Nickel – The Underfollowed Battery Metal Opportunity
There is one thing every renewable energy solution has in common, batteries. Batteries are the key to making electric vehicles possible and solar panels viable.
Without battery storage, the green revolution will never truly replace fossil fuels. To make battery storage economically viable, the world needs all the metals that make up a battery in plentiful and economic quantities.
Investors are aware that adequate battery storage will require far more copper, lithium and cobalt than the world produces today, but a key battery metal left out of the conversation is nickel.
To understand the importance of nickel in supporting the world’s drive for energy sustainable, one only needs to look at the chemical makeup of today’s most popular battery chemistries.
As a refresher, a battery is made up of a cathode and anode. Electrons leave the anode and travel to the cathode through an electrolyte solution, generating electricity.
Cathodes are currently the most important piece of a battery, they limit the energy density and dominate the battery cost. Among cathodes there are two chemical compositions that are set to dominate for at least the next half-decade if not longer, NCA and particularly NMC.
The important takeaway from the above battery teach-in is that nickel makes up a majority of every popular battery chemistry in use today and into the future.
Nickel-through the popular NMC chemistry- is a key building block to making the most energy dense batteries on the market.
Surprisingly, though nickel plays a major role in every single battery in use today, the battery metals investment community continues to focus primarily on lithium.
EVs Driving Nickel Demand
The rapid growth in electric vehicle adoptions continues to gain momentum. Electric vehicles sales are now 30% of vehicle sales in China, 20% in Europe and rapidly approaching 10% in America.
Nickel demand grew 17% in 2021, more than three times faster than demand for other base metals and is forecast to continue growing 7% a year, driven by nickel usage in batteries growing at least 20% per year.
Nickel Demand Forecast Driven by Electric Vehicles
Yet even with this extremely bullish demand outlook for nickel, investors are faced with no easily accessible and tradeable investment vehicles that benefit from rising nickel prices.
Nickel Underrepresented in the Stock Market
Given the strong growth of nickel, surely there would be significant investment in nickel companies… think again. The largest battery metals ETF (Global X Lithium & Battery Metals ETF) has $3 billion in assets; 50% of the ETF is composed of commodities and ALL of it is for lithium and lithium processing. There’s no nickel weight at all.
Nickel is clearly underrepresented in the stock market; it makes up 80% of the cathode yet there are very few high-quality pure plays for investors. Canada Nickel is a clear standout, it’s the next nickel giant on deck.
Canada Nickel: The Nickel Pure Play for Battery Metals Investors
When assessing the nickel investment opportunity, we believe it is important to own a nickel miner with the following key characteristics:
- Politically safe assets
- Close to sources of demand
- Resources large enough to scale
- Low production costs
- A pollution footprint that will help western government’s meet long term emission reduction targets.
Canada Nickel is the one company that ticks all 5 boxes.
Canada Nickel is based out of Ontario Canada, developing one of the five largest nickel mines in the world.
The Crawford mine is estimated to contain 3.5 million tonnes of nickel, putting it on par with the largest global nickel projects.
Developing a Top 5 Global Nickel Project
The project also sports one of the lowest cash costs in the world ensuring it will continue producing profits even as nickel goes through its typical price swings.
Crawford Cash Cost Very Favorable
Using a proprietary method to inject C02 into the nickel waste stream, Canada Nickel’s maiden project will have one of the lowest carbon footprints in the entire industry. This critical differentiator means any major miners looking to lower emissions will have to take a hard look at the project and the company.
It doesn’t hurt that Canada Nickel trades at less than 0.2x its net asset value, compared to smaller, less valuable projects trading 5x higher.
Historically valuation discounts close as projects move from exploration to development and on to construction. Canada Nickel is currently moving through these phases and is expected to file a feasibility study in September while continuing to raise capital to begin development of Crawford.
The world hasn’t had major nickel resources added to global reserves in years, casting doubt on the industries ability to meet growing demand without additional discoveries.
This fact increases the chances that a major discovery like the Crawford Project from Canada Nickel will advance towards production. The world simply needs more nickel than currently and future producing mines can supply.
Exploration Upside is Significant
Canada Nickel’s recent exploration success, at properties adjacent to Crawford, is making it possible that Timmins Ontario will emerge as a major new nickel district to rival any in Indonesia or Australia, historical nickel hubs.
Through exploration drilling, Canada Nickel has already confirmed a large scale discovery at its Reid discovery 90% the size of the resource at Crawford. Yet Reid is 50% larger than Crawford, leaving potentially more nickel to be found.
The larger Canada Nickel’s resource becomes, the more valuable it will be to the Canadian government, global mining majors and even key consumers of batteries, such as car manufacturers like GM, Ford or Mercedes-Benz.
Delineated Resource at Crawford vs Reid
The investment community will soon wake up to the importance of nickel in enabling the green revolution. Clarity will come in the form of capital, whether its through a direct investment in leading miners like Canada Nickel or indirectly through newly launched exchange traded funds, which will come.
Lithium may be grabbing all the attention from resource investors, but we believe better returns will be made getting ahead of the crowd through exposure to nickel.
Canada Nickel is a market awareness client of Capital 10X. For more information, including potential conflicts of interest please see our Content Disclaimer.
