SMM10, March 23: not all nickel is the same
The electric car revolution is steadily increasing demand for lithium-ion batteries, and nickel is a key component used to make these batteries. In the environment of growing battery demand, the demand for primary nickel will increase significantly.
With the continuous depletion of large nickel mines in the world and the sharp increase in market demand, the supply shortage of two kinds of nickel has shown a clear trend, especially the supply shortage of primary nickel. "many people don't understand that only 50 per cent of nickel in the nickel supply is suitable for batteries," says Sid Rajeev, an analyst at basic research firm (Fundamental Research).
"in the next year or two, there will be some exciting moments in the nickel market-both supply and demand will grow."
Mark Jarvis, president and chief executive officer of Giga Metals, said that because of the large amounts of sulphide nickel and cobalt deposits in its Turnagain project in northern British Columbia. The Turnagain deposit contains 4.1 billion pounds of nickel and 253 million pounds of cobalt in the actual measured and specified categories and 4.3 billion pounds of nickel and 280 million pounds of cobalt in the inferred categories.
All of these metals contain sulfides, which allows metallurgy to convert these resources into concentrate containing 18% nickel and 1% cobalt, which can easily be converted into a class of nickel products suitable for battery manufacturing.
Mark Jarvis, president and chief executive of Giga Metals, expects Turnagain Metals to face a very favourable market environment. "in the next year or two, there will be some exciting moments in the nickel market-both supply and demand will grow," he said.
Giga Metals has been pushing ahead with its plan to turn losses into profits because of an agreement to receive a 2 per cent net smelter commission for future production.
A subsidiary of Cobalt 27 positioned itself as a cobalt production company, which paid $1 million in cash to Giga and issued 1.25 million shares.
Given the expected price of the Cobalt 27 when it traded in July, the deal was worth more than $10 million, although Cobalt 27's shares have fallen back since then.
Mark Jarvis said the deal gave Giga "enough money to re-enter the pre-feasibility phase by the third quarter of 2019". The goal of the project is to reach the level of production by 2021.
Giga recently completed a 10800-meter drilling program in Turnagain. The plan has three objectives: to assess resources at the proposed open-pit mine and convert them to measurable and designated categories; to collect materials for additional metallurgical tests; and, finally, to carry out some exploration and drilling. The results are expected to be released in November.
A preliminary economic assessment in 2011 estimated that the net present value after tax (converted to 8 per cent) would be $724 million, the life of the mine in Turnagain would last another 27.2 years, and the capital expenditure required to build the mine would be significant, as high as $1.36 billion. This is a typical large-scale project.
Mark Jarvis says Giga is actively looking for ways to make the project cost-effective in the way smaller startups operate. The resource consists of two higher levels of mines that can be selectively exploited in order to deal with higher levels of resources early in the mine.
"our goal is to simulate as small an economically meaningful start-up as possible so that we can minimize advance capital risk," he adds. Companies are also looking for leverage to improve economic efficiency.
In addition to adopting an initial model of operation, the company is also providing exploratory services to end users outside the traditional smelter, which will purchase Turnagain nickel-cobalt concentrate. Mark Jarvis believes that companies that make nickel sulfate and cobalt sulfate for batteries may want to buy concentrate directly, leading to a premium.
As nickel stocks have fallen steadily in recent years and cobalt trading prices have exceeded the historical average, Giga's Turnagain deposit has leveraged battery demand, driving up the prices of primary nickel and cobalt.
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