When we last caught up with Vancouver BC-based
Giga Metals Corp. (
TSX-V.GIGA,
OTCQX: HNCKF,
Forum) back in
early September, the company was in the midst of developing its Turnagain Nickel Deposit, located in north-central BC, that’s among the largest undeveloped sulphide nickel deposits in the world.
Stockhouse Media’s Dave Jackson was joined, once again, by CEO Mark Jarvis to get our investor audience and company shareholders up-to-date on all the latest news from Giga Metals Corp.
(CLICK IMAGE TO PLAY VIDEO)
TRANSCRIPT BELOW:
SH: To start off with, for those who may have missed your first interview with us, can you tell us a little bit about yourself and the history of the company?
MJ: Well, I've been involved with this company since 2004 and we caught the wave of the last Supercycle in commodities and raised a whole bunch of money and did a whole bunch of drilling, metallurgy, and engineering and so forth. We went quiet for a few years following 2011 when the price of commodities got very low and you couldn't raise money. So we just basically conserved capital for a few years and then starting three or four years ago with electric vehicles becoming the new huge source of demand for nickel. We got active again and we recently completed a PEA that models nameplate capacity of 37,000 tonnes per year of nickel with a 37-year mine life. So 37,000 tonnes of nickel per year, plus 2000 tonnes per year of cobalt, truly a giant project then suddenly we have what everybody wants. It’s quite nice.
We just finished a season of doing work on the property, drilling both infill, geo-technical drilling, and other work for example, seismic around where we want our tailings management facility and probably, we won't see assays from our infield drilling till January or February. I understand the labs are very backed up but frankly I don't expect a lot of surprises as infill drilling. What we're intending to do is to collect enough data to provide backing for a pre-feasibility report. So we're looking to advance from the PEA to a pre-feasibility, to get a lot more detailed data and that's our current focus.
SH: Can you update our investor audience and your Giga Metals shareholders on any new company developments, particularly the aforementioned Turnagain Project?
MJ: Well, basically that we're advancing it and but really what it's changed. I mean, Dave, I think about it when you've got a project like ours and we're looking at first stage of development would be $1.4 billion, the first production, $1.4 billion US and that would take care of all of our infrastructure issues. Then the second stage would be another 500 million us dollars to get to full name plate capacity. So call it $2 billion all in. We're a company with a market capitalization of 40 or 45 million (dollars) Canadian. So it's difficult to see how to square that circle. How does a tiny company advance a huge project like this? The answer is that we really do have to get deep pocketed strategic investors involved at the project level rather than doing endless dilution of our stock.
Our goal is to try to get somebody involved at the project level for some meaningful money and that is entirely our focus right now and I can tell you that the temperature has been going up recently. We have what everybody needs. You have to have nickel, if you're going to build a Gigafactory, you better have your supply chain figured out for lithium, cobalt, nickel, even rare earths. So a lot of Western battery companies have plans to build giga factories but they don't have their supply chain figured out yet. The Chinese battery companies have their supply chain figured out. They've been building nickel mines in places like Papua New Guinea and Indonesia that are uneconomic in Western terms but they get them built and then it's all about having the security of supply for a long time at the cost of production, because for the Chinese, it is all about the cost of production.
So they've got their supply chain figured out, they've bitten the bullet on building these HPAL (High Pressure Acid Leach) projects with a, you know, $3 billion US capital costs to get to similar size as Turnagain for only $2 billion you know, 35,000 tonnes a year (plus or minus) mines and the Western companies are starting to realize my God, if we don't figure out our supply chain, maybe we won't be around in 10 years. So the temperature is heating up and we're running an internal process and it's led by Martin Vydra, our president. The reason Martin's leading this process is that he had a 30-year career at Sherritt which produces a nickel and cobalt out of Cuba. So he's an engineer that understands all the different forms of nickel, how it's produced, what form of nickel various end-users need and in fact, he spent a good part of his career selling nickel and cobalt products in various forms to the end users. So he knows them very well and they know him. That's really our focus is honor discussions with strategics.
SH: Mark you’ve said that “If you believe that nickel has to move higher to supply all the batteries for electric vehicles, then Turnagain is the type of deposit that gives you the most exposure to that kind of pinch point." How so?
MJ: Well, I think what I said is it gives you the most leverage. I mean if you want to exposure, you can buy Nor Nickel or other nickel producers, you can buy Vale, which is the largest nickel producer in the world, although it's also one of the largest iron ore companies in the world but if you want leverage, this type of deposit which has scale and which has marginal economics at the low end of the commodity price, that's the reason it's still not built. Well, as you move the commodity price higher if you look at the depreciated net present value of the project at ever higher nickel prices, there's a balloon effect. You go from a very low depreciated net present value to it, just balloons up to huge numbers very quickly.
We're right on that critical point. We ran our PEA at a nickel price of $7.50 a pound. That was the base case, currently nickel is over $9 a pound and it just looks like it's tightening up, particularly for the forms of nickel the battery makers want: briquettes and mixed hydroxide precipitates. Those are the two forms that the battery makers really crave and it's very tough to buy. There's only a hundred thousand tons a year of MHP right now and you can't buy briquettes unless you're willing to go to the LME, the London Metals Exchange and buy the briquettes there and supply for briquettes on the LME has been dropping by about to about 2,500 tonnes a week recently and it won't be that many weeks before there's none left. So I just think we're getting to the pinch point and it gets very, very interesting for a project like ours if the nickel price starts to get spiky as it traditionally does.
SH: How does Giga Metals fit into the exploding battery metals space and why is this company currently in somewhat of a ‘holding pattern’?
MJ: Well, I think if you look at something called the Lassonde curve, you're probably familiar with it, and probably a lot of your viewers are familiar with it. There's the excitement of discovery. That's the really fun part for doing your mining stock investors is when you actually find something and how big could it be and so forth. There's a lot of speculation and then once you've drilled it off, you've got a good handle on what the size of the deposit is. It enters more of a development phase and it's also known as the orphan phase and so it's quite interesting because the price will generally stagnate, the price of the stock will generally stagnate for awhile and generally it'll stagnate until the market can see a path forward where there's some belief that it is going to get built and that can be triggered by a lot of different things.
One of the things that could trigger that is if a strategic investor with deep pockets steps in and starts investing in the project. So the orphan stage of the Lassonde curve is an interesting stage for a long-term investor because the price of the stock tends to stagnate and because you don't know when the triggering events are going to happen. A good strategy is often to pick the best entry point you can, get your position and then just wait because you don't know when things are going to happen and when they do happen, things will be moving too quickly. You don't want to be chasing the situation. That's exactly where we're at.
SH: The Biden Administration’s multi-trillion-dollar infrastructure bill certainly means good news for green metals companies like yours. How is Giga Metals positioned to meet this demand?
MJ: Well both with the nickel because the green energy plan, the whole infrastructure bill that has passed in the US now a big part of that is aimed at infrastructure for electric vehicles and encouraging electric vehicle use. So nickel is well positioned for that. I mean just to review, just to make sure everybody understands why nickel, it is the part of the cathode that holds the electron. So it's got excellent energy density and so if you want your car to go farther on a single charge, you need more nickel as a percentage in your count and that's what all the big battery companies are working on is higher nickel formulations but also this whole infrastructure bill is going to be very good for copper.
Now, I should mention that while our main focus is Turnagain, we do have an exploration play going on in Brazil and we're actually hoping to drill some holes fairly soon. We're looking at red bed style copper mineralization, it can be copper cobalt, it can be copper silver but it started with the premise that the
São Francisco basin in Brazil is an offshoot of the African copper belt and starting there, there's a long history to it but frankly it's been flooded down there. We were hoping to be drilling already and we're not we're hoping now to be drilling within days of you and I speaking, and we're going to do an initial round of drilling to test the hypothesis that we've thought, red bed copper style mineralization and that could be fun. Hopefully, we get into the discovery phase there but we'll see.
SH: The company recently released a report, in partnership with The Supply Chain Initiative and the Wilson Center Critical Minerals Working Group, to address the troubling scenario surrounding the U-S supply chain for critical minerals. Can you expand on this initiative for our audience, Mark?
MJ: Well, I think the concern is and the Wilson Institute is a Washington based think tank and we were invited to join with them. We've got some very good in-house expertise particularly with Lyle Trytten, who's our manager of development and I guess just in general the concern is that the US doesn't have control of a lot of the critical minerals that you need, particularly for the green revolution. I mean the Chinese own the rare earth market for example, we're talking about a little bit earlier, that's of concern. The world needs to develop very diverse mines outside of China or the Chinese will be in control but it also applies to nickel and cobalt. So if you're going to build all these giga factories in North America to power all of these electric vehicles, where are you going to get the nickel from the Chinese?
It's a problem, there isn't enough nickel production in North America. Basically you've got Sudbury and you've got Labrador in Canada producing nickel. There's one nickel mine that I can think of this in production in the US and that's about it. It's not nearly enough. It's not nearly enough to supply what's needed for the giga factories that have already been announced. So the Wilson Institute is very concerned about critical supply chains. They've been looking at different kinds of approaches to solving the problem and we're trying to help them with that.
SH: I have to mention your stock continues to move nicely northward on the charts…a nearly 50-percent increase on the TSX-V since late July. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s still a good buy right now?
MJ: Well, I actually see it as a bit lower. We were trading up at the high fifties about a month ago and I think we're in the mid forties now and in Canadian pennies, I should say I just regard our stock as exceptionally cheap but I'm the CEO and I think I would think that at almost any price but seriously we've moved up from a low of sort of the mid thirties to kind of the mid to high fifties and we sold in around the mid forties and we seem to be doing some work in that level. I think we will be very, very linked to the nickel price and so if you see the nickel price start to break out and trade in a volatile manner as it does historically from time to time, I think things could get quite interesting for us.
SH: What’s the long-term strategy for the company moving into 2022 and beyond, and what should retail and institutional investors be looking out for?
MJ: Well, our long-term strategy is to develop this into a mine and the next step with a strategy is to get a strategic investment involvement and when I say that I don't mean the big mining companies, not at this stage. I mean the battery companies and the car companies were talking to a lot of people. There's a lot of interests out there. Also some of the trading companies have expressed a lot of interest. So we are at the due diligence stage with a lot of people some of the discussions are getting fairly advanced. I'm not saying that something's going to happen tomorrow but the level of interest is very high and so we just have to get that key strategic investor involved, that will be the trigger point to everything else where we can suddenly have visibility to actually getting this thing built.
SH: And finally, Mark, if there’s anything I’ve overlooked please feel free to elaborate.
MJ: I think you've covered it very well Dave.
For regular updates, visit
gigametals.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.