Highlights

• A Preliminary Economic Assessment (PEA) on the Kenbridge nickel project in the Kenora mining district, northwestern Ontario, returned attractive economics, with an After Tax-NPV5% of $109M, and a high AT-IRR of 20%, using US$10/lb nickel. TN is trading at just 20% of AT-NPV5%. For comparison, shares of Talon Metals (TSX: TLO/MCAP: $311M), a comparable advanced-stage nickel junior, are trading at 61% of AT-NPV7%.

• Unlike the historic PEA, which was based on an open-pit/underground operation, the latest PEA was based on a smaller-scale underground operation, targeting the project’s deeper/higher-grade resource. This scenario is more attractive as higher-grade ore can be accessed in the initial years of operation, through an existing shaft infrastructure on site. We believe very few nickel juniors in North America have high-grades and low CAPEX/OPEX as TN does.

• 2021 drill campaign resulted in a 25% increase in contained nickel (146 Mlbs), and an 18% increase in contained copper (78 Mlbs). Approximately 70% of the resource estimate is classified as underground resources.

• We believe the PEA was conservative as it did not account for the remaining 30% of open-pittable resources.

• Nickel grades of the underground resource increased 16% to 1.08%, and copper grades increased 10% to 0.55%. We note that nickel grades of over 1% are considered high.

• Management is planning to conduct a resource expansion drill program to test the deposit at depth.

• Nickel prices are down 23% in the past two months. We are expecting prices to be under pressure amid rising rates, and slower global GDP growth. In addition, the nickel market is expected to move to a supply surplus this year. That said, we are expecting long-term prices of US$8/lb or higher (current price: US$9/lb) as most of the large undeveloped nickel projects cannot generate attractive economics if prices fall below US$8/lb.

• Upcoming catalysts include a resource expansion drill program, and positive sentiment towards juniors focused on EV metals. The discrepancy between TN and Talon’s EV/AT-NPV indicates that the market has yet to realize TN’s potential.

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SOURCE: https://www.mining.com/sponsored-content/robust-pea-confirms-viability-of-high-grade-nickel-deposit/