50,000-ton concentrator which is large, but it is well within the scale of operation in the area. So, we are right located just outside of Amos Quebec. We’re on an all-weather highway and we have a powerline that runs 5km north of the project. And within 10km, there’s two other large open pit mines of similar scale. So, there’s lots of experience in the region on that sort of scale of operation. But it is a large project. It is $1Bn initial capital.

Matthew Gordon: That’s a lot of money.

Johnna Muinonen: Absolutely it is.

Matthew Gordon: Is it a normal number?

Johnna Muinonen: It is a normal number. When you’re looking at building a 50,000 tons per day mine and mill, you’re looking at $1Bn.

Matthew Gordon: So, that must restrict or give you a very good sense of who you can go and talk to?

Johnna Muinonen: Oh absolutely.

Matthew Gordon: And what are they thinking? Because they’re looking at ‘can we do something this cycle?’ Are you guys ready? Or is it next cycle, in which case, when’s that?

Johnna Muinonen: If you had asked me the same question 10 months ago, people would’ve been like ‘$4 nickel, $5 nickel’, not so sure. I think over the last sort of 3 or 4 months of interest we’re getting more calls. We’re getting more calls, getting more inbound interest by various people who do want to talk. And they’re not small players. They’re people that want to talk about when does it fit? When are you ready? What does it look like? And the $1Bn is a big price tag. But when you start to break it down into pieces, you look at there will be a senior debt facility in that probably to the tune of about $500M. There’ll be some equipment financing. The equity cheque at the end of the day to pull it off, take a loan as part of that, maybe a small stream of the precious metals, potentially. The equity portion of that is probably in the $300M range. So, when you start to break it down like that, it’s not we’re going to go out and build $1Bn… We’ve got to go raise that.

Matthew Gordon: And you’re 28% of that?

Johnna Muinonen:  And we’re 28% of that. Exactly.

Matthew Gordon: And so, again, it depends on what’s happening in the rest of RNC that will determine what the cost of that money is and where indeed where you put it in, project level, presumably. How do you go about having those discussions with people about the cost of that money and how do you retain as much as possible, because your brief is’ shareholder value’, right?

Johnna Muinonen: Yeah, absolutely. Absolutely.

Matthew Gordon: You’re 28%, so you’ve got to create some shareholder value, more than it is today.

Johnna Muinonen: Which is arguably not much, I’ll admit that.

Matthew Gordon: I certainly think you’re not getting much credit for it and I think it’s partly the company has said, ‘Oh, and you get Dumont for free’, that kind of strapline, which is a little bit disingenuous’.

Johnna Muinonen: Yeah. No, no, I mean it really is. I have heard that said ‘oh and you get Dumont for free’. Well I mean if you look at it, if we look at even the two commodities, I realize we are a gold focused company, and our real focus is on the gold assets in Australia. No question about that. But in a rising nickel price environment, where you’re starting to get interest and excitement around people realizing the world’s going to need a lot of nickel in about five years’ time. Where are we getting that from? Dumont has the real potential to add value to RNC.

Matthew Gordon: Is that part of your equation then? It’s like maybe we’re be better waiting for five years?

Johnna Muinonen: We’ve talked about it. Absolutely. Because Dumont is funded within the JV. And I think that’s where we get that whole ‘oh, we get it for free’. You know, the fact is, is that we are funded for several years within the JV. And so, it is a bit of a free carry. So, it is a bit of nickel exposure, future opportunity. However, in the short-term, looking at our shareholders, looking at the focus of the company, we may want to do something sooner rather than later. And like I said, we’re not about to put up for file, so we’re not in a rush. We have cash in the bank.

Matthew Gordon: You’ve got cash in the bank. The costs of running this thing for another 5-years is negligible in the scheme of things. Not negligible in terms of dollars. You’ve got salaries, permits to maintain all of that kind of thing. But you’ll do the math and work out whether you just deal with it now, focus on gold or you wait 5-years because the upside could be because of demand story. It’s going to be better for shareholders.

Johnna Muinonen: And it’s hard because you can’t predict the future. And so, if you look at today and you say, well, maybe the best option for shareholders, do something now, to clarify the structure, be a pure gold company. Maybe that has more value now than having two assets. And being, personally, I know people say it’s confusing. Are we gold or are we nickel? What are we? So, maybe there is value, but it is a bit of a…nobody has a crystal ball. So, you can’t really say, well, in 5-years’ time…

Matthew Gordon: It’s not distracting you financially or otherwise?

Johnna Muinonen: We have a team in Australia that’s fully dedicated to the gold. That is their focus. We have a smaller team within Canada that works on the Dumont story.

Matthew Gordon: How does RNC make the decision about timing? Because obviously the gold part of the business is moving along. It’s normalizing relationships in the marketplace as people understand the business plan. Is there any pressure from what’s happening in the gold side business, which affects your decision making on the nickel side?

Johnna Muinonen: I think the gold side is ramping up. We’re coming along there, the gold side. Like you say, it’s normalizing. We’ve seen a lot of success recently. We’ve hit a couple more pockets of the higher-grade gold. So, that is moving forward. And really, with Graham in Australia and Paul, they really have that managed. Because Dumont is funded within the JV for RNC’s portion, there’s no real immediate need for us to take cash from profits in Australia and funnel it towards the nickel. So, at the moment we are under no immediate pressure to do anything about it. However, we are in an interesting nickel market right now, very much more so than when we completed. So, when completed the fees back in June, nickel was $5.50 a pound. Nickel is now hovering between 7.50 and 8 dollars a pound. The stocks on the LME are almost at an all-time low. So, we’re in a very different place. So, we want to make sure that we do look right now at taking advantage of this current nickel price to see if there’s that appetite. But at the end of the day, we’re not going to fire sale Dumont.

Matthew Gordon: Sure. But neither are you going to decide rashly, because nickel is famously volatile, right? You’ve been through various super cycles of nickel and they last a long time. And I think we talked about it, bits of scrap metal getting to the market if the prices stay high for long enough. And that’s going to again, give us a false impression of supply for a while.

Johnna Muinonen: Absolutely. I agree. If we look at right now, this recent price action is really somewhat artificially generated by Indonesia exclusively. Where Indonesia has restricted the export of ore into China to make NPI. So, originally, they had restricted as of the end of the year, but then people were starting to massively export ore above and beyond their current permits. So as of Monday, they announced that it was shut down completely. Whether or not that’s going to be permanent or going to be for a few weeks until they figure out what’s going on, we don’t know. However, it’s definitely a supply control versus demand. With this rising nickel price environment, it is going to draw out stockpiles of stainless-steel scrap of ferro nickel that has been sitting in people’s backyards waiting for nickel to go above five or six dollars.

Matthew Gordon: I think we know which backyards.

Johnna Muinonen: Yes, we do. So, we will need to chew through that as an industry.

Matthew Gordon: How long?

Johnna Muinonen: Probably, next year into Q1, Q2. It’s not a huge amount. However, there is some. And stainless is still pretty soft in terms of the demand side of things.

[17:39] Matthew Gordon: And that’s going to affect prices?

Johnna Muinonen:  It will. Absolutely.

Matthew Gordon: But it will bounce back up?

Johnna Muinonen: I mean long term, we have seen year on year deficits in nickel production into the industry. We’re on our third year of deficits. I believe next year the International Study Group is predicting another small deficit. We are seeing these deficits. We do need new nickel to come online at some point in time. And that’s really just the stainless-steel story, you start to overlap the EV’s story on top of that. I think the challenge with EV’s is nobody’s quite sure how fast, how much and when. But it is definitely out there. EV’s especially within China, within Europe, all of the large major auto companies are now announcing major plans for EV cars to come out, various models. But it’s a bit uncertain about timing. And I 100% believe it’s coming. I personally drive an EV. I think that once you drive them you realize exactly why people love their EVs. But it is coming. I do think it will probably be slower and I think if you really look at the industry on the OEM side of things, specially within the historical the OEMs, they have so much infrastructure built into building internal combustion engine cars. That is going to be a very hard tide to change quickly. They have billions of dollars invested in plants and invested in manufacturing lines. Plus, you just need to ramp up the battery and cathode supply side. There’s a huge amount of capital that will need to be spent to actually make all these batteries. It’s not just tomorrow. So, when we look at Dumont, the one thing I’m very excited about is if you look at the world of nickel and you look at nickel sulphide deposits the reality is there just aren’t that many or any nickel sulphide deposits that are currently permitted in a low risk jurisdiction that can produce something in the order of 30,000 to 50,000 tons of nickel annually for 30 years. And that’s where I think Dumont’s value really is.

Matthew Gordon: How long did the last cycle last?

Johnna Muinonen: Oh, I mean, the down cycle, the reality is that we haven’t seen a true nickel bull market since 2007/2008 really. I mean, there was a bit of a bull market 2010 when RNC first IPO’d. We sort of lucked into a window there back in 2010, but otherwise it ran up a little bit 2013. But we haven’t been in a true bull market for a while.

Matthew Gordon: We’ve seen some pretty big numbers forecast. What are the conversations internally with Waterton.

Johnna Muinonen: There’s sort of two conversations. One is how do we maximize value for RNC shareholders? And then how do we maximize value for Dumont within the JV? And what does the structure of the JV… It’s a JV between two partners.  

Matthew Gordon: Why are those two separate things?

Johnna Muinonen: Not necessarily. Maybe they get cleared up in one step. Well, in terms of ownership, in terms of how Dumont is owned. And maybe there’s options around things like potentially… to get to your point of you can’t predict the future, looking at an alternative for Dumont that separates it in some form from RNC, but potentially RNC retains an interest of some sort of upside potential. I don’t know exactly what that looks like. But maybe there’s something there where you kind of look at doing the best of both worlds. You create a clean gold company, a clean nickel company but RNC at some level retains some sort of upside interests. We are talking about that, looking at that, what does it look like? Adding a new NSR onto Dumont’s probably not doable but revamping something around that or something. But there are options that we’re looking at because that really for RNC shareholders, that would start to reduce some of these short-term risks of just selling it. It removes the management in Operation and Distraction.

Matthew Gordon: So, these are not unusual considerations in the mining space and those conversations have happened before. But if I’m a long-time, long-suffering shareholder, I am asking the question, ‘how long do you guys need to monetize this?’

Johnna Muinonen: I’ve been there almost 10 years now.

Matthew Gordon: 10 years. Mines can take 10 years to get into operation. So, this has had, because of the nature of the nickel market… I must explain here. It’s not like gold. It’s not like copper. So, you can go in fits and bursts, but people are saying, ‘just get it over and done with. I need to see something now’. What do you think it could do for RNC if you did do something this cycle?

Johnna Muinonen: If we did do something this cycle, first of all, in the short-term, there might be a potential to offer RNC some sort of initial consideration. RNC has some debt outstanding. There’re opportunities for capital spend in Australia as well, potentially. If we could monetize Dumont in some way, some short-term value. I think longer term having or retaining some sort of upside consideration is really where that’s where you get exposure to the nickel prices. The last time nickel ran, we went from $1.98 up to $25 a 1lbs. Nickel is the most volatile of the base metals, it goes the highest and it goes the lowest and it dives the lowest. So, having some exposure to that long-term, I think that that’s how we go about adding value.

Matthew Gordon: What do you think you need to deliver for this cycle to be able to put you in the position, to give you the opportunity to have those conversations?

Johnna Muinonen: We’re completing the updated feasibility study. We had to do that just because if we had not done that, we would be trying to market Dumont with an outdated study. So, that was done. The next stages: one is off the back of that study. We need to make sure that our stakeholders, which include the government, including the local communities, are all updated on the study, as well as updating things like closure plans, updating looking at our CFA’s, making sure that we don’t need to do anything there or if we do, start to take care of that. Because what we want to make sure is we build Dumont as a shovel ready project, which essentially means what is shovel ready? Shovel ready means that you have your permits in place. You have your land ownership. You have your surface options. You have your mining lease. You have your closure plans. You have your technical study up to date. So, making sure all of those things are maintained because updating your Feasibility Study. That Feasibility Study forms the basis for all of those sorts of feed forward information flow to the government as well. So, the next in the short-term, making sure that we have all of that, maintaining our shovel ready status, that is very important. A couple of things, some of the more optional ones, are really around looking at some of the value-added opportunities that we saw come out of Feasibility Study. So, in the feasibility study, we saw some opportunities around automation, truck automation, just like the EV story, just like all of the things, haul truck automation is coming along faster than… so, by the time Dumont gets into production trucks of that scale will almost all be automated. So, we want to look at that because that adds significant value. We want to look at potentially magnetite off-take. We want to look at some technical equipment choices. So, there are a few things we’d like to look at over the next sort of 6-months to look at how is there an opportunity to add more value to Dumont? Because that really speaks to investors who want to come in to say, what are my upsides? Here’s the project, what else could I get?

Matthew Gordon: But you can have these conversations now because you’ve got to leave something on the table for them because they can go, well, maybe we automate this. There’s an opportunity margin for them, right? Are you having conversations now?

Johnna Muinonen: We’ve had ongoing conversations with people over the last three to four years.

Matthew Gordon: Who?

Johnna Muinonen: The major mining companies, nickel companies. We’re talking with downstream OEMs. Battery companies, as well as trading firms.

Matthew Gordon: But some of those are more realistic like those OEMs, EV revolution, a couple years out, mining companies, they know who you are and you’re one of a handful of big, large scale operations for nickel. So, why aren’t they knocking at your door now?

Johnna Muinonen: I think they’re keeping they’re in a bit of a wait and see approach right now.

Matthew Gordon: What are they waiting for?

Johnna Muinonen: I think they’re waiting for a couple of things. I think that they’re waiting for the nickel demand side of the story to become much stronger.

Matthew Gordon: They’ve got to have a view on this, because they must be looking at nickel, reading the same reports I’m reading going, it’s all good, right? So, why not come in now? What’s stopping them?

Johnna Muinonen: A history of greenfield nickel projects that have not been successful. Now they’re much more complicated than ours. They’re very much higher risk jurisdictions, much more complicated flow sheets. Dumont is a very standard mine and mill, as opposed to some of the very complicated HPALs or a laterite projects that have been blown out the water.

Matthew Gordon: By complicated, do you mean more expensive?

Johnna Muinonen: Technically complicated, which then leads to more expensive, significantly more expensive. We are a mine and a mill. On a scale of simple, people know how to build mines and mills.

Matthew Gordon: People should be attracted to that. You’re saying people still just aren’t committing because the nickel price is doing what they think it should be doing.

Johnna Muinonen: I think that they’re still in a wait and see mode. Absolutely they have forecasts. I mean, absolutely. They think that the future of nickel is, ‘we are about to enter a bull market over the next 12-months to 18-months’. They’re keeping in touch. They’re making sure, knowing what’s up, knowing what’s happening. But I think people are waiting to see the demand side start to get a little bit stronger. I just think that with the supply restraint in Indonesia…We were at $5 a pound 3-months ago. I just think most people haven’t quite caught up and there’s still there’s a bit of a disbelief that now we’re between $7.50 and $8, let’s just have a wait and see for a bit.

Matthew Gordon: They want some consistency.

Johnna Muinonen:  Do we make it through this next quarter? Do we see the price fall back? And if so, how much does it fall back? How much scrap is really out there that’s going to come into the market?

Matthew Gordon: That’s a question of pricing. How much they are going to pay. Not a question of if, it’s a question of what’s the optimal timing for us to work out how much this is going to cost us? Is that what you’re saying?

Johnna Muinonen: I think in some ways. I do think that whole EV story… I do believe in the EV story. But I do think the question on speed that it’s going to advance and the timing. I think that most people are still somewhat bearish on some of those estimates. And so, people are still taking that wait and see. Everybody believes that the EVs are coming and that batteries are going to be a significant consumer of nickel moving forward. But timing! Is it really 2023 or is it 2025? What are we really going to need this nickel to come on board? And then with the run up that’s been so sudden and somewhat unexpected, I think people are just sort of wait and see. So, keeping in touch and making sure they know what the updates are, what’s happening.

Matthew Gordon: If someone puts a $1Bn, gets this thing built out for you. What do they expect to make?

Johnna Muinonen: If you look at the free cash flow of the project over the life of the deposit, somewhere, EBITDA $200M annually. It’s a large cash generating project. It is a low cost. Overall our C1 cash costs over the life of mine (LOM) are just over $3 – $3.22 are all in sustaining cash (AISC) per pound on a U.S. dollar basis is just under $4 at about $3.90. So, when you’re looking at projects to invest, because the thing about nickel, I talked about it before, nickel is the most volatile of the base metals, it jumps the highest and it falls the lowest. If you’re going to invest $1Bn in the project, you need to make sure that that $1Bn is going to be paid back. You have to make money.

Matthew Gordon: And there’s a cost to it.

Johnna Muinonen: And there’s a cost to it. There’s interest there. There’s a cost to that to everybody. The reason why I believe in Dumont, one of the reasons, is just because of its scale. So, we have a 30-year life project. That 30-year life allows you to take advantage of those peaks and valleys of the nickel cycle. And because it’s such a large scale, low-cost project, you are profitable along that that entire time. Any investor that comes in has that time on their side to be able to get back their investment. Because nickel, unlike copper, it does really go up and down. When you look at some other projects that are $300M – $500M to invest, but only are 10-years, you can really easily miss the price cycle.

Matthew Gordon: The cost of building the plant, aggregated at over 10 years versus 30 years. We understand that. Johnna thanks very much for coming in. Brilliant to catch up with you. We understand your brief. Monetise this for shareholders. That’s what they want to hear from you in the next few months. How you going to do it, what are those discussions are developing and what it’s going to mean for them.

Johnna Muinonen: Our focus is shareholder value. And the board and Paul have given me very clear direction around looking at what we can do with Dumont to maximise shareholder value.

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A group of four mining workers stand proudly in front of a huge hunk of gold ore.

Magna Mining – How Do Private Nickel Companies Compete? (Transcript)

A wide arial photo of a large nickel mine.

Interview with Jason Jessup, CEO of Magna Mining Corp.

Magna Mining Corporation is a private nickel company incorporated in Ontario, Canada in 2016. Their primary purpose is on the acquisition, exploration and development of nickel-copper deposits in the Sudbury Basin of Ontario, Canada. Magna made its first acquisition, Ursa Major Minerals in 2017; Magna became owners of the “rather advanced” and “world-class” Shakespeare Mine, Ontario, an open-pit nickel project that was in commercial production as recently as 2010/11 via toll milling, with approximately 490,000t of nickel ore tolled. The mine also possesses all the major permits, and Magna Mining sees it as central to their play. The mine was acquired by a contrarian strategy when nickel was around $4/lb and nickel projects were about as appealing as diving into the mine itself head first.

Jason is originally from Sudbury, and has vast experience as an operations manager at mines for large corporate and junior companies; this latest project is familiar territory. The president of Magna Mining is Vern Baker, an MBA holder from Stanford University with decades of mining experience, though shareholders might be concerned his priorities lie elsewhere as full-time CEO of Jaguar Mining. The remainder of Magna’s team is comprised of experienced, highly-knowledgeable individuals. The team looks exciting, but there will be question marks around whether Magna is the priority, given many of them have heavy involvement with other corporate entities.

Magna has big aspirations of becoming a 50-year, +$100M company, but they have a long way to go before they can get off the ground. Magna Mining needs to raise money, locate acquisitions, make acquisitions and then go public. These are big steps that have to be implemented before they can proceed forward to even the earliest mining of nickel. For some Magna might be an intriguing long-term proposition, especially if they buy into the almost unanimously supported EV narrative, but for many investors, it might seem Magna has bitten off a little more than they can chew. Perhaps Magna might be ready to go by the time the EV revolution finally kicks off.

Magna Mining implements a roll-up strategy via opportunistic growth, where key assets are identified based on promise and past performance and then acquired. Magna is in ongoing discussions regarding non-core assets in Sudbury, but is the stage of this project all a little early for investors to consider getting involved?

Some might argue it’s a great opportunity for investors to get involved at an extremely early stage while stock is cheap and potential is yet to be extracted. The team at Magna has an excellent track record in nickel, and are certified experts in the field of mining metals. Nickel itself is a commodity with great potential, so perhaps Magna is a company to explore. The Shakespeare Mine’s Capex of $150M is particularly unique and the surrounding area of Sudbury is as good as it gets for facilitating mining.

What did you make of Jason Jessup? Does Magna have the potential you require as a potential shareholder, or is it more of a pipe dream? Comment below.

Interview highlights:

  • Company Overview
  • Team Experience and Track Record
  • Genesis of the Project: What is Their Main Focus?
  • Challenges Going Forwards: Is their Goal Realistic, Bi-Products, Costs and Strategies to be Applied
  • How does Magna Mining Stand Out?
  • Assets: Can Shakespeare Become a Profitable Asset? What are They Planning for the Mill?
  • What is the Future for Magna Mining, if the Market Changes or Stays Stagnant?
  • Finding Funding and Remuneration
  • Why Should You Invest in Magna Mining?

Click here to watch the interview.

Matthew Gordon: Now this is an early stage project, but it’s a nickel project. I think people are excited about nickel at the moment so why don’t you give us a one-minute summary and we’ll get into it.

Jason Jessop: So, Magna Mining is a private company. We incorporated in Ontario in 2016. And really, the purpose of our company was to consolidate nickel copper projects in the Sudbury base. So, we’re very focused on one particular region. This is a region that we have a lot of experience in. I personally live in Sudbury. I’ve worked here for different companies over the past 20 years. So, this is really where we’re comfortable. In 2017, we made our first acquisition of Ursa Major Minerals. Ursa Major owns the Shakespeare mines. Shakespeare is a nickel, copper, cobalt, platinum, palladium, gold open pit project that has tons of resource. It is you know, it’s rather advanced in that it wasn’t commercial production in 2010-11 through toll milling, approximately 490,000 tons of ore was toll milled through a mill here in Sudbury. It does have permits, all the major permits to build a 4500-ton open pit mine with a concentrator and tailings storage facilities. So, this really attracted us to the project. And, you know, we were I would say very strategic. And when we purchased it because nickel was in that $4 range, people were not really looking at nickel projects, but we understand the fundamentals behind nickel. And when people are not talking about nickel is a time to make acquisitions. So, we’ve been able to advance the project over the last couple of years, de-risk it further. And we’re pretty excited to move into up to the feasibility study and in a position to make a construction decision in 2020.

Matthew Gordon: Perfect. Okay. Thanks. That’s something. Appreciate it. I’m interested in this story because it’s early stage. You’re private, we talked about that, but with all things Canadian it eventually gets listed. So, I would love it if you could share with us the process that you’re going to go through to kind of get it to that point. So, for our subscribers and followers and investors I’d love to maybe start with who’s on the team. So, tell us about you and then tell us about the team.

Jason Jessop: Sure. So, as I mentioned, you know, I’m from Sudbury. I’ve worked for a number of different companies here. You know, I really started my career in Sudbury. I was management at one of the mines here in Sudbury. Spent about five years working there. You know, great company, great experience. But after five years, I recognized that I probably don’t fit within a large bureaucratic company like that. So, I went to work for another up and coming junior that was in the basin. Those who don’t know FNX mining in 2002, they were a junior company, share price about 25 cents acquired five pass producing mines through good exploration and creativity and entrepreneurial spirit. They were able to bring three of those mines back into production, made some significant discoveries at them. And you know, before the financial crisis of 2008, had a share price of approximately $40. So huge success. And I was really fortunate to be part of that team and see that growth.

Matthew Gordon: What did you do there?

Jason Jessop: So, I was an operations manager at two of the mines here in Sudbury, brought one of them into commercial production. I helped raise another one from 300,000 ton per year production to over 800,000 ton per year. So, you know, I was heavily involved in the operations side of the business. And after 2011, we had merged with another company, gone a little bit bigger. And I thought there were some opportunities, maybe work for another junior. So, I’ve spent a couple years in the corporate development field doing work in royalty space as well as junior mining structuring deals and finding acquisitions and evaluating projects. And in 2016, saw an opportunity here in Sudbury to do something again similar to the experience I had and that’s when we formed Magna.

Matthew Gordon: And who else is on the team?

Jason Jessop: So, our chairman is Vern Baker. Vern Baker is a professional engineer, he has an MBA from Stanford. Vern was the V.P. of operations at F&X Mining. We worked there together. Vern was a great leader and actually a really great mentor of mine. And we kept in touch after we both left. And, you know, we all see this opportunity in Sudbury to take some of these non-core assets and be very successful, mining them differently than some of the majors.

Matthew Gordon: But he’s says here he’s full time CEO at Jaguar Mining.

Jason Jessop: So, yeah, so he’s our chairman. He’s also a CEO of Jaguar Mining in Brazil. So, he joined that team in August and he’s helping them unlock the value in their operations in Brazil.

Matthew Gordon: So, what’s his actual day to day with you on this particular project?

Jason Jessop: You know, we communicate weekly. He’s involved is as much as needed. So, he is available. You don’t get to see him probably in person as often as I’d like to. But, you know, he’s a great leader and a great collaborator to bring teams together.

Matthew Gordon: Right. And what does that mean for you and in terms of what you’re trying to do now? So, he’s giving you advice or still mentoring you or…?

Jason Jessop: Yeah. Well, he you know, he’s the chairman of the board. So, you know, on board decisions and large decisions, he obviously gets involved. You know, he’s still very involved in the strategy of how we move forward. And we have a few other opportunities that we’re looking at. So, he gets involved in that. One of the things that we’ve done here, and I think this is really what speaks to the experience, and I can get into some of the rest of the team but, you know, our experience working in FNX and in Sudbury is really based around people, and I think that’s what differentiates us from maybe other groups that have tried to do something similar in Sudbury in the past. We are a very successful group because of the culture. So, you know, Vern, I would say from a cultural perspective, you know, he sets that tone for the group and we provide a lot of ownership to the people that work in our team. So, we’re a small team. You know, we wear many hats. But right down to, you know, the guys that go out to site and do one monitoring and, you know, the care and maintenance work. We give a lot of ownership to our people. And that’s the successful culture that we saw at FNX Minings, we recreate that. Now, as far as the rest of the team, our CFO and co-founder of Magna is Derek Wayrauch. Derek is a CA by background. He’s been an executive or board member of a number of publicly listed companies over his career. Currently, he is the interim CEO of Palladium One, which is a junior palladium company explorer, and has a property in Finland. So, all the nickel property here in Ontario. Derek, you know, at this point we do not need a full time CFO. So, he acts as our CFO and as a board member. You know, Derek and I speak almost daily and are quite involved, especially on the financial side of the business. And Peter Litefoot is our V.P. exploration. Peter is a veteran of the Sudbury base and spent a lot of his career as a chief geologist for international nickel targeting. And he really wrote the textbook on Sudbury deposits and the origin of Sudbury Igneous Contact. So, Peter, he really leads our exploration in and around Shakespeares, as well as evaluations of other non-core assets that we’re looking at.

Matthew Gordon: I notice you’ve got a bunch of other strategic advisors and let’s not get into that. We can maybe post this presentation up at some point for people to look at. You’re kind of like I’m bringing the band back together here. Some people you’ve worked with before, people who’ve experienced success together and you think… What do you think actually? We just want to do a project. We just want to work together. I mean, that was the genesis of this? What was the idea?

Jason Jessop:  Yeah. So, you know, we have big aspirations here in Sudbury. We don’t want to be just a little single asset junior who hopefully we can get to a point where we’re a $50MIL or $100MIL company. We have seen the success. It can happen. And like I mentioned in the past with our group. So, we really have big aspirations. There’s a few things that we see. So, by having Shakespeare and building the mill, it gives a real strategic presence in the basin. And there’s a number of deposits that either don’t fit well with the majors or have metallurgy that maybe isn’t conducive to the large mills they have here in Sudbury, for example, Valley’s Milford process, probably 35,000 ton a day. So, it’s a huge plant. You can’t customise for a small or small percentage of ore coming in. So, having this opens up a lot of opportunities to negotiate and find other feeds that can be higher grade than our open pit ore.

Matthew Gordon: Come back a bit for me here. You’re getting into the project. Come back a bit. Tell me like a helicopter view. We are trying to be what? A major nickel producer in the Sudbury region or globally? What’s the idea?

Jason Jessop: So, absolutely. We are looking to become, I would say, a mid-tier producer in the Sudbury region. We’re very Sudbury focused. We’re leveraging the experience of our team. And, you know, and I would say our advisory team is very important to us. Again, a lot of former F&X people who have a lot of first-hand knowledge and insight. So, that is what we are focused on. You know, I would say that we are not experts in mining exploration, in mine building. We’ve not built a mine in the Congo. We have not operated a heap leach gold operation in Chile. What we have done very successfully and what we are experts on is exploration mining in Sudbury and building mines in Sudbury. That is really where our expertise is. So, this is where our focus will be.

Matthew Gordon: So, what’s the challenge going forward then? You know what you want to be, you’ve articulated that clearly and it makes sense. And that’s the experience, you know what you know. What are the challenges? You’re talking about building this thing into a mid-tier. You’re going to need to raise money. You’re going to have to find acquisitions. You’re going to need to make those acquisitions. And go public, I suspect at some point. How do you manage all of that? Is it realistic, first of all?

Jason Jessop:  We believe it’s realistic. We believe that we have a great strategy. We have a team that’s done it before raising money, I think, you know, is always a challenge in the junior space and being a private company, especially, you know, in the past couple of years as nickel prices were quite depressed. Yeah, it was absolutely challenging. Again, we were able to keep our GNA cost quite low and be really focused, continue to de-risk. Going forward we have we believe in this better nickel environment. There is a lot more opportunity to raise capital. Having a project and a company that’s focused in a great jurisdiction, there’s a tremendous amount of metal endowment in this region. And, you know, with the combination of not just nickel, but also some really considerable by-products of copper and cobalt and platinum and palladium and gold. We have seen a lot of interest in and we think that getting the capital once we have our feasibility study done for project financing, is quite reasonable. We’re not looking at raising $500MIL to build out Shakespeare. Our CapEx is not completely finalized, but we’ll be in about $150MIL Canadian range. So, it’s manageable. We have a good by-product credits, so there’s opportunity to use a precious metal stream as a portion of that project financing without taking away from the overall economics to much of the project. So, there is some strategies we’re working on right now as far as moving that forward. As for other projects in the basin, because of our success in the past with many of our team members, finding the capital to make these acquisitions, we believe is very possible. It’s very doable. And the challenge always is, is dealing with major so as being a smaller private company, we get asked the same kind of questions a lot of people do. Where are you going to get the capital? Do you have the support? Are we wasting our time negotiating with you now? We’ve been here for a while now. Like I said, I’ve been working such for 20 years. We’ve built long standing relationships. We know, a lot of the people and the players. And now that Shakespeare has moved forward over the last year, we have developed more credibility, I would say, with some of the other companies that are in the basin where they see a strategic benefit in working with us. So, obviously a deal is never done till it’s done. But I would say in the next year, we should be able to secure some additional projects in the basin that will have synergies with our Shakespeare mine.

Matthew Gordon: This is where it starts getting interesting for me. Okay. You’ve got a long track record in the basin. That’s correct. You know, people. Right. But like you say, they’re only going to go with you if you’ve got access to capital. Right. Or this is strategic benefit. You’re saying some people are interested. There are interested in your knowledge, presumably. But it still comes back to the issue of availability of cash. Right. Availability of good projects because no one gives the good projects away for free. Right. So, you’ve got to either step up and pay a premium or pay a price for it or you’ve got to deliver them something which they don’t have. And, you know, what is it about you guys versus the bunch of other people I’ve spoken who have experience in this basin? Why are they going to go for you? Personal relationships?

Jason Jessop: Yeah, I think there’s a little bit. So, one of the things, we’re not looking to buy a World-Class deposit in the Sudbury Basin. Those aren’t for sale.

Matthew Gordon: Well, tell us about that. What is it? Do you find small assets? Roll them up and together? Is that the idea?

Jason Jessop: That’s what we’re looking at. So, we’re looking at projects that are, you know, ideally past producers that can be brought back into production relatively quickly, but just do not make sense for the cost structure and the way that larger companies operate. And, we have an in-depth understanding of that. Again, going back to our experience, taking mines that were, very very low priority and would’ve never restarted under a major company. We were able to take those, approach things differently, keep cost structure low, you know, use mining methods that probably haven’t been used in the Sudbury basin and in 30 years, very selectively mined some of these deposits and create a lot of cash flow. Now, it isn’t on the scale that really moves the needle for a major company, but for a junior company, it can create a tremendous amount of cash flow. And so, these are the opportunities we’re looking at. And we have experience in doing it before. I wouldn’t say it’s easy. It definitely it comes down to having the right team, the right culture, the right approach, and having a CEO that asks the right questions from the people, so they can stay focused on what’s important. So, I think we have a lot of credibility with people, they know what we’ve done here before, and that gives more confidence that if they do a deal with us, at the end of the day, there’s going to be some benefit to them. Most of the deals that we’d be looking at doing in one way or another have some tie to the owner’s long term, whether it’s an off take or royalty or something. So, they don’t want to sell something that the end of the day really there’s no long-term benefit. What’s the point? So, we have developed some confidence, I would say, in some of the discussions and people, you know, in the basin.

Matthew Gordon: So, first things first, you’ve got to get Shakespeare moving. You’ve got to get financed and you got to be able to… I think you’ve talked about doing various studies and sort of understanding what it is that you’ve got and try to understand the economics. That’s fair enough. And if you do that, you might be able to persuade someone to give you the money to be able to develop this thing. So, from what I read, it’s the standard sort of low grade, about .3, that sort of level? But you do have the copper credits, which is a good thing. So, the low grade means you need scale to get the economy’s going there. Do you need to do these other acquisitions to kind of give you that scale? Or do you think Shakespeare has got the potential to actually become a meaningful project in its own right?

Jason Jessop: Yeah. Good questions. So, Shakespeare is a, I would say you describe it in a lower grade category, but it’s not overly low grade the because of the by-product. So right now, it’s sort of sitting in that, .65% nickel equivalent range. And that’s why it really requires about a 4500 ton per day plant, running it at 2000 tons per day. You just don’t really get the payback you require. So, I think we have a good-sized plant that sort of permits our, currently, 4500 tons per day. You know, one of the things that has held back Shakespeare in the past is it only has, you know, in the 2006 feasibility study, about 11.5MIL tons of reserves, which at 4500 tons a day gets it about a seven-year mine life. And so, people look at that as a seven-year mine life’s way too short. You know, it doesn’t kind of meet our hurdles, but there is tremendous exploration potential. So, to get back a little bit to why there’s a seven-year mine life, in 2002, Ursa Major optioned the property from Falcon Bridge and they made a discovery in 2003, about 150 meters to the east of the West Deposit, which was the known historic deposits, about 2.5MIL tons. And, you know, had a great intersection, followed that up and basically drilled out over the next two and a half years, about 14MIL tons of resource. Now, this was at a time in 2005 where nickel was starting to take off and they saw an opportunity here. Let’s get this permit. Let’s do a feasibility study and get it into production and take advantage of these rising nickel prices. So, they continued in 2006, completed a feasibility study, 2007 received permits for construction. So, they did a great job. But after 2005, there really wasn’t a focus on exploration anymore. They had enough to get going once for cash flowing. We’ll continue to drill out, extend the mine life. And that was the strategy. 2008 came along. You know, everything stopped. And it wasn’t until 2010 that they were able to actually start up through toll milling some production. But when we acquired the property, you know, it was really an orphaned asset. The owner had become very non-core. There was no institutional knowledge left. So, it took us a lot of work to pull together all the data, the historic work that was done, re-interpreted, take this store, geophysics, reinterpret that. What we found was there’s a tremendous amount of exploration potential and we’re quite excited about it. In 2018 we did some drilling in an area between the east and West deposits. So currently the project has two separate pits. As per the 2006 feasibility study. What we were able to do, we drilled this EM plate between the two deposits in an area it was previously believed to be unmineralized and every hole hit exactly where we expected in resource grade mineralization. Now, we had a budget that didn’t allow us to continue to keep drilling. So, we’re hoping to continue that drilling and bring more of that material in between the two pits into resource. By b doing that, we should be able to deepen the West Pit and expand the resources considerably. There’s also a zone that has very little understanding. Two holed intersected it in the 50s. One of the early drill campaigns. It has 103-meter intersection just to the south in what would be the foot wall of the west deposit. And there’s no follow up drilling. So, it’s a very large resource grade type intersection zone. Currently, it’s about 750,000 tons in resource, but there’s no drilling around it. Up dip, it’s open. Incidentally, we found some mineralization on surface, I guess long and short as we really think through exploration, there’s a lot of potential at Shakespeare. It’s really been underexplored. And we think there is tremendous scale. Right now, taken the resource 21MIL tons, we believe we can add another 5MIL tons of resource with additional drilling around the West deposit.

Matthew Gordon: All right. OK. Those are the kind of exploration statements I would hope you would say and expect you to say. But if we come back to what you’ve got today, I do want to talk about this mill component because again, I want to understand your thinking. I’m fascinated by the way the management think, because you make or break companies with good decisions or bad decisions. So, around this mill, right now, today, 4500. You say you have a permit for that?

Jason Jessop: So, we have the permits, the closure plan and major permits for the mill and tailings storage facility and mine.

Matthew Gordon: Beautiful. So, how long does it like the mill of that size take to build?

Jason Jessop: So, once you start breaking ground, assuming that there isn’t delays to long lead item components. It’s about an 18 month build. But let’s say 18 to 24 months.

Matthew Gordon: And what does that mean for you in terms of your ability to kind of hit this cycle? I mean, you’ve got to have a view on how long this cycle is going to run, how quickly you can get into production and does this mill, the cost of this mill, prohibit you in a down cycle from actually operating? What are all the economic factors you’re trying to manage? The rest you’re trying to mitigate, because you’ve got to have a view of the future. You’ve got to have a view of what you can do today and what happens if there’s a down cycle, right? And, you must have then had contingencies and plans and said maybe, maybe we just can renegotiate the terms with… I think is a couple of other mills locally, aren’t there? Get better terms with those guys? So, how did you get up measuring those things up against each other, if you did do that?

Jason Jessop: Yeah, that’s a good question. We get asked that a lot. You know, once the mill is built and we’re in production, it might actually have a pretty low C1 cost. You know, again, we’re not finalized the feasibility study, but from all the internal work we’ve done we’re gonna be somewhere on a by-product basis, you know, sense of a dollar, a pound, nickel… So very good C1 cost. As far as a toll milling idea, we definitely have looked at that and a lot of people said, you know, why don’t you just continue to keep toll milling and create some cash flow? It is an option. It is an option. Now, I don’t see it as being the best option for us. Again, you talk about these larger mills in the basin and you know, they are really set up to process a massive amount of certain ores. And because our ore is, it’s done great recoveries, but it’s not the same as a standard Sudbury contact, 2% nickel ore. So, I don’t think we’re gonna get as good of terms as necessary as we would want. And, is it worth investing? I think that if nickel went to $10, there’d be an opportunity during our construction stage to be shipping ore, as we’re stripping, start some early production through some toll milling for maybe a year or two until the mills up and running. That’s definitely a possibility. And I think we could make some pretty good cash flow from that. Long term, I just don’t see it as being the best option for the company, because really at some point, you do not have final control over your destiny. If they say, you know what, we’ve decided we don’t want your ore anymore. What do you do? So, you know, there may be some opportunity to create some cash flow in the short term, depending on metal prices. But I think that, the real focus is to get this built and be a low-cost producer. As far as how we can tie in other projects, you know, Shakespeare on its own has a reasonably good payback. If we can extend the mine life, you know, the NPV goes up significantly. But if we could add in another deposit, let’s say another non-core Sudbury deposit that has higher grades, higher margins and add that in at 1000 tons a day, displace some of our open pit ore. Well, the economics of that, they’re fantastic.

Matthew Gordon: Well, yeah. Look, I don’t envy a junior mining board at all because there’s so many ifs and buts. You know, if it gets to 10 bucks and if we can find an asset, if we can’t, it’s kind of like me playing with a spreadsheet of, you know what ifs. I could make I make a lot more money if my shares went up in price every day. I’m trying to piece together the kind of the roadmap that you go through. So, what I’m hearing is you’ve got to get Shakespeare nailed down, get that where you want it to be in terms of what you know about it, to be able to go and have intelligent conversations, sensible conversations with either money, people with money. And you’re not public yet so you’ve got some options, right? Strategic partners who may be just money and offer you different types of money or an operating company which has cash, which again, once you kind of have to somehow under their wing. I mean, you’ve got to look at a multitude of different options and you must have these sorts of conversations each week. I suspect to look at how you move forward, right?

Jason Jessop: Yeah. And it’s actually interesting. You know, we have a lot of irons in the fire, especially in the base metals space. You know, there’s just a limited number of players. So, you want to get to know all of them. So, we’ve had a lot of discussions with a lot of different players. You know, at this point, we may want to partner with a producer already, look for a strategic investment. We have been talking with a lot of private equity groups who are quite interested. They like the team. They like the space. They like the opportunity and the de-risk nature of the project based on the permits. So, there is a lot of opportunity out there. There’re three majors operating in the basin. You know, we have regular discussions with all of them. And, you know, we’re quite optimistic about the opportunities we have here. So, we do need to be, you know, flexible, see opportunities, weigh them against other opportunities and risks. And, yeah, we’re doing that on a regular basis, since it’s part of the exciting and fun part of it is this way.

Matthew Gordon: Well, it’s exciting till you run out of cash and then it stops becoming exciting. And I appreciate you’re private and we don’t have to be worried too much because you’re not public yet, but you will be. So, how have you financed this thing so far? I mean, you know, you’ve been in it two years.

Jason Jessop: Yeah. So, we started off with a very small sort of friends, family, type route. Raised some money. And, we brought in some strategic sort of investor from Vancouver, David Elliot from Heywood. So, David came in and he’s been a very supportive shareholder. David Elliot and his group own about 20% of the company. And they’ve been they’ve been great. You know, we are looking for that sort of next strategic partner to put in another piece of money. Right now, we need about $2MIL to finish the feasibility study update and do some of this high priority exploration drilling adjacent to the deposit. As well as finalize some of the minor permits and engineering to get done. So, you know that that money… there’s interest out there being a private company. It gives you some opportunity to get money from maybe some places where, from private equity groups that are looking to take a bigger stake in a company, but, you know, being private also has its drawbacks where some investors just can’t invest because they don’t have that opportunity for liquidity. So, we talk to lots of people. We keep our GNA costs extremely low. So, we really want to make sure that, we’re doing what’s right for our shareholders, keeping the money that we’re raising, going into advancing Shakespeare, advancing our strategies. And so, we’ve been able to do a lot, I’d say, for a little. And it’s one of the reasons we’ve been hesitant. Up until now to go public, because just the extra costs associated with that. But, definitely I would say once we have our feasibility study done and it looks positive with hopefully some exploration success, it would be a time we’ll definitely look at…

Matthew Gordon: So, how much is the management sitting on at the moment? They have shares in this, I guess? Have you bought shares?

Jason Jessop: So, you know, management has lots of that. The two founders, I myself and Derek, we have about 47% of the company currently. Neither of us have taken any salary or compensation. I don’t even have options in the company. I am really working hard for the other shareholders that are putting their cash into the company. And I believe so strongly in that I’m willing to do that. It’s a big picture.

Matthew Gordon: That was my next question. Were you paying yourself? You’re not. That’s good. So, the money that’s been put in today is going to board in costs from outside costs at the moment, right? Okay. And then the next 2MIL. Would that continue to be the case?

Jason Jessop: Yeah. You know, at some point I wouldn’t mind paying myself a modest salary if the board agrees.

Matthew Gordon: What does more modest look like? A company of your size, what’s modest today?

Jason Jessop: Yeah. You know, probably more than 5000 a month, and less than 1500.

Matthew Gordon: So, we’ve just seeing some fantastic salaries on here. And I do ask the CEOs, you know, what they’re earning because the public company it’s easy. I can take a look. But they don’t like talking about it. Look, I think it’s been a great introduction to you, which is the important thing here for people, so when you do go public, they can sort of see what you’re like and what you’re thinking has been like and what your plans are or were from the start of this and track back and see if he delivered on those. So, I do appreciate that. Do you kind of give us the three reasons why people should be continuing to follow your story?

Jason Jessop: Sure. So, I’d say first and foremost is really like I mentioned earlier, I think that our team is unique. I think that we have a group that’s been successful before. We’re not trying to do something that we’re not experts in, that we don’t have experience in. We’re really trying to leverage the knowledge and the experience of the team in a region that we have deep roots in. So, I think that that’s sort of the biggest thing. Next, Shakespeare is a unique nickel development project. I don’t know of any other nickel development projects that are out there in a good jurisdiction that could be producing concentrates in two and a half, maybe three years and have a CapEx of 150MIL. So, it’s really unique de-risk. Great. You know, we have a great region we’re working in here, being in Sudbury, we have every service provider. You know, workers go home every night, so you don’t have the camps, which allows us to keep operating costs lower than a lot of projects. So, I think that’s great. And then the third thing is really our broader strategy, the consolidation strategy, to grow in the Sudbury basin. I think that is something that all of our investors currently have really seen as sort of a key reason that they want to get in early and take advantage of that, because the potential is great. If you believe in nickel, I think that we are one of the best stories out there.

Matthew Gordon: Well, yeah, it’s definitely the story of the moment. And I think, Cobalt and Lithium have been through a lot in recent years. And, you know, gold hopes that it is the new story, but people are interested in nickel. It’ll be interesting to see how you guys get on.

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