Discovery Watch is a weekly 15-30 minute audio show produced by HoweStreet.com where Jim Goddard interviews John Kaiser about resource juniors with projects that have caught John's attention. The projects will not be limited to companies he has covered through the Spec Value Rating System. Jim and John will periodically circle back to review the projects and if necessary close them out as no longer worth watching. Check out the catalog of KRO Free Stuff. We currently have a USD $200 Membership Special which grants full access to the end of 2020. Discovery Watch is available via YouTube or Podcast..
FPX Nickel Corp has had a Bottom-Fish Spec Value rating since 2017 while the junior worked on over-coming the limitations embedded in the PEA Cliffs delivered in March 2013 for a 114,000 tpd open-pit nickel mine at Decar which required a $9/lb plus nickel price to be viable. Most of this work has been completed and 2020 promises to be a relaunch of the Decar nickel story with an updated PEA expected in September 2020. FPX was introduced to Discovery watch in November 2016 as a different type of discovery in the sense that the Decar deposit, recognized in 2009, is unusual in having a very low 0.12% nickel grade as defined by a Davis Tube assay which only measures nickel recoverable through crushing and magnetic separation. This is different from a fire assay which will yield a similar grade for almost every ultramafic body that is economically worthless because it reflects nickel trapped in an olivine lattice. The Decar nickel is different because it occurs as awaruite, a nickel-iron alloy that is in effect natural stainless steel. The result is a very homogenous 1 billion tonne deposit that can be large scale open pit mined for 40 years without any sulphide related acid drainage and which, thanks to the magnesium content that ends in the tailings, could operate as a carbon sink which could bring Decar close to the holy grail of a carbon neutral mine. The key changes achieved by FPX management headed by Peter Bradshaw and Martin Turenne since buying back 100% ownership from Cliffs in 2015 are 1) replacing gravity separation with a flotation stage that generates a concentrate with 65% nickel that can be fed directly into stainless steel mills, delineation of the SE Baptiste zone that allows front-loading the ore schedule with higher grade ore, and preliminary studies that indicate that the concentrate can be converted directly into nickel sulphate, the form required by the EV battery market. FPX is unusual in that it has been funded by insiders and close associates through private placements that did not include warrants, a sign of strong internal belief that Decar is a winner. A key question the PEA will answer is the cost structure of Decar using the new flowsheet, which will make it easier to assess the potential economic value of developing Decar, expected to have a CapEx of $2 billion or more. The wild card is the future price of nickel which during the past decade has suffered from a glut of low grade laterite ore mined in Indonesia and the Phillipines and shipped as whole rock to Chinise blast furnaces where it is converted into nickel-pig-iron, a feedstock for lower quality stainless steel that meets China's standards. Indonesia no longer allows direct shipping of ore, and the Philippines is rapidly depleting the laterite resources suitable for this NPI market. The FPX PEA will show what nickel price is needed to achieve an NPV at least 50% of CapEx. Given that it will take another $40-$50 million to push Decar through feasibility to a permitted production decision, the speculative question is who might pay what percentage of the NPV at what stage for the privilege of investing another $2 billion to develop Decar as a 40 year mine in a secure jurisdiction that threatens little variation during the life of the mine. A decade ago the FPX team scoured the world in search of similar deposits, but concluded that Decar is pretty much unique. (Jul 22, 2020)
NioBay Metals Inc was introduced to DW in February 2019 after the junior was granted a drill permit for the James Bay niobium deposit in northern Ontario near the First Nations town of Moosonee. This didn't solve the problem that the tribal council chief was opposed to mining in principle and refused to consult with NioBay as required, and, when the Ontario ministry granted the permit anyway, filed for a judicial review of the decision claiming that NioBay never consulted with the Moose Cree FN. That pissed off the other MCFN tribal council members who resigned and forced an election in July 2019 rather than as scheduled in 2020. The anti-mining chief was not re-elected and most of her anti-mining allies on the council were replaced by members prepared to listen NioBay. That process finally led to a "protection agreement" which plugged the MCFN into NioBay's exploration plans and gave them comfort that this was not going to wreck their backyard. It allowed NioBay to conduct a drill program in Q1 of 2020 which it got done before Covid-19 shut down everything. The drilling deepened and extended the footprint of the carbonatite which led to an updated resource estimate in early July 2020 that boosted the indicated+inferred resource 19% to 63.5 million tonnes at a grade of 0.52-0.53% N2O5. That, however, is not so important because the critical milestone is a PEA which describes a plausible mining scenario and what its economic value might be. The niobium market is dominated by supply from Araxa in Brazil which is five times richer and five times bigger than James Bay. Niobium is a $3 billion market controlled 85% by the CBMM family which has set the niobium price at a level which allows 2 other mines to be viable, one in Brazil owned by ChinaMoly and Niobec in Quebec owned by Magris. Niobium demand has being growing at a CAGR of 6.5%, though this will be lower during the pandemic. But James Bay wouldn't be in production until 2025 or beyond. The deposit was discovered during the 1960's and taken to feasibility by Bechtel, but never developed because of its remote location. NioBay's goal is to make it the world's fourth major primary source of niobium and to do that James Bay needs to be viable at the price set by CBMM. NioBay is working on a PEA it hopes to have out before October 2020. It will present an underground only as well as open-pit/underground hybrid scenarios with a 6,000 tpd processing facility. The market has a hard time quantifying the size of a niobium prize, so I have created a SC 6,000 tpd UG scenario OV within the ShareCollective using a resource of 40 million tonnes at 0.53% N2O5 and the spot ferroniobium price. Its after tax NPV outcome is USD $576 million which translates into a potential future stock price of $13.19 if there is no further dilution. That is quite an impressive target even when you assume 100% dilution to drive James Bay through feasibility. The 43-101 PEA will thus be a critical milestone for the market's perception of the upside for NioBay, and it will also become the basis on which the MCFN will have to decide on what terms, if any, they support a major niobium mine in their backyard. (Jul 15, 2020)
Disclosure: JK owns FPX Nickel & NioBay; FPX Nickel and NioBay are Good Spec Value rated Favorites, Golden Goliath is a Bottom-Fish Spec Value rated Favorite.