While many metals markets are exhibiting strong fundamentals (and rising prices), the same can’t be said for the mining sector – especially the junior mining companies who are the foundation of this industry. Valuations remain broadly depressed.
This can’t continue. Junior mining companies discover the vast majority of all metals (and mineral) deposits on the planet. Without the healthy valuations that allow these companies to fund exploration, the flow of metals to the global economy will dry up.
Even in the current conditions, however, astute mining investors can still uncover companies with multi-bagger potential. Thanks to the exponential growth of the electric vehicle market, many of the best opportunities are currently associated with what are now known as “battery metals” mining companies.
For investors interested in early-stage mining companies, one strong candidate is Power Ore Inc. (TSX: V.PORE, Forum). PORE has just acquired its TSX-V listing. That’s as “early” as it gets for publicly listed companies. This micro-cap is sitting on assets that rival – if not exceed – the holdings of battery metals companies with market caps more than ten times as large.
The Company’s assets feature both cobalt and nickel mineralization. Why cobalt and nickel packaged together? Stephen Stewart is the CEO of Power Ore. Stewart connects the dots on this dynamic metals combination.
Power Ore already owns one former producing cobalt mine with recent bonanza grade silver and cobalt intersections and also a nickel property. Going forward we are positioned to aggressively grow our portfolio of advance stage nickel and cobalt assets which we see as the two key ingredients for the EV battery metal revolution. This transition to batteries is truly an energy revolution which is at its infancy. Price parity for electric vehicles and internal combustion vehicles is a lot closer than people realize and when this happens... then it’s a whole new world. There will be an explosion in demand for these key inputs. As such Canada’s nickel and cobalt deposits are akin to the oilfields of Saudi Arabia and Power Ore will own as much of these coveted metals as we can reasonable acquire. [emphasis mine]
An Energy Revolution? It’s not just cars. Every fiveweeks, China replaces the equivalent of London’s entire bus fleet with electric buses.
And it’s not just EV’s. Solar and wind power are now more economical than fossil fuel power generation. What’s missing is more energy storage capacity to harness the excess power produced from solar/wind during peak power generation. Nickel is already widely used in energy storage cells and as more and more EV’s come onto the road, energy storage capacity will become even more important – to fuel all these electric vehicles.
Even in the EV sector, nickel’s importance as an input in lithium-ion batteries is still largely overlooked. This is the opinion of someone with a rather high profile in the electric vehicle industry.
Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide… [there’s] a little bit of lithium in there, but it’s like the salt on the salad.
Power Ore is a spin-off of parent Company, Orefinders Resources Inc. (TSX: V.ORX, OTCQB: ORFDF, Forum).
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The Company’s premier asset is the Mann Silver-Cobalt Mine. This was a high-grade silver-cobalt mining operation, located in the Cobalt-Gowganda region (near Cobalt, Ontario). Canadian mining investors will already be familiar with the Cobalt, Ontario district, at least those investors with a focus on battery metals.
This mining district has produced more than 570 million ounces of silver, most of that at very high grades. Along with the silver was (is) robust cobalt byproducts, roughly 28 million pounds altogether. Virtually unique in the world, this mining district yields silver/cobalt mineralization.
NI 43-101 compliant drilling at the Mann Mine has produced the following intercepts:
- 5.8 meters at 0.34% Co, including 1.4 meters of 1.12% Co (MN11-01)
- 29.3 meters at 131 g/t Ag (MN 11-01)
- 28.8 meters at 181 g/t Ag (MN11-03)
While cobalt has earned the title of being the hottest metals market today, silver investors will argue that silver is the planet’s most undervalued metal. Also included in the Knight Project acquisitions was the MacMurchy Nickel Property.
This earlier-stage property has already yielded an impressive (historical) result. In 2008 drilling, a gold-rich quartz vein delivered some big numbers: 7.43% Ni + 2.1 g/t precious metals (Pt, Pd, Au) over 1.0 meter.
The question for the Orefinders management team: what to do with these assets? Under the Orefinders umbrella – a precious metals mining company – these lower priority assets would be unlikely to command a significant valuation as part of Orefinders.
A strategic thinker, Stephen Stewart made the decision to spin-out these assets to shareholders. This rewards Orefinder’s existing shareholders while offering new investors a “pure play” battery metals option. Demand for cobalt is already robust – and rising. Supply, however, is severely constrained. Almost all of the world’s cobalt (~98%) is produced as a byproduct of other mining, mostly nickel and copper. And most of the world’s supply comes from the Democratic Republic of Congo, where supply is problematic for a number of reasons.
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These extremely powerful supply/demand fundamentals have produced a very impressive run for the price of cobalt, surging from roughly $10/lb at the beginning of 2016 up to over $40/lb today (USD). Ultimately, however, it is these same fundamentals that are the Achilles Heel for the cobalt sector.
[chart produced courtesy of InfoMine.com]
With electric vehicles expected to virtually completely replace internal-combustion engines over the next few decades, the increase in demand for these vehicles (and batteries) is already baked into the cake. The problem? There is simply no way to scale-up the supply of cobalt to keep pace with this demand over the long term.
Many industry experts now see nickel as the key to unlocking a solution here. CEO Stewart subscribes to this hypothesis himself. Like cobalt, nickel possesses some especially attractive metallurgical properties for battery-making, similar qualities to those possessed by cobalt. Indeed, the standard “NMC” lithium-ion battery (nickel/manganese/cobalt) uses roughly equal quantities of all three of those metals. But already, R&D from lithium-ion battery manufacturers is coming up with new formulations for EV batteries – new battery chemistries that feature less cobalt and more nickel.
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The original “NMC” lithium-ion battery (nickel/manganese/cobalt) used roughly equal quantities of those three metals. The latest NMC formulation (NMC 811) is named after its proportions: 80% nickel, 10% manganese, 10% cobalt.
While somewhat less plentiful than many base metals, nickel can still be found in large, primary deposits – even at robust grades. Cobalt is required by the automobile industry as the battery metal for today. Nickel is needed by lithium-ion battery manufacturers as the supply solution for tomorrow.
An Energy Revolution is underway. For investors who accept this premise, how do battery metals factor into this Revolution? CEO Stewart shares these additional thoughts.
Power Ore’s initial value proposition is about comparing our assets, cash and share structure relative to our peers in Ontario’s Cobalt district. We expect our early stage shareholders to participate in this upside given our peers in the $20M market cap range. The market will dictate our price, but our total package is as strong as anyone in the neighbourhood. Then going forward you’ll see us focus not only on cobalt but on nickel assets whose upside is still out in front of us. If you look at the historical nickel prices and factor in the expected demand coming from EV battery growth, it has tremendous upside particularly with the sulphide type deposits that we are targeting.
Power Ore Inc. has positioned itself to be a mining investment for today and tomorrow. For investors taking a close look at this Company, the first word that comes to mind is “value”. PORE is not merely a cheap investment opportunity.
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With several Canadian-based battery metals companies from which investors can choose, Power Ore provides projects that have already benefitted from historical work as well as (in the case of the Mann Mines Project) some NI 43-101 compliant drill results. Even with its current holdings, there is strong potential for an upward revaluation of these assets.
However, Mann Mines and MacMurchy are just the starting point for PORE. Sitting with $1 million in the corporate treasury, the immediate priority for management is acquisitions. More strategic thinking.
While this new Company has already raised some capital, in a conference call with Stockhouse Editorial, CEO Stewart acknowledged that when it comes to carrying out drilling operations, $1 million can’t be stretched very far. PORE’s strategy is to deploy its starting capital to get the biggest initial “bang” for its buck.
That means more acquisitions as well as getting out into the field at Mann and MacMurchy for some preliminary sampling and mapping. With the two land packages only 25 kilometers apart, work can be simultaneously carried out on both in a cost-effective manner. As PORE builds its portfolio of projects, Stewart’s expectation is that this will also provide the market with time to upwardly revalue these assets.
Management doesn’t want to return to capital markets for additional funding until it has built up Power Ore’s market cap to a more realistic level for this asset base. Then the Company will reach out for additional funding for drilling operations.
The bad news for mining investors in recent years is that valuations for most mining companies have lagged the actual prices for the resources these companies produce (and discover). The good news is that this means that in absolute terms mining companies have never provided better value for investors.
In a world of “mining bargains”, Power Ore Inc. stands out. This (new) undervalued company provides investors with an exciting growth strategy, positioned in metals markets that are poised for explosive growth.
www.powerore.com
FULL DISCLOSURE: Power Ore Inc. is a paid client of Stockhouse Publishing.