Canada Nickel Co. introduces plans for new processing facilities, but funding remains uncertain

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Canada Nickel Company Inc. CNC-X announced plans Thursday to build two large processing facilities near Timmins, Ont., whose output would be directed partly to North America’s rapidly growing market for electric vehicles.

The company said its wholly owned subsidiary, NetZero Metals Inc., intends to build a nickel-processing facility it described as North America’s largest, as well as a stainless-steel and alloy plant it said would be Canada’s biggest.

The company added that it’s studying several brownfield properties in the Timmins region and hopes to select sites within a few months. Neither facility has been designed yet, but Canada Nickel said it planned to award that work to engineering firms shortly. The combined cost is expected to be roughly $1-billion.

Canada Nickel is a small exploration company with limited resources but large ambitions. It recently revealed a feasibility study for its proposed $1.9-billion Crawford nickel mine, which the company said will be the world’s second largest. The final decision on whether to construct that mine is scheduled for next year.

Yet possessing no operating mines, Canada Nickel remains dependent on continued funding from investors and lenders. Incorporated in 2019, the company reported a net loss of $14.2-million for the year ended Oct. 31.

In its opinion on the company’s 2023 financial statements, published earlier this month, auditor MNP LLP said the company’s ability to continue as a going concern was in significant doubt.

Mark Selby, chief executive officer of Canada Nickel, said he expects the bulk of the funding to build the plants will come from government sources.

“The key thing in the critical minerals space right now is that we have governments willing to provide a refundable critical mineral tax credit for about 30 cents on every dollar,” he said.

“These projects are also suitable for the Canada Growth Fund, the Critical Minerals Infrastructure Fund, and the Strategic Innovation Fund. We also qualify for U.S. Department of Defence funding. So between those various funding agencies, we expect to be able to get the bulk of the equity we need.

“We’ll be applying for those funds later this year.”

Mr. Selby said the two plants would employ more than 500 workers. The nickel plant is to begin production by 2027, initially using feedstock from other producers. Future expansion would depend on successful completion of the Crawford mine; the nickel plant would be expanded in subsequent phases to an annual capacity of 80,000 tonnes of nickel.

That would represent a significant boost in Canada’s nickel production. According to the U.S. Geological Survey, Canada produced 180,000 tonnes of nickel last year.

Although primarily used for making steel and alloys, nickel is also an ingredient in common chemistries for EV batteries, which are expected to add significantly to future demand.

Last year, major cell manufacturers such as Volkswagen and Northvolt announced plans to build plants in Ontario and Quebec, bolstered by tens of billions of dollars in subsidies. Those announcements helped propel Canada to the top spot in a global ranking of countries involved in lithium-ion battery supply chains, published Monday by BloombergNEF. The commodity and clean technology research organization deemed Canada “a raw materials powerhouse” but warned low metals prices could slow the progress of mining projects.

While Canada remains among the top nickel producers, its output is only about one-tenth that of leader Indonesia. Little progress has been made in diversifying the world’s sources of nickel in recent years, according to a report published last summer by the International Energy Agency.

The organization noted, however, that exploration activity had increased significantly, led by Canada.

George Pirie, Ontario’s Minister of Mines, said the government doesn’t want Indonesian nickel used to make batteries in Ontario.

“To produce it, they have to burn coal to produce the electricity. And the major partners they have in Indonesia are Chinese,” he said. “We can produce it cleanly here in Ontario.”

Mr. Pirie added that although Canada Nickel hadn’t requested additional provincial funding yet, Ontario contributed $500,000 toward research into the technology the company plans to use to sequester carbon emissions. He played down concerns about the company’s finances.

“Most junior companies have a going concern warning,” he acknowledged. “But if you take a look at the partners that they’ve attracted, they’re talking to Samsung, Anglo American and Agnico AEM-T. That’s an international consortium of very powerful companies.”