Repayment of Operating Debt; Initial Cash
Distribution from Ramu; Strong EPS; Share Buyback
Nickel 28 Capital Corp. (“Nickel 28” or the
“Company”) (TSXV: NKL) (FSE: 3JC0) provides
the following update to shareholders from its Executive Chairman,
Mr. Anthony Milewski.
As we close out 2021, I want to take a moment to provide an
update to our shareholders and partners. As one of the few nickel
producers listed on the Toronto Stock Exchange, Nickel 28 is a
unique vehicle providing shareholders leverage to the price of
nickel and cobalt through our interest in the producing Ramu nickel
mine as well as royalties on quality Canadian-based nickel sulphide
deposits – Dumont and Turnagain.
Some of the key highlights from Nickel 28’s operating year
include repayment of the first tranche of Ramu JV debt, first cash
distributions from Ramu to the Company, initiation of the share
buyback program, and strong earnings per share.
Although Covid continued to impact the global economy in 2021,
Ramu continued to be one of the top performing nickel producing
mines globally. Ramu’s production in 2021 is on target to produce
over 31,000 tonnes of nickel in product. Costs of production remain
consistent at around $2.00/lb of nickel making it the lowest cost
HPAL producer according to Wood Mackenzie. As we have seen a
significant appreciation in nickel prices in 2021, we see that Ramu
is generating significant cash flow, which, with the retirement of
the operating debt at Ramu, is being utilized to pay down the
construction debt. In October, Nickel 28 received its first cash
distribution from Ramu of US$3.2 million representing 35% of our
attributable cash flow from Ramu for the first six months of 2021
following repayment of the operating debt.
Early in 2021 we were pleased to report that independent
analysis confirmed that Ramu is one of the lowest GHG emitting
operations globally for nickel production. Independent analysis
suggested that Ramu averaged 15.6 tCO2e/t of Ni produced over the
three years from 2018-2020. This compared extremely well to the
industry average of 36.6 tCO2e/t of Ni reported by Wood Mackenzie.
In March 2021 we announced the purchase of offset credits, ensuring
that Nickel 28’s attributable nickel production from Ramu would be
carbon neutral in 2021.
We are also encouraged by the progress at two of our important
royalties. Both Dumont and Turnagain are two of the world’s largest
undeveloped nickel sulphide projects which are located in Canada.
An investment bank lead process is underway to find a partner to
advance Dumont and we are hopeful a result is achieved in 2022.
Turnagain is also working toward bringing in a partner to help
advance its feasibility studies and to put the project on track
towards a construction decision. As we have observed in previous
years the global energy transition continues, we believe that the
Turnagain and Dumont projects have the potential to be low carbon
footprint nickel mines and critical suppliers to OEMs and battery
makers for decades to come.
We are excited about Nickel 28’s portfolio. Its unique mix of
producing and development nickel projects provide investors with
significant leverage to higher nickel prices as the world continues
its transition to a low carbon future.
Reflection on the 2021 Nickel Market
Similar to the previous year, 2021 started with a renewed
optimism in the nickel market buoyed by anticipation that mass
electrification of transportation would continue towards a tipping
point where EV production would eventually eclipse internal
combustion engine production. At the end of 2020 nickel prices were
approaching $8.00 per pound and in February 2021 reached a new high
since 2014 of $8.42 per pound. However, in February Tsingshan, the
world’s largest producer of nickel (all of it in NPI) announced
that they would make nickel matte later in 2021 to help feed the
large demand being created by the battery industry for nickel
units. This sent the price down 20% over the next month, however as
the year has progressed it is evident that Tsingshan’s announcement
would have limited impact on nickel availability for battery
production and the nickel price has recovered and exceeded the
February high and currently is trading above $9.00/lb. This is the
highest price that nickel has attained since 2014 and does not show
any signs of abetment.
It is evident that the world has embraced electrification and EV
production is taking off. According to many global analysts, 2021
looks to set a record for EV production with almost 6 million
vehicles expected to be produced in the year. Macquarie reported
that EV sales in 2021 are up 83% over 2020 with nickel rich lithium
ion batteries continuing to dominate the industry. 2021 saw major
announcements from both Ford and GM committing to major shifts
towards electrification sending a strong message to the industry
that materials such as lithium, nickel, cobalt and graphite will be
in strong demand to feed this transition in the years to come.
Nornickel recently reported that almost 400,000 tonnes of nickel
will be consumed by the battery industry in 2021, a number many
analysts did not expect until 2025. At current levels it appears
that the nickel market will require an additional 1 million tonnes
of supply by 2030.
As we have seen the LME nickel price appreciate in 2021, we have
also seen a steady decline in global nickel inventories. Over the
course of 2021 approximately 150,000 tonnes of nickel has come off
global stockpiles mainly in the form of briquettes used by the
battery industry. At the time of this letter, LME inventories are
just over 110,000 tonnes representing a 60% decline in available
stocks. As the LME inventory continues to be depleted, we
anticipate upward pricing pressure on the nickel price as available
material for the battery industry becomes more limited.
This brings me back to Ramu which produces nickel and cobalt as
mixed hydroxide (MHP). Last year we were encouraged by demand and
pricing for this product which was contracting for 80-85% of the
LME price. As availability and pricing of nickel briquettes has
started to impact battery production, demand for MHP has only
increased. MHP is moving towards being the preferred feed material
in the battery manufacturing process and coupled with higher LME
nickel prices in 2021 we have seen payability for nickel and cobalt
in MHP improve to 90-95% in 2021. This is a trend we see continuing
in 2022 which should provide another strong year of cash flow
generation at Ramu.
Sincerely,
Anthony Milewski, Executive Chairman
Corporate Update
On December 8th, the Company granted an aggregate of 5.2 million
incentive stock options and restricted share units ("RSUs") to
certain of its directors, officers, advisers, and consultants. The
incentive stock options granted are exercisable at $0.87 per share
for a period of five years expiring December 8, 2026. Following the
award of stock options and RSUs, the company currently has an
aggregate of 8,969,997 options and RSUs issued and outstanding,
representing approximately 10 per cent of its issued and
outstanding share capital.
Justin Cochrane will step down as the Chief Executive Officer on
the last day of the year, but he will retain the title of President
and remain on the board of directors.
About Nickel 28
Nickel 28 Capital Corp. is a nickel-cobalt producer through its
8.56% joint-venture interest in the producing, long-life and
world-class Ramu Nickel-Cobalt Operation located in Papua New
Guinea. Ramu provides Nickel 28 with significant attributable
nickel and cobalt production thereby offering our shareholders
direct exposure to two metals which are critical to the adoption of
electric vehicles. In addition, Nickel 28 manages a portfolio of 13
nickel and cobalt royalties on development and exploration projects
in Canada, Australia and Papua New Guinea.
Cautionary Note Regarding Forward-Looking Statements
This news release contains certain information which constitutes
‘forward-looking statements’ and ‘forward-looking information’
within the meaning of applicable Canadian securities laws. Any
statements that are contained in this news release that are not
statements of historical fact may be deemed to be forward-looking
statements. Forward-looking statements are often identified by
terms such as “may”, “should”, “anticipate”, “expect”, “potential”,
“believe”, “intend” or the negative of these terms and similar
expressions. Forward-looking statements in this news release
include, but are not limited to: statements and figures with
respect to the operational and financial results; statements with
respect to the prospects of nickel and cobalt in the global
electrification of vehicles; statements related to the repayment of
the Company’s Ramu joint-venture debt; statements related to the
production impacts of the Covid-19 pandemic; statements related to
the development of Dumont and Turnagain; and statements with
respect to the business and assets of the Company and its strategy
going forward. Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements involve
known and unknown risks and uncertainties, most of which are beyond
the Company’s control. Should one or more of the risks or
uncertainties underlying these forward-looking statements
materialize, or should assumptions underlying the forward-looking
statements prove incorrect, actual results, performance or
achievements could vary materially from those expressed or implied
by the forward-looking statements.
The forward-looking statements contained herein are made as of
the date of this release and, other than as required by applicable
securities laws, the Company does not assume any obligation to
update or revise them to reflect new events or circumstances. The
forward-looking statements contained in this release are expressly
qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release. No securities regulatory authority has
either approved or disapproved of the contents of this news
release.
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version on businesswire.com: https://www.businesswire.com/news/home/20211209005322/en/
Investor Contact: Nickel 28 Investor Relations
Tel: 647.846.7765 Email: info@nickel28.com
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