Recording date: 1st September 2023

Same comment as our last call - Nickel continues to bounce along the bottom of $20,000-$22,000 ($9-$10/lb) range where it's been since early June and has only briefly broken $9/lb.  LME inventories remain near multi-year lows.

China is still split on 2 key markets – sulphate for battery continues to tread water, while stainless continues to edge higher, again despite lots of noise on Chinese weakness with both stainless prices and NPI prices moving higher once again. 

Things are quiet here in summer, however

SPC Nickel, who consolidated property in Sudbury from Vale, hit some interesting intervals.  Talked in the past about a good exploration team that is in the same neighbourhood as Magna Mining Sudbury property.

Hole WG-23-047, intersected a high-grade section that returned 1.27% Ni, 0.47% Cu over 18.00 metres from 245m to 263m within a thick zone of nickel and copper mineralization grading 0.70% Ni, 0.32% Cu over 50m from 221m to 271m.

Canada Nickel made Mann Northwest announcement - is another major discovery 

One of 11 targets larger than Crawford – target geophysical footprint of 6km2 is more than triple the size of Crawford footprint.
The first 8 holes drilled at Mann Northwest intersected well-mineralized, multi-hundred-metre intervals of mineralized peridotite and minor dunite across a combined strike length of 2.7 kilometres  - all holes were largely mineralized across the entire core length.  Initial mineralogy samples showed well-serpentinized material with heazlewoodite and pentlandite dominant nickel minerals.
Target remains open in all directions.
The big thing to talk about this week is Chalice Mining PEA – market cap has fallen by +30%.  They are the big boy with a pre-announcement market cap of $1.8 billion (which was already higher), so we need to say it like it is – particularly as PEA had some “offensive/aggressive” assumptions. Headline numbers all look great – but the market quickly realized some very aggressive assumptions.

Chalice Mining just published a PEA, a month earlier than Canada Nickel will be publishing their Feasibility Study (FS) on Crawford – their deadline for FS is 2.5-years from now.

Their biggest issue is the price deck:

Palladium price (over ½ revenue) was $2,000 – today’s price is $1,200. Remember palladium's main use is now being phased out as EV market reduces the need for catalytic converter
Nickel price was $24,000 –($11/lb) – we’ll probably be looking at the $20-$21,000 range. 
Copper price was $11,000 ($5/lb) – copper prices have NEVER been this high
When looking at the value at today’s price deck – you get to a value somewhere between negative and $500 million – Remember their market cap is still $1.3 billion!!

Chalice and  Canada Nickel are interesting comparisons.  Gonneville was discovered about the same time as Crawford so a good yardstick – the focus was nickel initially, but it turned out to be mostly PGE deposit with a scale about 1/3 less than Crawford and half the mine life.

Another thing that is interesting is capex – we’ve indicated our capex will likely be in $US1.8-1.9 billion range, Chalice is getting 1/3 bigger mine/mill operation, a leach plant, a hydromet plant for 10% LESS cost than Canada Nickel in a higher cost jurisdiction.

When the price deck is crazy aggressive, raises questions around what of the other 300-400 assumptions in there are also very aggressive! Will need a reset of expectations, and more than likely, a new owner who can take advantage of this fall from grace.

I’ll State it Again

We have talked about it in the past, but want to make sure watchers are very clear on this point.

A PEA IS ONLY AS GOOD AS THE ENGINEERING FIRM WRITING THE REPORT.  REMEMBER THERE ARE ENGINEERING COMPANIES THAT ALMOST NEVER BUILD PROJECTS, SO WRITING REPORTS IS THEIR BUSINESS AND IF THEY DON’T GIVE MINING COMPANIES THE ANSWERS THEY WANT, THEY DON’T GET THE BUSINESS.

MOST FRUSTRATING FOR ME, WHEN INVESTORS SAY WHY NOT PROJECT HAVE MID-20% IRR?  REALITY IS THAT WITH VERY FEW EXCEPTIONS – ONLY GET THOSE RESULTS FOR SMALLER, HIGH-GRADE DEPOSITS IN TOUGH JURISDICTIONS, GENERALLY WITH A COMPARATIVELY SHORT LIFE OF MINE.  IF BUILDING A MINE IN PLACE THAT GOVERNMENT WON’T TAKE IT AND A SCALE MAJORS WANT, BASE METALS PROJECTS ARE EITHER SIDE OF MID-TEENS IRR.