Agnico Eagle invests $23M for 12% of Canada Nickel

Agnico Eagle Mines (TSX: AEM; NYSE: AEM), the largest gold producer in Canada, has acquired a stake of Canada Nickel Co. (TSXV: CNC; OTCQX: CNIKF) as the junior advances its US$3.5 billion Crawford project in Ontario past a feasibility study. 

Agnico Eagle invested $23.1 million to buy 12% of the explorer focused on its project in the Timmins area of the province’s northeast, the companies said on Tuesday. Canada Nickel raised a total of $34.7 million in the share offering. 

Near Agnico’s operations in the Abitibi region of Ontario and Quebec, Crawford contains the world’s second-largest nickel resource of 2.46 billion tonnes at 0.24% nickel, for 13.3 billion lb. of nickel, according to a feasibility study issued in October. The investment follows similar stake-building last month when Agnico bought almost 11% of junior FireFox Gold (TSXV:FFOX; US-OTC:FFOXF) with its project in northern Finland that could become a joint venture. 

“Expansion into base metals is increasingly popular for gold companies,” BMO Capital Markets mining analyst Jackie Przybylowski said in a note on Tuesday. “Crawford could benefit from Agnico Eagle’s extensive base in the region for exploration, development, procurement and operations.”

Crawford is slated to produce 3.54 billion lb. of nickel, 52.9 million lb. of cobalt, 490,000 oz. of palladium and platinum, 58 million tonnes of iron, and 6.2 million lb. of chromium over an initial 41-year mine life. 

“Agnico Eagle’s investment in Canada Nickel represents an early stage investment in this growing sector,” Agnico said in a release. “This investment represents an opportunity to establish a presence in an emerging nickel belt and monitor both the project’s progress and emerging technologies relevant to its development.”

Staggered pits

The Crawford project would cost US$3.5 billion to construct its first and second stages and generate an after-tax net present value of US$2.6 billion at an 8% discount, Canada Nickel said in the study. Annual earnings before interest, taxes, depreciation and amortization may be US$811 million with free cash flow of US$546 million, it said. 

Crawford is to consist of two separate open pits of about equal tonnages of ore. When the first pit is exhausted in year 17, it will become tailings storage to reduce the mine’s footprint and tailings management costs. Drills, shovels and trucks are to be electrically powered.

Canada Nickel stocks jumped 23% to close at $1.40 apiece in Toronto on Tuesday, valuing the company at $199 million. Shares in Agnico Eagle fell 0.8% to $72.05 each for a market value of $35.8 billion.

Agnico also obtained investor rights to acquire as much as 15.6% of Canada Nickel. The company’s next largest shareholder is Anglo American (LSE: AAL) with an 8% interest after an investment in March.

Canada Nickel plans to use its in-process tailings method of carbonization to create an eco-friendly project. It involves injecting a concentrated source of carbon dioxide into tailings in the mill. The carbon is geologically sequestered in the tails while they are in the processing circuit, rather than after. (See CMJ news for Jan. 4, 2023.)

“Agnico Eagle has a long operating history in the Abitibi region, deep technical expertise and a track record of operating success with its core open pit, bulk-tonnage, gold assets in the Abitibi at both Canadian Malartic and Detour Lake,” Canada Nickel CEO Mark Selby said in a release. “The proceeds from this offering will help us continue to unlock the potential of our Timmins nickel district.”