The Battery Show

Recording date: 18th December 2023

The Battery Show (Copper Bottomed, Episode 9)

Merlin is still catching up from travel and jury duty, but he is not alone - Bloomberg appears to be six weeks behind Copper Bottomed in calling out a tight copper market for 2024. Meanwhile, Friedland promotes with energy and soon after, Ivanhoe Mines taps the market for C$500M. Dr J.M.Wise reminds us that copper mines take (on average) 16 years from ‘discovery’ to production - which means that resources defined in 2024 will likely only start production in 2040. Mind the Gap, Go Explorers! Talking of which, there are results out from: Pampa Metals, Kodiak Copper, Pacific Ridge Exploration, Benton Resources, Vizsla Copper, MacDonald Mines, Sterling Metals, and Mirasol Resources. Benton Resources - once again - is the pick of the bunch. Copper Equivalents continue to rear their ugly heads in news releases, undermining the integrity of the reporting company.

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Recording date: 11th December 2023

The Battery Show (Copper Bottomed, Episode 8)

Travel has delayed this weeks’ Copper Bottomed a few days… but hang in there, it’s a corker. 
The Market section discusses some of the aspects of the Panamanian decision to close Cobre Panama, and the wrong-think and politics behind the decision. Thousands have lost their jobs, the mine produced 5% of GDP and 75% of exports, and the government will almost certainly lose in international arbitrage. A terrible outcome for everyone, and it will take years to unpick. 

In other news, Goehring and Rozencwajg published excellent research, but Merlin uses an ICSG from 2019 report to challenge their assumptions on the success (or lack thereof) of hydrometallugical processes on copper concentrates. Meanwhile, the drill bits have been active and results have been published by Filo Corp, C3 Metals, Ivanhoe Mines, Copper Road Resources, Northisle Copper & Gold, Avrupa Minerals. 

The art of writing cogent and succinct news releases seems to be dying. The use of copper equivalents continues, doing no favors to any company, least of all Filo Corp as all it highlights is metallurgical uncertainty.

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Recording date: 5th December 2023

Nickel prices did a 5% up and down round trip during the period - touched $15,500 level, then with a few days a nice little squeeze back up to $16,750 driven by Indo news I flagged was coming at the end of this month, and is now settling in either side of $16,500. 

Inventories continue to grind slowly highly – am surprised we haven’t seen some chunky LME deliveries during this period - may still see some going into year-end before we start moving higher early in the new year.

Good signs from both the copper market and iron ore prices in China so still convinced should see good stuff coming in the first quarter.

Indonesian government announcing pricing deals at a conference at the end of the month. With nickel prices coming off, seeing further convergence – sulphate was trading and NPI discounts continuing to narrow.

When bouncing off a bottom as we are doing now. A good rule of thumb for prices - is long-term price typically is 90% of the cost curve and 70% of the cost curve for short-term.

Big news this week “Entities of Foreign Concern” – qualifying for credits can’t have 25% or better interest from a Chinese company (or other unfavouable country/region). Benchmark highlighted that 82% of supply in Indonesia is MAJORITY Chinese controlled (is one of the key reasons why the US not rushing into an FT deal with Indonesia).

LME also dodged a bullet with a lawsuit. They have some pretty broad language in their regulations that allows them to do pretty much whatever they want to “maintain an orderly market”. Despite cancelling trades being highly problematic on multiple fronts, it falls within their purview.

Company News: 

Blackstone Minerals picking up another Manitoba nickel project (is a great jurisdiction!). Wabowden and Bucko Lake deposits – series of payments for $70 million through to production. Bucko was mined in mid-2000s by CaNickel but the mine collapsed and didn’t reopen. They’re looking at open-pitting some of these deposits – not hugely wide but good grade (for open pit). Keep an eye on this one.

Some spectacular infill results from Widgie Nickel (heading to resource in early 2024) from Mt. Armstrong deposits (this one was previously mined in 2 separate occasions).

Fathom Nickel got some narrow higher grade intervals (1-3% nickel) within broader disseminated intervals from their Gochager Lake project – a small high-grade past producer. No big fire yet, but lots of smoke.

Centaurus Metals got some deeper 1% intervals which shows that the mineralization extends more than 300 metres below the current resource. Aiming to get contained nickel +1 million tonnes.

SPC Nickel got some good final resource drilling results.

Western Mines Group – Mulga Tank – disseminated Crawford-like orebody – some good higher grades in the central core of structure – multi-hundred metres 0.3% nickel and good nickel:sulphur ratios. Economics in Western Australia is more challenging than in Ontario but good to see big potential resource – is one to keep an eye on and the market cap is pretty modest.

Alaska Energy Metals released initial inferred resource 320 million tonnes @0.22% nickel+CU+PGMs

Premium Nickel release another set of drill holes – more holes with consistent grades. Hinted at some longer intervals of mineralization – will see what assays come through for those.

On the carbon front, BHP hired ARCA (UBC spinout) to look at CO2 capture using Mt Keith tailings. Good to see more people recognizing the potential of mineral sequestration.

Panoramic Resources looking for a buyer for Savannah mine. Past producer restart which has not gone well – don’t want to be broken record, but this is a resource at brownfield site 13.45Mt @ 1.56% Ni, 0.70% Cu and 0.10% Co for 209.8Kt Ni, 94.2Kt Cu and 13.7Kt Co contained metal (about 2% Ni-Eq) and couldn’t make work!

Something you don’t see very often, Norilsk PAID someone to sell their share in the Nkomati asset in Southern Africa. Old low-grade disseminated open pit which produces a very low-grade concentrate.

Financings:

Perseverance Metals (private company) – a bunch of old FNX crew raised $2.8 million in Targeting higher grade nickel sulphides in Michigan, remote Quebec, and NW Ontario. Some good historical holes at some of the properties. Michigan was owned by Bitterroot Resources – good to see targeting new discoveries. Potential for good promo holes. Let’s hope they find some good nickel – we need it all.

Fathom Nickel raising $4.5 million.

Premium Nickel raised a total of $22 million – $17 million in equity and expanded the existing debt facility by another $5 million. In exploration-stage companies without a clear path to major milestones, debt is dangerous. We stated a warning on this one last time. Hope it doesn’t come true – but this is one that has massive downside risk from the current valuation. 

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Recording date: 30th November 2023

The Battery Show (Copper Bottomed, Episode 7)

A double-header this week as Merlin was on Jury Duty for the past fortnight. Key market news includes Supreme Court of Panama ruling that the Cobre Panama contract was unconstitutional. The mine produces about 25,000 tonnes of copper per month and has closed down, temporarily one would think. 

Also in the news is the purchase of the 1.9 Mt contained copper Khoemencau project by China’s MMG for US$1.9 billion. Another major that finds it easier to buy than to discover. 

Merlin then runs through two weeks’ of exploration results from: DLP Resources, American Pacific Mining, Atico Mining, Cascadia Minerals, Lara Exploration, Halcones Precious Metals, Northstar Gold, O3 Mining, Benton Resources, Minsud Resources, Arizona Sonoran Copper and Pacific Ridge Exploration. 

Poor drafting abounds, and several companies continue to ignore TSX reporting guidelines. Repeat offenders are losing airtime. Benton Resources is producing some cracking results. 

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Recording date: 17th November 2023

The Battery Show (Copper Bottomed, Episode 5)

Copper has long been considered a bellwether for the global economy, yet prices have held up remarkably well lately despite economic headwinds. This resilience is signaling strengthening fundamentals poised to drive copper higher. Supply constraints are mounting while demand continues to expand, tightening the market more rapidly than expected.

Most impactful was Ivanhoe Mines’ mega discovery in the Democratic Republic of Congo of over 16 million tons of 3.55% copper along with 154 million tons at 1.89% copper. This remarkable grade is nearly 7 times the global average, with over 3 million tons of contained copper. Once infrastructure is established, this could be a generational low-cost, high-margin mine.

Alarm bells are ringing on the supply side as smelters struggle to source enough copper concentrate. Trafigura is now having to help Chinese smelters obtain sufficient imports to meet blistering demand. With mines already operating full tilt, this sets the stage for the type of demand-driven copper bull markets of the past.

Meanwhile, Cobre Panama, one of the world’s largest new copper mines, is experiencing severe production issues. Output is being throttled back as protests block port shipments. Many experts believe its mining license will be revoked, potentially removing 300,000 tons of supply next year. This would substantially reduce the forecast 460,000 tonne market surplus in 2023.

The demand backdrop remains positive for copper as well. Commitments were renewed at COP27 to triple renewable energy capacity by 2030. This will necessitate a tremendous amount of copper, as renewable systems require 4-5 times more copper per megawatt than conventional energy.

While inflation is easing a bit, governments are still spending heavily on infrastructure and stimulus programs. Manufacturing and construction activity in top consumer China have also picked up. With the electrification of transport gathering pace, copper demand looks resilient despite economic hurdles.

The takeaway is clear - new supply is not coming online fast enough while demand continues expanding. Copper prices need to rise considerably to incentivize the huge investments required for new mines. Juniors offer upside potential, but extensive due diligence is mandatory given the risks.

With global decarbonization accelerating, copper will become increasingly scarce. Its essential role in renewable energy makes it poised to be one of the best performing commodities of the coming decade. Investors seeking commodities exposure should have copper at the top of their list. The warning signs of a major supply shortfall are already flashing bright red.

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Recording date: 16th November 2023

Nickel, trading down again around $17,000/tonne level (think may briefly touch $16,500), but expect to trade in its recent range between $17,000-$17,500 before we start moving higher at year-end. LME inventories in the same range. Ore and NPI prices both came off their recent highs as was reported that Indonesia granted some temporary ore quotas to reduce the need to import ore.

Before getting to company news, and a follow-up from last week, global EV sales were up 23% in September and YTD up 39% - hardly a death spiral that you might think given some of the recent headlines…Remember some key markets saw the removal of some subsidies which obscure overall trend.

Is anything wrong with CNC?

Spruce Ridge just acquired 80% interest in Homeland Nickel with the project in Oregon which was home to US’s only nickel mine for quite a while. Steve Balch, interim President and CEO, stated, “Spruce is poised to enter the U.S. critical minerals market with two important properties containing significant resources of nickel with further expansion potential. We have now signed the definitive agreement to complete the acquisition. Together, Cleopatra and Red Flat have resources equivalent to over 1 billion pounds of nickel.” Cleopatra and Red Flat are nickel laterites with resources identified in soil and rock. The most recent work included unpublished NI 43-101 reports (“Evaluation of the Cleopatra Ni/Co Property Mining Potential, Curry County, Oregon, U.S.A.”, A.J. Rancourt, 2009 and “Evaluation of the Red Flat Ni/Co Property Mining Potential, Curry Country, Oregon, U.S.A”, A.J. Rancourt, 2009) which identified total inferred resources at Cleopatra of 39.5 Mt grading 0.93% Ni and at Red Flat of 18.8 Mt grading 0.84% Ni both using a 0.7% Ni cut-off.

Horizonte Minerals, from bad to worse, and not sure what’s worse than worse. Provided project updates, ”to manage resources and funds whilst undertaking discussions with the Company’s cornerstone shareholders and lenders, the Company intends to reduce construction activities at Araguaia, advancing only critical work streams” to preserve remaining cash into the new year. Not expecting the funding solution to close until the end Q1/24. On earlier shows, we were suspicious of capex estimates (given Barro Alto and Onca Puma costs), but after multiple investors came in, thought maybe we were being too hard…

Centaurus announced a further delay in completing FS – now coming in Q1/2024 because engineer Ausenco needed more time to complete opex and capex estimates as suppliers are slow in responding

TLO released 14 holes – some good grades – 14 out of 20 outside the current resource.

IGO-Buxton Resources JV – had one of the best holes and new greenfield discovery in the Kimberly region in the north.  Good picture of “pentlandite eyes” in the core and a well-laid-out release which lets you see the size of the target (currently not massive)
Table 1: Dogleg Prospect Significant Drill Intersections: 23WKDD003 177.34 13.24metres of 4.35Ni,  0.34Cu,  0.15Co includes 5.60metres of 7.47Ni, 0.31Cu, 0.25Co

IGO - Cosmos - have spent more than $A500 million developing so far, suspended guidance for the year. Was part of the acquisition of Western Areas they wrote off nearly $A1 billion shortly after the acquisition. Figuring out how to ramp up. Talk about grade so often – this is a past-producing mine targeting new deposits with 10 million tonnes at 2% nickel and they’re struggling. 

Premium Nickel (PRNL) also released drill results – consistent with what’s there but grade x widths at the depths they’re talking about are tough to see how economic it is.

SNUG-23-025 (South Limb): 9.25 metres of 1.78% NiEq (1.35% Ni; 0.67% Cu; 0.07 % Co)

SNUG-23-018 (N2 Limb): 9.85 metres of 1.28% NiEq (0.77% Ni; 0.95% Cu; 0.04% Co)

including 5.6 metres of 1.06% NiEq (0.50% Ni; 1.13% Cu; 0.03% Co) and 2.45m of 2.24% NiEq (1.75% Ni; 0.72% Cu; 0.09% Co)

After Horizonte Minerals and Chalice Mining,  need to highlight this company valuation (and kudos to them for getting it to this level) relative to other projects in the nickel space.  It’s more than a number of other nickel projects with larger and/or higher grade resources, much more advanced, is ¾ of Centaurus which is going to have FS out shortly.

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Recording date: 9th November 2023

The Battery Show (Copper Bottomed, Episode 5)

This week's discussion covers recent exploration results and market news related to copper mining companies. Merlin starts with Arizona Sonoran who announced drill results from its Parks/Salyer and Cactus Mine projects in Arizona, USA. The company completed infill drilling at 38-meter spacings at both deposits, highlighting continued mineralization. The best results were 1.97% total copper over 165 meters at Parks/Salyer and 83 meters at 2.5% soluble copper at Cactus East.

Valhalla Metals, a small exploration company with an $8 million market cap, reported results from its maiden 4-hole, 1100-meter drill program at the Sun project in Alaska, USA. Highlights included 21 meters at 6.8% copper equivalent. However, only 1.3% was actual copper, with the rest being zinc. The company used questionable assumptions for the copper equivalent calculation. Overall, the project relies on nearby infrastructure being built by Trilogy Metals.

Benton Resources, market cap of $24 million, announced partial assays from its first drill program at the Great Burnt copper-gold project in Newfoundland, Canada. Early highlights included 4% copper over 3 meters and 8% copper over 4 meters. Due to early success, the initial 2000-meter program has been expanded to 4000 meters. However, the news release included confusing technical jargon and lacked cross-sections. Previous drilling delineated a 670,000-tonne resource at 3% copper.

Imperial Metals, market cap of $312 million, drilled 165 meters at 3% copper at its Whitting Creek target, located 8.5km from its past-producing Huckleberry mine in British Columbia, Canada. The intersection is at the reserve grade of the former mine, which closed in 2016. More exploration work is underway to potentially expand resources and restart the Huckleberry Mine.

Mine supply is expected to peak in 2026 while the project pipeline is low, pointing to supply shortages. $120 billion of investment is estimated to be needed over the next decade to fill supply gaps. Demand continues to grow, especially related to electrification and grid infrastructure. Overall, higher copper prices will be needed to incentivize new mine development.

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Recording date: 7th November 2023

Nickel prices trading this AM at $17,600 ($8.00) after trading back up to $18,000 at start of the week. Got a little boost as a few thousand tonnes came off LME inventories taking them back to where we were at the start of October. Expect nickel prices to bounce off the bottom here for the next little while until we underlying growth in both EV and stainless comes through and we get past battery chain destocking from lower lithium prices (will get into some of the details later in the discussion today).

“Great convergence” still underway – sulphate prices trading flat to nickel prices, NPI discounts continue to contract by another several per cent, and MHP now trading at 78-80% of LME price (about halfway back to the low 90s% level 18 months ago). One analyst reported seeing more contracts now incorporating processing fees (25,000 RMB / $3,400 per tonne) rather than %.
Bulls emboldened to push back as more stories about ore quotas and ore imports from the Philippines. Indonesia set to unveil new pricing mechanisms at the end of the month – stay tuned. Indonesia has more control over the nickel market than OPEC did at its peak – no 4X increase in price, but will do what it takes to maximize value from a finite resource base.

China’s Stainless Steel Council has released the country’s output figures for the first nine months of this year. Crude stainless steel output over this period was 26.6Mt, up 11.8% on a y/y basis, while that of nickel-intensive 300-series was up 14% y/y at 13.6Mt. Combining production and trade, China’s stainless steel apparent consumption rose 9.2% y/y to 22.3Mt during the first nine months. Will see production rates drop off a little bit during the last few months as Chinese seasonal demand is not as strong as anticipated – but strong demand given all of the economic headwinds we’ve had over the last 12 months.

EV sales – will have more next week for September – but China is up 22% y-o-y.  People seeing a few models not selling well and extrapolating across the market – will be interesting to see what totals look like for the US. Will have more on this next week.

Rumours of possible limited FT agreement with Indonesia. Letter from bipartisan.

Not a concern – we need some amount of Indo nickel into US/Europe – no real new Western supply- effectively zero in next 2-3 years. Western car companies (particularly the higher end of the market, not going to depend on high carbon, environmentally damaging nickel from Indonesia. 

Canada Nickel Crawford project is the only large sulphide project that can come online by the end of 2027. We need more than half a million tonnes for US/Europe. We need EVERY big project in Canada to come to market – current across-board weakness is not reflected in physical discussions. The urgency of automakers and battery supply chain has taken a massive step change in the past 6 months – we are formally starting our process for Crawford in early December once FS report is filed end of month and expect it is going to be a very fun, profitable process for our shareholders. 

Glencore announced that Nickel Rim South (core mine in Sudbury) going on care & maintenance next April. Will be replaced by Onaping Deep mine which is ramping up in Sudbury. Keeping on C&M to be able to access Vale’s Victor deposit (which is larger than the original Nickel Rim Deposit) – is a shame for Sudbury & Canada that this hasn’t happened yet (was a key part of synergies in the 2005 Inco-Falco merger).

Magna Mining released more drill results from 4 holes from its Crean Hill project – the best intercept (into crown pillar) was 96m of 0.75% Nickel, 1.29% Copper, and 2 g/t PM.

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Recording date: 2nd November 2023

The Battery Show (Copper Bottomed, Episode 4)

Copper prices hit $3.67/lb this week, up from $3.57/lb last week, partly driven by protests in Panama that threatened production at First Quantum's Cobre Panama mine. The mine contributes nearly 5% of Panama's GDP but protests erupted after the government rapidly passed a law extending First Quantum's mining concession by 20-40 years. The protests highlight political and social risks for mining projects, even major contributors to local economies. The resolution of the protests remains uncertain but Panama relies heavily on Cobre Panama so an extended shutdown seems unlikely.

The copper market faces a 460,000 tonne surplus in 2024 per the International Copper Study Group. However, Anglo and Teck recently cut guidance so the market could balance or even tighten if more mines miss targets. Tightness underscores the asymmetry in copper due to the lack of new mega projects coming online in the next decade.

Filo Mining discovered a new high-grade copper/gold zone outside its main Aurora resource area in Argentina, highlighting expansion potential. However, with a $2.3 billion market cap, significant new discoveries are needed to double Filo's valuation. The resource used relatively high metal price assumptions while the latest results used more conservative prices. More metallurgical work is also needed. Filo is a quality asset but substantial upside is challenging from the current share price.

Lion Copper & Gold hit high-grade copper intercepts but they were 700-900 metres deep, likely requiring underground mining. The results are encouraging but Lion needs to better demonstrate potential to delineate high-grade zones for a lower cost open pit before getting investors excited. More complete drill hole depth disclosure and metric unit reporting would also help.

Meridian Mining discovered a 3+ km long copper/zinc zone near its flagship project which could provide additional mill feed. However, reporting excavation results as copper equivalents based on existing resources is questionable. The potential value from the new zone is also unclear until more detailed economic studies are done. Meridian has upside but still carries risks typical of single-asset junior miners.

The copper market shows signs of emerging tightness but juniors with new discoveries still need to de-risk projects substantially before onboarding large institutional investors. Retail investors with higher risk tolerance may find upside in selecting exploration stories like Filo, Meridian and Lion but expect volatility and invest small amounts as part of a diversified portfolio.
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Recording date: 1st November 2023

Nickel prices bounced off the $17,500-$18,000 range as expected, with inventories continuing to gradually increase. The "great convergence" continues as the premium between nickel sulphate and NPI has narrowed.

Fastmarkets launched new price indexes for nickel pig iron (NPI) and mixed hydroxide precipitate (MHP) exports from Indonesia to bring more transparency to battery raw material markets.

Indonesia is re-confirming the ban on new class II nickel smelters to maintain balance between nickel ore supply and demand. Mining quotas will likely be used to manage supply.

Company News:
Canada Nickel released a feasibility study for its project. Alaska Energy released more drill results for its bulk tonnage nickel project and plans to release an inferred resource in 2023.

Rio Tinto signed an agreement to earn up to 80% of a nickel project from Sultan Resources by spending $2m on exploration.

Alliance Nickel delayed its feasibility study for its nickel leach project in Australia to mid-2024 due to higher than expected costs. Australian nickel leach projects have historically struggled, so new projects will need cautious evaluation.

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