From batteries to cell phones, the global economy relies on the supply of electric metal elements and we have been working to identify companies that are positioned to benefit from the trend.
Although the market for critical earth elements has recently softened, demand for these resources has shown no sign of slowing down and we have highlighted a company that is well positioned to capitalize on this.
The company, Power Nickel Inc. (TSX Venture: PNPN) (OTCQB: CMETF) (Frankfurt: IVVI) is a Canadian junior exploration company which is highly levered to the critical battery metals market.
Although 2022 has been a period of strong growth for the electric metals market, the trend has recently lost momentum, thus impacting companies like Power Nickel. We are of the opinion that the recent weakness is transitory and consider the company’s valuation to be even more attractive after the recent pressure.
We consider Power Nickel to be an attractive play on the critical energy metals vertical and believe our readers should be aware of the business due to the following:
- Rising demand for electric vehicles (EVs) has played a key role in the meteoric rise in critical energy metals prices and we believe that Power Nickel is very well positioned to capitalize on this trend.
- As gas prices are rising, we are noticing an increased interest in EVs. We consider the current supply-demand dynamic for EVs to be an important trend for Power Nickel.
- According to a report from Benchmark Minerals, the EV industry could be impacted by a shortage of batteries that are needed for EVs. We believe Power Nickel’s properties will appreciate due to the supply-demand dynamic and will monitor how the projects advance in the coming months.
Highly Levered to the Nickel Market
In September, Power Nickel issued an update on the “Nisk” Nickel project following the commencement of the second round of drilling. The property is in the southern portion of the Eeyo Istchee James Bay territory, Québec, a region that is the site of a number of major mineral findings.
Earlier this week, Power Nickel announced a major update from its current drill program at its Nisk project near James Bay. The initial drill results confirm the presence of high-grade Ni-Cu-Co-PGE mineralization in the main zone and extends mineralization by an additional 150 meters at depth and to the east and below to the central portion. Hole 22-009 was a particularly exciting hole and included the following data: 1.17% Ni, 0.80% Cu, 0.08% Co, 1.46 ppm Pd and 0.23 ppm Pt over 25.86m.
Although Power Nickel is awaiting assay results from holes that were drilled, the initial results are very encouraging and continue to demonstrate the robustness of the system. We believe the data further de-risks the project for Power Nickel and consider this to be a significant data point for the project.
From a geographic standpoint, the Nisk property is in an area that has the critical infrastructure needed to execute on a mining project in a low-cost manner. The project is also located in a region that has a history of major findings and we believe these factors de-risk the project.
Last year, Power Nickel completed the acquisition of its option to acquire up to 80% of the Nisk Project from Critical Elements Lithium Corp. (TSX Venture: CRE) (OTC: CRECF) and we are favorable on the project for the following reasons:
- The Nisk property is comprised of a large land position with numerous high-grade intercepts.
- The company is in the process of confirming and expanding its current high-grade nickel-copper PGE mineralization historical resource by preparing a new mineral resource estimate (MRE).
- Finally, Power Nickel is working to develop a process to produce nickel sulfates that are in batteries for electric vehicles (EV)
Following the acquisition of the option, Power Nickel retained 3DGeo Solution to create a geological model of the Nisk Project which it used as a guide to run a successful initial drill program and we believe the market underappreciates this aspect of the story.
Power Nickel is a Company with Catalysts for Growth
A core pillar of our bullish view on Power Nickel is related to the amount of near-term catalysts the business has. Since September, the company has been drilling on the Nisk property and the management team expects results to start being published later this month.
Over the next quarter, Power Nickel expects to receive several updates on existing drilling programs and we believe the market is not assigning much value to this aspect of the story. Since Power Nickel has expanded the size of the drilling program, we believe the initial data has been positive and consider this to be an underappreciated aspect of the story.
Although media firms love to talk about management teams and insiders that are selling stock, we rarely hear about operators who are investing in their own business. This is the case for Power Nickel and this represents a core pillar of our bullish view on it.
Power Nickel’s management team has been the largest investors in recently announced (and completed) non-brokered private placements and we consider this to be a testament to their bullish view on the business. By being the major investor, the management team has put its money where its mouth is, and we find this to be significant.
Led by a Management Team With a Proven Track Record
We believe Power Nickel is led by a management team that has a proven track record of success and are bullish on how the story has advanced so far this year. As part of its strategy to maximize shareholder value, the management team has identified three avenues to execute on and we want our readers to be aware of these:
- The company is paid more per pound of nickel equivalent (NiEq) discovered
- Finding more NiEq
- Improvement in the nickel and electric metal price curve
Power Nickel CEO Terry Lynch has a proven track record of success in several highly regulated industries and we are bullish on how he continues to execute on a multi-faceted growth story. In the next segment, we will discuss how CEO Lynch put additional skin in the game by being the largest investor in a non-brokered financing.
Strengthens Balance Sheet
During the last month, Power Nickel has strengthened its balance sheet by completing a over $4 million non-brokered private placement. The largest investment of the capital raised was from the management team and we consider this to be a testament to the strength of the business.
The additional capital will let Power Nickel further expand the drill program and allow the team to continue drilling through mid-December and start back up again in mid-January. Initially, the company planned to drill 5,000 meters but will now be adding an additional 7,500 to 10,000 meters due to the amount of potential value that is associated with the region. We believe the initial data is positive for the business and de-risks the overall growth strategy.
Power Nickel plans to use a good portion of the proceeds from the non-brokered private placement to incur eligible Canadian exploration expenses, which would allow for the business to qualify for the federal 30% tax credit pursuant to the draft legislation released in August. We believe this is a strategic use of capital and are favorable on the management team’s ability to maximize the use of the capital raised.
On top of using the proceeds for Canadian exploration expenses, Power Nickel intends to use approximately $800,000 to settle an outstanding debenture and the remainder for general administrative and working capital purposes. By settling an outstanding debenture, Power Nickel will further strengthen its balance sheet by eliminating the amount of debt outstanding.
Trading at a Discount When Compared to Its Peers
When it comes to analyzing Power Nickel, we believe it is important to understand the critical energy metals it is focused on mining. By executing on a series of strategic growth initiatives, the management team has enhanced the company’s growth prospects and we are bullish on the assets it owns.
If you analyze some of the mining firms that own similar high grade Nickel Sulfide projects, you will see that many of these operators are valued considerably higher than Power Nickel. We expect this trend to change soon and want our readers to understand the significance of the developments that have been reported by the company in the last month.
At current levels, Power Nickel’s market capitalization is less than USD $10 million and we find the risk-reward profile to be favorable. After conducting analysis on operators that are comparable to Power Nickel, we determined that the business is undervalued and find the disparity in market capitalizations to be worth noting.
- Talon Metals (TSX: TLO) is valued at more than 240 million USD for 60% of deposit
- Noront sold for $480 million USD
- Premium Nickel (TSX Venture: PNRL.V) is valued at more than $137 million USD
Based on Power Nickel’s market capitalization, we believe the business has substantial upside potential and find the valuation to be compelling. Although the media loves to talk about how the global economy is in a recession, we believe certain sectors are better positioned than others. With Power Nickel, we are of the opinion that the business is focused on verticals of the energy metals market that have shown continued strength and want our readers to be aware of this.
Over the next quarter, we expect Power Nickel to publish a series of positive developments and believe the valuation disparity will become less significant as the story continues to advance. We want our readers to understand this potential for the business and conduct further due diligence to better understand our view of the business.
If you are interested in learning more about Power Nickel, please send an email to support@onthebids.com with the subject “Power Nickel” to be added to our distribution list.
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Pursuant to an agreement between Spotlight Media and Power Nickel we have been hired for a period of 180 days beginning November 1, 2022 and ending May 1, 2023 to publicly disseminate information about Power Nickel including on the Website and other media including Facebook and Twitter. We are being paid $3,000 per month by Power Nickel and were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of Power Nickel that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of Power Nickel in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information
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