Canada Nickel: Building a World Class Nickel Project

Canada Nickel (TSXV:CNC) (OTCQX:CNIKF) recently released results from the Bankable Feasibility Study (BFS) for its Crawford Nickel Sulphide Project, confirming and improving on the economics from the earlier Preliminary Economic Analysis (PEA).

With an after-tax NPV8% of $2.5 billion and IRR of 17.1%, or $2.6 billion and 18.3% when including carbon tax credits, Crawford is positioned to be one of the largest and lowest cost nickel mines in the world.

Crawford, located in Timmins, Ontario, Canada, has the world’s second largest nickel reserve. Once Crawford gets started, its poised to be one of Canada’s largest carbon storage facilities and a net negative contributor of CO2 over the life of the project.

Project Highlights

  • $2.5 billion after-tax NPV₈% and IRR of 17.1%; increasing to $2.6 billion after-tax NPV₈% and IRR of 18.3% with projected Carbon Capture & Storage tax credits
  • Production of 1.6 million tonnes nickel, 24 kt cobalt, 490 koz palladium & platinum, 58 million tonnes iron and 2.8 million tonnes chromium over 41-year project life
  • Annual EBITDA of $811 million, free cash flow (FCF) of $546 million, and 48ktpa of nickel production during peak 27-year period
  • Crawford is world’s 2nd largest nickel reserve and 2nd largest resource1. Initial mineral reserve of 1.7 billion tonnes of ore grading 0.22% nickel

We had the chance to chat with the CEO, Mark Selby to provide colour on the significance of the report and economic value of the project.

Crawford BFS in Brief

Crawford is planned as a conventional open pit mine/mill operation, built in two phases. The first phase will cost $1.9 billion and have a mill throughput of 60 ktpd.  Phase II is planned for commissioning in the fourth year, will get mill throughput to 120 ktpd, at a cost of $1.6 billion. Phase III is in 30 years, when the 120 ktpd milling rate is satisfied from stockpiled lower grades.

Crawford is estimated to have an annual average nickel production of 83 million lbs (38k tonnes) over its 41-year life.  The production breaks down to 48 ktpa nickel, 0.8 ktpa cobalt, 13 koz palladium and platinum, 1.6 Mtpa iron and 76 ktpa chrome over its 27-year peak period. Crawford is in the first quartile of the cost curve, with a net life-of-mine cash cost of $0.39/lb nickel on a by-product basis.  The net AISC cost, also on a by-product basis is $1.21/lb nickel.

Crawford by The Numbers

Projected revenue is strong at +$48 billion, or more than $1 billion annually over the life of the project. The after-tax project returns are looking good: $2.5 billion NPV₈% and 17.2% IRR; increasing to $2.6 billion NPV₈% and 18.3% IRR, including the expected Carbon Capture and Storage tax credits received. The overall payback is 5.6 years and peak capital requirement to build is $1.7 billion. This is less than the $1.9 billion initial capital cost estimate, due to the inclusion of the Critical Minerals Income Tax Credit.

Canada Nickel anticipates that government tax credits will be more than $1 billion over the life of the project, given a scenario where they receive both Critical Minerals and Carbon Capture credits.

Recoveries & Cash Flow

We’ve seen significant improvement in resource recoveries from the PEA, with a 10% improvement life-of-mine (41% vs. 27% used in the PEA), and a 23% improvement in Phase I/Phase II when compared to the PEA (46% versus 37% in the PEA).  Crawford in poised to generate strong earnings and free cash flow (FCF); with a projected annual EBITDA of $810 million and FCF of $540 million over its peak period, and an annual EBITDA of $667 million and FCF of $431 million over the life of the project.

Mineral Processing

Crawford will produce two concentrates with life-of-mine average concentrate grades:

  • Nickel concentrate: 34% nickel, 0.7% cobalt and 4.1 g/t combined palladium and platinum
  • Iron ore concentrate: 55% iron, 0.3% nickel, 2.6% chromium

Canada Nickel believes the nickel concentrate is the highest-grade concentrate in the market and has lots of potential to be used in both the battery metal and stainless steel sector. The iron ore concentrate has the three key ingredients for the 300 series stainless steel and alloy market, and the company expects it to directly feed North American production.

Carbonation is the Key

We would be remiss to not mention the great potential for carbon capture.  First, Canada Nickel has made good strides in reducing its carbon footprint. Crawford’s operations are planned to minimize its carbon footprint at 4.8 tonnes CO2/tonne of nickel in concentrate, 2.3 tonnes CO2/tonne nickel equivalent (NiEq).  This is mainly due to the sites’ switch to an electrically powered mining fleet (including trolley-assist trucks), which is expected to reduce diesel consumption by over 40%.  The company will also take advantage of the natural features of their deposits to boost their carbon capture efforts.

Crawford, and Canada Nickel’s other properties in the Timmins Nickel District are hosted in ultramafic rock, which contain minerals that naturally absorb and capture CO2. The company has been busy developing a novel IPT (In-Process Tailings) Carbonation process. To make it simple, the process injects a concentrated CO2 into the tailings while they are still processing vs. after they have been fully deposited.

The IPT Carbonation process should allow capture and storage of 1.5 million tonnes of CO2 annually during the projects’ peak period – most of that will be sold to third parties generating an estimated C$37 million at carbon prices of $25 per ton.

Canada Nickel believes that this process will be a very effective carbon storage solution, that would meet Environment and Climate Change requirements for the Carbon Capture, Utilization and Storage (CCUS), and the Critical Minerals Investment Tax Credit (ITC), outlined in the Canadian government’s 2023 Federal Budget presentation. The company has already received interest from multinational corporations requiring carbon storage solutions, as the world aims for NetZero.

Overall, Canada Nickel expects to have a net negative carbon footprint from carbon capture, and a storage capacity of 30 tonnes CO2/tonne of nickel, after accounting for the carbon footprint of the project. An impressive achievement, which we believe is a gamechanger for the nickel and larger mining industry.

What’s Next for Canada Nickel?

In tandem with the completion of the BFS, the company is doing the necessary work to obtain federal and provincial permits, as well as develop a financing package with its advisors (i.e., Scotiabank, Deutsche Bank and Cutfield Freeman) by mid-2025.

Next, they will decide to begin construction of Crawford with the aim of first production by the end of 2027, making this potentially the first negative emmissions nickel project in history.

Canada Nickel will use the BFS results in its ongoing engagement strategy – building meaningful and productive relationships with its indigenous partners and surrounding communities.

A technical report in support of the BFS will be filed with the Canadian securities regulatory authorities on SEDAR+ next month.

Canada Nickel is a market awareness client of Capital 10X.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Duane Hope is a Partner at Capital 10X, he brings over 15 years of communications and research experience to the firm. His research and writing have appeared in publications for North American, European and Asian audiences.


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