Please give a brief overview of your operations at the Crawford Nickel Sulphide Project.
Canada Nickel Company Inc. (TSXV: CNC) is aggressively advancing its wholly-owned its Crawford Nickel-Sulphide Project, a new nickel sulphide discovery in the heart of the prolific Timmins mining camp located in northeastern Ontario. The project is located adjacent to a provincial highway with all of the major mining support infrastructure (highway, power, rail) in place.
In May 2021, just 20 months after drilling commenced at the project, Canada Nickel completed its Preliminary Economic Assessment (PEA), which confirmed robust economics showing an after-tax NPV8% of US$1.2 billion and an after-tax IRR of 16%. The PEA demonstrates that the Crawford Project has the potential to be one of the largest nickel-sulphide operations globally, producing 1.9 billion pounds (842kt) of nickel over a 25-year life of mine, with net cash costs of just over US$1 per pound ($2,400/t). The company has begun its Feasibility Study which it expects to complete in 2022, just three years after drilling commenced.
Based on the results of the PEA, Crawford is expected to produce two nickel concentrates, a high-grade concentrate expected to be the world’s highest-grade nickel concentrate at 35% nickel, a standard grade concentrate containing 12% nickel, and an iron concentrate containing chrome targeting the stainless steel market. The PEA had all products focused on the stainless steel market while the feasibility study is expected to have roughly equal amounts of nickel delivered into both the EV and stainless market. In April 2021, the company commenced an Environmental and Social Impact Assessment, as it actively advances the permitting for the project to allow Crawford to begin production by the middle part of the decade when the Company expects the nickel market to be entering one of its “supercycles”, which occur every 15 to 20 years.
Please tell us about your foray into zero-carbon nickel production through your wholly owned subsidy NetZero Metals Inc.
Zero carbon production has been an integral focus for Canada Nickel since it was founded in late 2019. The Company formed NetZero Metals Inc., a wholly-owned subsidiary, which will market the Company’s products and is leading its research to achieve zero-carbon products. Canada Nickel has applied and obtained for trademarks for NetZero NickelTM, NetZero CobaltTM, and NetZero IronTM in most major jurisdictions. The company is currently evaluating the use of various technologies to achieve our net zero objectives at each stage of the mining process: mining, milling, and processing.
At present, the Crawford Project offers two significant advantages that provide a strong foundation of our net zero focus and have already allowed the company to achieve lowest decile carbon curve concentrate production based on the results from its PEA. First, all contemplated operations are expected to take advantage of low-cost, low carbon hydroelectricity abundantly available in the Timmins region which allows the company to utilize available technology to reduce the carbon footprint of mining activities through the use of electric shovels and trolley trucks which utilize electricity, rather than diesel fuel, as a power source wherever possible – substantially reducing CO2 emissions.
Second, the Crawford deposit largely comprises serpentine rock that spontaneously absorbs CO2 when exposed to air. Numerous studies have been completed that demonstrate that serpentine rock naturally absorbs CO2 when exposed to air through a naturally occurring process of spontaneous mineral carbonation which permanently stores this carbon. As a result, the generation and deposition of waste rock and tailings during the mining process will expose the serpentine rock to air allowing CO2 capture through natural mineral carbonation which, we believe, will be sufficient to offset the CO2 emissions from the project. Research on the exact amount and rate at which CO2 can be absorbed from materials mined at Crawford is currently underway.
Canada Nickel is also exploring opportunities to reduce the carbon footprint of the downstream activities required to process its concentrates into final products by utilizing natural gas and products, such as biochar, which would take advantage of waste or unutilized wood products from the forestry industry already located in the Timmins region. This would eliminate the use of coal as a reductant in nickel and iron processing. The company is also looking at existing hydrometallurgical processes which are inherently lower carbon to produce nickel and cobalt products.
In terms of the mining industry, in your view, what are some of the major problems associated with producing Class 1 nickel for EV batteries, and how does Canada Nickel address these?
There are three far more important issues for the nickel industry than Class 1 vs Class 2 supply, which we view as a non-issue in the medium and long-term. Each of these issues underpins how important we believe Crawford will be to North American and European nickel consumers in the coming decade.
The first and most important issue is, simply, the overall supply of nickel to meet the demand from all segments of the market, which we believe will fail to keep pace with demand as we believe demand from the EV sector, on top of continued strong growth from stainless steel, will push nickel demand to over 5Mt by 2030 – more than double the level in 2020 and far in excess of projected supply forecasts today. Unfortunately, this will push prices by the middle of the decade into substantial price spikes (which occur every 15 to 20 years in nickel) to force demand in line through substitution in both the stainless (to lower nickel 200 and 400 series stainless steels from 300 series) and EV markets (more LFP, less NCM) with the available supply. Nickel demand in 2021 will be up nearly 15% this year – three to five times the other base metals and far greater than any of the commodity analysts had forecast at the start of the year and pushed nickel to what may be its largest deficit yet – and contrary to the 3 to 5% surpluses that most analysts were calling for less than a year ago.
The second is the concentration of nickel supply. NPI production, in China and Indonesia, has represented more than 100% of supply growth for the last five years and will continue to be the dominant source of growth for at least the next five years. This will leave Indonesia, alongside the Philippines and New Caledonia, providing more nickel supply than OPEC did for the oil market at its peak in the early 1970s. Few U.S. and European companies will want to have a critical component of their supply chains dependent on effectively Chinese-controlled regions of Indonesia. Indonesia has already made announcements that they are looking at additional bans and taxes to ensure most of the nickel is processed and upgraded in the country. In this context, Crawford, located in Canada, will be viewed as an attractive and safe source of supply for many consumers.
Class I versus Class II supply of nickel is a non-issue in the medium and long-term
The third issue is the airborne environmental reality of nickel production. The current generation of NPI production in China comes with a massive CO2 footprint – 50 to 80 tonnes per tonne of nickel produced – and the prior generation of supply from large sulphide deposits still generate substantial amounts of SO2 per tonne of nickel produced, with devastating environmental impact.
We believe that large, lower-grade deposits like Crawford, with multi-million tonnes of contained nickel, which can be easily scaled as an open pit mining operation, and are hosted in rocks that spontaneously absorb CO2 with zero-carbon production potential, represent the future third generation of nickel supply and the first without a massive airborne footprint.
Class I versus Class II supply of nickel is a non-issue in the medium and long-term. As announcements made by Tsingshan and many others during the past year illustrate, nickel can be supplied via any ore source to any end market and that China and others are quickly building the capacity to make that processing flexibility available very cost-effectively to end consumers.
Many countries are looking to establish their own supply chains to help further the energy transition without reliance on China. How does Canada compare as a nickel-producing jurisdiction with Indonesia, for example, and what are the advantages?
Canada is ideally positioned for an integrated mine-to-EV supply chain as it is one of the few countries in which has production capacity at both ends of the supply chain: the mines that can produce and process the nickel, cobalt, lithium, graphite, and other materials that EVs require, and the automobile assembly plants that will build the electric vehicles. Much of the U.S. automobile industry is within a few hundred miles of the Canadian border. Canada Nickel’s Crawford project in Timmins is ideally positioned within 1,000 miles of most of these automobile plants and the closest source of nickel after Sudbury (where production has been shrinking for the past decade), to most of the North American auto industry.
We view Canada Nickel as the leader in the next generation of large-scale nickel supply and one of the few new sources of potential mined nickel supply outside of Indonesia and China.
How do you see the future of nickel and cobalt production developing as demand for EV batteries grows? For instance, will supply chains focus only on higher quality deposits?
We believe that the fundamental issue for the market is providing enough nickel for all consumers by the middle part of this decade given the high growth rates that are expected. So the quality of the deposit won’t matter. What will matter to some consumers is the carbon and environmental footprint of the nickel that gets produced, and deposits like Crawford should be a preferred source of supply.
Are you seeing investors being attracted to Canada Nickel’s low-carbon approach, as well as general ESG practices in mining?
Most definitely. Canada Nickel’s plans for net-zero operations to deliver a new generation of nickel – one that provides an alternative to carbon-intensive nickel mining operations seen elsewhere in the world, often in less stable jurisdictions – is resonating with a broad group of investors of all sizes. Both retail shareholders and professional money managers understand that the transition to low-carbon and net-zero mining operations, especially in battery metals, has the potential to obtain lower costs capital for construction financing, attract strategic partners at the project level, or achieve preferential commodity pricing. Furthermore, the base metals and nickel majors are not only looking to replace depleting reserves but are factoring ESG considerations into M&A approaches as they come under increasing scrutiny by capital markets and broader stakeholders to decarbonize aging operations and assets.