It’s all about the nickel. Regular readers of this news service will know just from our own coverage how desperate many big companies are for secure nickel supplies, ideally from their own region. With the Biden administration applying more pressure on manufacturers in the US to mend their ways and become more planet friendly, American firms are casting around for a big new source of nickel in their back yard.
FPX Nickel Corp (TSX-V:FPX) could be that resource.
Why nickel, and why now?
Nickel demand is forecast to grow steadily between now and 2040. The stainless steel industry, a consistent buyer of nickel, is yielding ground to the battery sector, which made up only 6% of the sector in 2020, and is forecast (by Roskill) to account for 36% of nickel demand by 2040. Glencore sees 3.7x growth in nickel demand by 2050, as compared to 2019 levels. Growth in demand is expected to outstrip that of copper or zinc.
A good nickel mine, in Canada, would be just what US industry would like to see. The Decar Nickel District hosts the FPX Nickel Corp Baptiste Project, one of the world’s best development stage nickel projects, reckoned to have the potential be one of the world’s top 10 largest nickel mines by output. It has the added benefit of superior green credentials – e.g. the lowest carbon intensity in the nickel industry and non-acid generating host rock.
Why Baptiste looks like a winner
Location-wise Baptiste is well positioned to tap existing transport infrastructure to both factories in North America and via sea to Asia. In British Columbia alone it can leverage excellent local mining transport links and abundant supplies of fresh water.
But it’s the scale of the thing that really impresses us. Baptiste breaks down into an identified higher grade starter pit plus a broader ‘ultimate pit’ that is included in the mine’s 2020 PEA (see below). FPX Nickel has also identified what it is calling a significant new discovery at its Van Target. Here 35% of surface samples in the area are grading at over 0.12% DTR Ni.
With the Baptiste Project we are looking at total contained nickel at a relatively consistent level of 0.2 to 0.24% Ni. It represents a premium nickel product suitable for either the stainless steel or the batter market. The EV battery market requires a Ni-Co solution that has minimal impurities and can be leached under moderate conditions. This could be that resource.
PEA confirms potential as a top 10 nickel resource
The 2020 PEA confirmed the FPX Baptiste Project as one of the world’s most robust, large scale nickel projects. It has a pre-tax NPV of $2.93bn and a pre-tax IRR of 22.5%. C1 operating costs (mining, milling, concentrating) are $2.74 / lb of nickel. The payback period after tax is estimated at four years.
The PEA is based on assumptions that include processing throughput of around 120,000 tonnes a day, a mine life of 35 years and a nickel price of around $7.75lb. This is a heavyweight project, however, with pre-production capital expenditures estimated at $1.67bn. Sustaining capital expenditures come in at $1.1bn. But Baptiste still represents a relatively cheap source of nickel when matched against general industry nickel mining costs at the moment.
Baptiste compares VERY favourably against many of the existing big nickel projects, with lower operating costs than the likes of Sunrise in Australia or Araguaia in Brazil. It also has a significantly longer potential mine life than cheaper projects like Tamarack or Eagle’s Nest.
In our view this looks like an incredibly exciting nickel project. The US is going to need nickel, and lots of it. The Biden administration is already making noises about how the country needs to secure the right metals supplies to fuel its transition to a greener economy. FPX Nickel looks like it could well have the solution. A large, cost-effective mine like this is going to be on many US auto manufacturers’ Christmas lists.
