Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long CNC.V, FPX.V, and TLO.TO
On Tesla’s recent earnings call, here’s a doozy of a quote from Elon Musk if you follow the nickel market:
“…well, I’d just like to re-emphasize, any mining companies out there, please mine more nickel. Okay. Wherever you are in the world, please mine more nickel and don’t wait for nickel to go back to some long — some high point that you experienced some five years ago, whatever. Go for efficiency, obviously environmentally friendly nickel mining at high volume. Tesla will give you a giant contract for a long period of time, if you mine nickel efficiently and in an environmentally sensitive way. So hopefully this message goes out to all mining companies. Please get nickel.”
And just like that, all the nickel stocks popped. Most people don’t even know what a nickel company is these days, never mind what their names/tickers are and whether or not their projects are of interest. As for more nickel coming without a big price spike… I’m sorry Elon, but that’s not how the metals markets work. Mining is a boom and bust industry driven by price moves that result from years of chronic underinvestment. Those price moves incentivize new production. Yin and yang.
Because I’m such a nice guy, and am already long a basket of nickel stocks (because I think that one day all of the battery production will whip nickel prices higher), I thought I may as well flag a few names that pretty much define the Canadian nickel space as I know it, which might save some people a lot of time and effort if they care to play this theme. Personally, with chatter of a Tesla “Terafactory” out there, I think that the battery metals space may be set to heat up a little, so I have exposure through lithium and nickel. Here’s my nickel list with a few sentences on each one:
Canada Nickel (CNC.V, last at $1.29). Market cap ~$88 million.
Large, low-ish grade, bulk tonnage deposit in Ontario with drilling ongoing. Mostly nickel sulphide with some nickel-iron alloy (awaruite). Nickel recoveries appear to be better in higher grade material than lower grade material. A resource update is imminent here on their huge Crawford project. I guess timing is everything. The CEO, Mark Selby, was also the CEO of Royal Nickel and moved the Dumont project forward through to feasibility during his time there. Dumont is now controlled by the private equity firm Waterton. I would think Mr. Selby’s experience with Dumont will save a lot of time and money for CNC.
FPX Nickel (FPX.V, last at $0.37). Market cap ~$60 million.
Large, low-grade, bulk tonnage deposit in British Columbia. Very low strip ratio. Low-looking grade, but the metallurgy is unique in that the nickel is bound in a naturally occurring nickel-iron alloy called awaruite. This is a highly magnetic mineral and easily recovered as a result. Because awaruite is not a sulphide mineral, the tailings produced by a mining/milling operation here would not be acid generating, which could tick a big box for Elon in terms of being environmentally friendly. FPX also notes that their waste rock absorbs CO2, meaning that the mine should get a double thumbs up from the environmental types. A new PEA is due on FPX’s Baptiste deposit in Q3 or Q4 of this year. Cleveland Cliffs once had an option on this property and had earned a 60% interest after spending $22 million on advancing the project to PEA stage. The PEA was published in March 2013 and didn’t show much of a project in terms of the economics, so Cliffs sold their interest back to FPX for US$4.75 million in 2015. Six years later, FPX has refined its metallurgical work/testing and is running a new PEA on the project. I’ve been aware of this one for about 10 years I think. It was once called First Point Minerals.
Giga Metals (GIGA.V, last at $0.24). Market cap ~$12 million.
Large, low-grade, bulk tonnage deposit in British Colombia. Nickel sulphide. Their PEA was delayed earlier this year because of COVID. I don’t own it, but that’s only because I can’t own ’em all. Similar to FPX, they say that their waste rock captures CO2.
North American Nickel (NAN.TO, last at $0.10). Market cap ~$8 million.
I only mention it because they have been exploring in Greenland for as long as I can remember with limited success. Nickel exploration is tough. They have an option on a piece of a nickel deal in Botswana that I know nothing about, so there you go.
Sherritt International (S.TO, last at $0.21). Market cap ~$85 million
I only include this so that people know that I’m not ignorant of Sherritt. It’s just not my cup of tea being a minority partner in someone else’s nickel operation and I can get oil exposure in places other than Cuba.
Talon Metals (TLO.TO, last at $0.22). Market cap ~$115 million.
High-grade, small tonnage, underground mine potential in Minnesota. Partnered with Rio Tinto. About to start exploration drilling looking to expand on their massive sulphide resource. This is one of the most advanced, highest grade nickel sulphide projects that I’m aware of, and the market cap shows that. If nickel goes higher, it will take TLO with it.