Billion-dollar Canada Nickel plants would boost Ontario processing for EV supplies

Canada Nickel (TSXV: CNC; US-OTC: CNIKF) says it plans to build two metal processing plants that could cost more than US$1 billion to serve the world’s largest nickel sulphide project it’s developing in northern Ontario.

Studies due this year will have more definitive cost estimates covering the three-stage development of the plants to process nickel and to produce stainless-steel and alloys, Canada Nickel CEO Mark Selby said by phone in Toronto. The company, backed by almost $50 million in investments from Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Anglo American (LSE: AAL), is now choosing sites near Timmins.

Investments in new plants would substantially boost local infrastructure in a historical nickel mining area that has seen few upgrades in decades. The nickel processing plant, planned for a 2027 start-up along with the giant Crawford project nearby, would be the largest in North America while the stainless-steel factory would be Canada’s biggest, the company said.

“It’s an opportunity to capture significant amount of additional value over and above just producing the concentrates at Crawford,” Selby told the The Northern Miner. “Most critically, it provides the missing link in the whole mine-to-electric-vehicle strategy.”

Canada Nickel aims the plants to be carbon-neutral to address growing demand for environmentally friendly production. How the plants demonstrate zero-carbon nickel production could transform the industry, U.S.-based investment bank Cantor Fitzgerald said in a note on Thursday.

“The development plan announced today is ambitious in scope and scale with an aggressive timeline,” mining analyst Mark O’Keefe said.  It should show “potential development partners and stakeholders the greater economic potential that can come from the Crawford nickel project.”

Engineering firms to complete the design of both plants are to be named shortly, Canada Nickel said. Feasibility studies are underway and expected to be completed by year-end.

US$3.5B mine

The Crawford project holds 2.5 billion tonnes grading 0.24% nickel for 13.3 billion lb. of contained nickel, according to a feasibility study issued in October. The project’s after-tax net present value is US$2.6 billion at an 8% discount rate, with an internal rate of return of 18.3%. A two-stage construction concept is estimated to cost US$3.5 billion.

Agnico Eagle, Canada’s largest gold producer, invested $23.1 million for a 12% stake in the nickel developer and its giant Crawford project in January. Days later, South Korean battery manufacturer Samsung SDI spent US$18.5 million to acquire 8.7% and rights to potential offtake agreements. Anglo American last year invested $24 million for a 9.9% stake.

“We need as a bunch of nickel mines to meet the doubling or tripling of new demand in North America from where we are now over the next decade,” Selby said. “And we also need new processing capacity commensurate with that growth in mine supply if we want to have a completely local North American supply chain for the battery sector.”

Ontario Mines Minister George Pirie also championed the proposed plants to develop local battery metals and to use carbon capture technology. Canada Nickel even named the subsidiary developing the plants NetZero.

“Timmins is poised to become a hub for the clean nickel we need to build the supply chain for electric vehicles,” Pirie, a former mayor of the city and head of Placer Dome Canada before Barrick Gold (TSX: ABX; NYSE: GOLD) bought it in 2006, said in a news release on Thursday. “We have what the world needs right in our backyard to fuel the electric vehicle revolution.”

2027 start

The nickel processing plant is expected to reach annual capacity of more than 80,000 tonnes of nickel with feed from other companies in early 2027 before Crawford starts production, Canada Nickel said.

The stainless-steel and alloy plant will process nickel-chromium magnetite concentrate from Crawford and other feeds into more than 1 million tonnes of alloy products a year, including more than 500,000 tonnes of 304-grade stainless-steel. Its startup would align with Crawford in late 2027, the company said.

No government funding was stated for the processing plants, but Ontario and Ottawa have earmarked hundreds of millions of dollars for just such critical mineral funding. Greg Rickford, Minister of Northern Development and Minister of Indigenous Affairs, joined in Thursday’s announcement, saying the federal government would be supporting local communities. Chief Bruce Archibald of Taykwa Tagamou Nation also welcomed the plan.

“Our partnership has been based on mutual respect and ensuring our treaty was honoured with a true seat at the decision-making table,” Archibald said. “We’ll proudly continue to partner with them.”

Shares in Canada Nickel gained 2% by Thursday afternoon in Toronto to $1.40 apiece, valuing the company at nearly $200 million. They’ve traded in a range of 89¢ to $2.24 over the last 52 weeks.