The age of electric vehicles has arrived but is not yet fully underway. Currently, sales of electric vehicles (EVs), almost all being automobiles, are briskly ramping up – each requiring nickel and cobalt for the cathodes in their batteries. Electric SUVs and pickup trucks are now in development. In Los Angeles, Xos is manufacturing electric semi tractor-trailer trucks.
These recent events portend the tremendous, near-future increase in demand for both nickel and cobalt. In fact, nickel is in a structural deficit with dropping inventories and new supply not increasing. Inventories are now at multi-year lows as demand continues to outpace supply with the gap forecast to widen over the next five years. EV battery recycling will take place; however, this will hardly make a dent in the supply gap by 2040.
With this unfolding demand in mind, Giga Metals Corp. [GIGA-TSXV; HNCKF-OTC; BRR2-FSE] has been advancing its road-accessible Turnagain nickel-cobalt project in northwestern British Columbia, one of the largest undeveloped nickel-cobalt sulphide deposits in the world.
It’s important to understand that not all nickel deposits are suitable for battery production. There are actually two types of nickel – Class I nickel (purity over 99.98%) is suitable for batteries while Class II nickel (ferronickel and nickel pig iron) is only suitable for stainless steel due to iron content and impurities. Less than 50% of world nickel production is Class I.
Sources of Class I nickel are sulphide deposits such as Turnagain. Limonite nickel deposits are processed with high pressure, high temperature, acid leach technology (HPAL) that is capital intensive and prone to technical issues. Sulphide deposit processing is reliable and proven.
Currently, nickel and cobalt are used in the cathodes of two of the three dominant battery chemistries for EVs – NMC (Chevy Bolt) and NCA (Tesla). Also, nickel metal hydride batteries are the dominant chemistry in hybrid vehicles.
Due to cobalt’s price surge and uncertainty of supply, 65% of which comes from the unstable Democratic Republic of Congo, battery manufacturers are moving towards higher nickel-lower cobalt chemistries. By 2025, it is expected that NMC 811 type chemistry will make up 75% of the nickel-dominant NMC battery mix.
As it happens, the Giga Metals Turnagain deposit hosts both nickel and cobalt, thereby giving investors exposure to both metals used in NMC battery technology and protection against changes in battery chemistry.
Giga Metals has completed resource calculations that have led to a positive Preliminary Economic Assessment (PEA). Measured and Indicated resources stand at 227,379,000 tonnes grading 0.22% nickel and 0.014% cobalt. This equates to 4.1 billion pounds of nickel and 253 million pounds of cobalt. Inferred resources are pegged at 976,295,000 tonnes grading 0.20% nickel and 0.013% cobalt, for 4.3 billion pounds of nickel and 280 million pounds of cobalt.
Less than 25% of prospective nickel geology has been drilled. It is also of note that Turnagain has additional metal credits in copper, platinum and palladium.
An independent PEA has been prepared by AMC Mining Consultants (Canada) Ltd. that envisages a conventional truck and shovel open pit operation with the following key metrics:
Annual metal production for years 6-21 would be 98 million pounds of nickel and 5.4 million pounds of cobalt. At 25% nickel (contained), Turnagain concentrate is competitive to production of MHP or mixed sulphide intermediate via the more capital intensive HPAL process and is directly amenable to NiSO4 production by hydrometallurgical refining. Turnagain concentrate is on par with the high-grade concentrate from the Voisey’s Bay mine, Labrador.
Wood Mackenzie estimates that for large greenfield Class 1 nickel projects, a long-term incentive price of US $12/lb nickel is needed. At US $12/lb., the Giga Metals December 2011 PEA estimates Turnagain has a NPV of $2.8 billion After-Tax and a 29.5% IRR.
Giga Metals has sold a 2% NSR on future cobalt and nickel production to Cobalt 27 Capital Corp. [KBLT-TSXV] for US $1 million in cash and 1,125,000 shares of KBLT. Funds were used for Turnagain drilling and to fund a Pre-Feasibility Study. Engineering studies are underway to lower the Capex by reducing start-up size. In addition, the NI 43-101 resource estimate is being updated using 2018 drill results.
Giga Metals is advancing the project to feasibility and will initiate permitting as it works towards a production decision. The company, which is headed by Mark Jarvis, CEO, has 53,774,015 shares outstanding.
|C1 Cash Cost||US $4.26/lb.|
|Initial Capex||US $1,357M|
|Expansion Capex in Year 5||US $492M|
|After-Tax NPV @8%||US $724M|
|After-Tax IRR (100% equity)||13.50%|
|Payback Period||7.3 years|
|Mill Operation||27.2 years|
Based on US $8.50/lb. nickel & US $14/lb. cobalt
|Production Metrics||Yr 1-5||Yr 6-21||Avg LOM|
|Strip Ratio (%)||0.74||0.83||0.82|
|Annual Mill Throughput (Mt)||15.8||31.3||28.1|
|Average Mill Feed Grade|
|Annual Metal Production|
|Annual Concentrate Production|