Canadian broker Red Cloud Securities says Samsung’s “rare” strategic investment in the developer of a new nickel project speaks to the potential significance of the venture, but the US$370 billion South Korean company’s timing also seems pretty significant.
Canada Nickel Company posted a bankable feasibility study for its proposed US$2 billion Crawford project in Ontario’s Timmins district late last year. The BFS hung an after-tax, US$2.5 billion NPV (8% discount rate) and 17.1% IRR on a circa-40-year mine producing an average 38,000 tonnes of nickel a year, plus some cobalt, platinum, palladium, iron and chrome. The net nickel AISC with by-products of $1.54/lb signalled a position low on the international cost curve.
Anglo American Corp bought into Canada Nickel early last year at C$1.95 a share. Agnico Eagle outlaid about C$35 million at $1.77/share for 12% of Canadian Nickel after the BFS was released.
Samsung SDI is buying about 8.7% of the company at C$1.57/share and can acquire 10% of Crawford for US$100.5 million at the time a construction decision is formally made. It is also looking for offtake.
Canada Nickel’s market value, meanwhile, is down at around C$195 million (US$145 million), with its share price drifting lower this year.
Red Cloud, which has a C$3.50/share target value on Canada Nickel, says manufacturers and end-users of metals such as Samsung rarely invest directly in non-producing mine developers, though it’s likely to become less infrequent.
“Samsung SDI is a third major strategic investor in CNC,” Red Cloud said.
“We believe these investments in conjunction with the offtake agreement, should help provide funding for project construction.”
