Canada Nickel Company Launched And the Timing Could not be More Propitious

Alessandro Bruno
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The revival of interest in nickel should benefit Canada and the Greater Sudbury and Timmins regions of Ontario in particular, given their significant and well-known nickel deposits. In particular, the higher nickel prices, will encourage investment into the sector, including into better equipment for deeper mining. And given the overall context, nickel might well be one of the resources with the least amount of price volatility for the foreseeable future. It is in this context that Noble Mineral Exploration Inc. [CVE:NOB; OTCMKTS:NLPXF] plans to establish the Canada Nickel Company, launching a new project around the Crawford nickel-cobalt sulphide project in the Timmins-Cochrane area of northern Ontario to be led by Mark Selby, who boasts considerable expertise in nickel mining, having served as president and CEO of RNC Minerals Corporation and leading the development of the Dumont nickel-cobalt project in the Abitibi region of Quebec (containing the second largest nickel reserve and ninth largest cobalt reserve in the world). The project will be funded through a fully subscribed $5.0 million private placement. The Crawford Project is an ideal place to start, given its well known geology and mineralogy and its under-exploration. The first drilling program the Project intersected serpentinized dunite at a persistent grade, higher than 0.25% nickel. But, what sets the Crawford Project and the Canada Nickel Company apart as an investment opportunity is the timing. There is considerable upside for early participants, given the growing global demand for nickel.

Nickel Has Entered a Sustained Bullish Phase

Nickel is a metal, whose name possibly derives from either the Swedish name ‘Nickel’, a diminutive of Nicolaus, associated with goblins and restless children or from the German ‘Kupfernickel’, false copper. The Germanic names defy the fact that nickel ores were used in the ancient Middle East, perhaps confused with silver ores. Thus, the deliberate use of nickel is a far more recent development owing to the accidental extraction of a white metal from the ore known as niccolite in the mid-18thcentury. The Graeco-Indian Hellenistic Kingdom (comprising of present-day Afghanistan and parts of the Punjab) minted nickel-copper coins in the II century BC, while the first pure nickel coin, the three-cent ‘nickel, was minted in 1881. But, nickel’s future is not in coins; rather it’s in rechargeable batteries both for small-scale items as smart phones and for larger scale ones such as electric cars, booming.

This is one of the main why the long-term prospect for nickel prices is bullish. In the shorter term, prices of nickel will rise because of an Indonesian export ban. While Russia’s Norilsk Nickel (MCX:GMKN, LSE:MNOD) is the single largest nickel miner, Indonesia has become the largest nickel producer (at some 400,000 metric tons annually):

Rank            Country                          Mine Production (in Metric Tons, 2017)

1                      Indonesia                                400,000

2                      Philippines                               230,000

3                      Canada                                    210,000

4                      New Caledonia (France)          210,000

5                      Australia                                  190,000

6                      Russia                                      180,000

7                      Brazil                                       140,000

8                      China                                       98,000

9                      Guatemala                              68,000

10                    Cuba                                        51,000

Source:(Worldatlas)

The Catalyst for Nickel Upside

While nickel has been most commonly associated with coins and stainless steel, demand has been increasing; because, it is also used in the manufacture of rechargeable batteries. With more and more automobile manufacturers adding electric-car models to their product lineups, nickel could achieve successive production peaks over the next few years. More significantly, nickel prices are going up, which should continue to boost the performance of nickel mining stocks in the longer term. In the short-term, however, nickel prices should move higher because of related developments in Indonesia, the world’s most prolific producer (see chart above).

Nickel in Indonesia

The production of nickel in Indonesia shall continue to increase, but the better news is that the Government of Indonesia has ordered a nickel export ban, which should induce a supply shortage. Expectations of the shortage have already sent nickel prices surging from about $12,000 per tonne to over $17,668 per tonne  in the period from July to October 3, 2019. Indonesia’s export ban is intended to stimulate a domestic processing industry, producing higher value-added goods. But, it threatens to cut off supply just as demand for battery production is increasing. Indeed, by 2030, demand for nickel could increase 16 times compared to the present, leaving a nickel supply deficit of some 2.0 million tons. (Source: Economic Times).

The world has simply become more ‘battery dependent’. There simply aren’t sufficient active resources of so-called battery metals (cobalt, lithium, copper among others) to feed both the demand for small and increasingly common devices such as smartphones and ‘home assistants’ such as the Amazon Alexa and batteries for electric cars. Nickel is part of the solution to this growing crisis. Tesla Motors has been leading the way by substituting cobalt (much of which comes from difficult to regulate producers in the Dem. Republic of Congo, which adds considerable corporate governance risks) for nickel. The fact that Tesla, the company behind the battery Gigafactory, has been among the first to sound the battery metal shortage alarm, can only generate more demand for nickel. And this demand can only be fulfilled by more nickel mining; especially, given the Indonesian restrictions….and that others could decide to follow Jakarta’s example.

Alessandro Bruno

Alessandro Bruno

Alessandro Bruno, born in Naples, (BA and MA in International Relations, University of Toronto). Alessandro is a research analyst and writer in various business sectors and international politics. He was a Programme Officer for the UN in North Africa and a senior for one of the first international sustainable investment...
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