Nickel prices have climbed recently as have global pure nickel inventories, if Canadian miners aren’t on your radar, they probably should be.
FPX Nickel Corp.’s (TSXV:FPX) team announced on Wednesday that it signed a private placement financing agreement with a new cornerstone investor.
That investor is Sumitomo Metal Mining Canada Ltd. (SMCL), a wholly owned subsidiary of Sumitomo Metal Mining Co., Ltd. (SMM).
What’s in the deal for FPX Nickel Corp.
FPX will issue 30,104,488 common shares in the capital of the company to SMCL at a price of $0.48 per share for gross proceeds of C$14,450,154. SMCL will own 9.9 per cent of FPX’s shares once the deal is done. The offering price of $0.48 per share represents an approximately 75% premium over FPX’s share price prior to the announcement.
The Vancouver-based company intends to use the proceeds mainly for exploration and development at its Baptiste Nickel Project in central British Columbia, such as continuing environmental baseline activities and preparing its feasibility study.
SMM is an integrated producer covering the business from mineral resource development, smelting and refining, to the production of battery materials and functional materials in Japan and internationally.
FPX Nickel Corp. management’s take
“This strategic investment by SMM represents another significant technical validation of FPX’s Baptiste Nickel Project, and underscores our view that Baptiste is a class-leading asset,” FPX President and CEO Martin Turenne said in a news release. “SMM is one of the world’s largest nickel producers, with peer-leading expertise in mining, processing and refining products in the stainless steel and electric vehicle battery supply chains. FPX is pleased to be one of SMM’s preferred partners as they look to expand their nickel production profile and diversify their supply chain to allied partners in North America.”
Baptiste is found within the Decar Nickel District and is a large-scale greenfield nickel discovery in the form of awaruite, a naturally occurring nickel-iron alloy. It is the most prospective for bulk-tonnage open-pit mining among multiple targets identified across the company’s 245 square kilometres of claims in the district.
SMM aims to increase its production capacity of nickel from approximately 82,000 tonnes per annum currently to 150,000 tonnes per annum in the long term. This mining giant holds a lot of faith in FPX’s abilities, to the point that a provision was made in an agreement signed between the two companies where it would not vote against management’s recommendations on ordinary matters to be approved by the shareholders of the company. More on that agreement later in this article.
SMM has explained that its business strategy is to partner with high-quality operators is evidenced by its strong portfolio of joint venture overseas assets, including several large-scale base metal operations held in joint ventures with partners including Teck Resources Ltd. (TSX:TECK.A and TECK.B; NYSE:TECK), Freeport-McMoRan Inc. (NYSE:FCX) and Lundin Mining Corp. (TSX:LUN).
Terms of the agreement
The financing is expected to close Jan. 22 subject to conditions, acceptance by the TSX Venture Exchange, and the execution of an investor rights agreement and offtake right agreement.
As the private placement closes, the two companies will sign an investor rights agreement to provide, among other things, SMCL certain rights in the event it maintains minimum ownership thresholds in the company, including the right to participate in equity financings.
SMCL has also agreed to a two-year standstill with respect to the acquisition of additional securities in FPX totalling more than 14.9 per cent of the common shares of FPX then issued and outstanding on a non-diluted basis. If SMCL reaches and maintains a minimum ownership of 15 per cent or more on FPX shares, it will have the right to nominate one director to FPX’s board of directors.
In turn, FPX will grant a right of second offer that provides SMCL the right to negotiate, at market terms, one or more offtake agreements with FPX for up to an aggregate of 60,000 tonnes of nickel from Baptiste. SMCL’s offtake right will rank secondary to the offtake right previously granted by FPX to Outokumpu Oyj.
FPX Nickel Corp. in the headlines
The news follows FPX’s agreement with the Japan Organization for Metals and Energy Security (JOGMEC) and the Prime Planet Energy & Solutions (PPES) joint venture between Toyota Motor Corp. (NYSE American:TM) and Panasonic Corp. (OTC Pink: PCRFY).
Established in April 2020, PPES is a joint venture to produce automotive prismatic batteries, with 51 per cent owned by Toyota and 49 per cent owned by Panasonic. JOGMEC is a Japanese government independent administrative agency that secures energy and mineral resources for the country.
FPX and PPES are working to kick-start nickel production through FPX’s Baptiste Nickel Project in British Columbia, including production of nickel sulphate and cathode active materials for the PPES supply chain.
Investment corner
Nickel’s spot price is up 2.7 per cent in the past week. The metal has a wide use of daily functions from construction to healthcare. It can be found in items as common as a battery or frying pan, or as complex as moving a vehicle in the air.
Based on the company’s 2023 preliminary feasibility study (PFS) released in September, Baptiste has the potential to produce an average of 59,100 tonnes of nickel per annum over a projected mine life of 29 years. At this stage, the team’s leadership stressed it’s not certain that the conclusions or results as reported in the PFS will be realized.
Stockhouse has been tracking the company for some time and noted in September coverage that the global demand for nickel in EV batteries will total 665,000 tons worldwide by 2025.
The company currently has a market capitalization of C$72 million and a share price of $0.27 – a good value compared with competitors with considerable upside.
To keep up with the latest developments, visit fpxnickel.com.
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