I had the opportunity to interview Mark Jarvis, the president and CEO of Giga Metals, while he was in London this week. We talked about the Nickel market, electric vehicles, the billionaire investor Mike Beck, and what plans Giga Metals has for the rest of the year.
On the Next Bull Market Move today we have Mark Jarvis. How are you today Mark?
I’m doing just fine, I love London.
So what brings you to London?
I was mostly in a series of one to one meetings, which I found of very high quality.
Fantastic. Okay, you’re the president and CEO of Giga Metals. Before the interview we were talking about the Nickel market, and why the price of Nickel might take off within the next few years due to new supply and demand issues within the industry, can you talk about that with us?
Well, you know nickel is already in deficit in terms of production versus demand. However, there’s large inventories that are being drawn down, and so that’s provided a cap on the price of nickel for now, however those inventories are being drawn down too.
The thing that’s changed in the nickel market is the arrival of electric vehicles. And when you actually start to run the numbers on electric vehicles and the penetration rates of electric vehicles on the market, and how many batteries are needed, and how much material is needed for these batteries, it’s really quite astounding.
I think it marks a fundamental shift in the nickel market because this brand new source of supply is growing to become a major source of demand.
So we think, by the early 2020’s there’s gonna be a real supply crunch in nickel. And that’s why our goal is to get this project shovel ready by 2021. We think if we can get this project ready to go by then, that’s when you’re really gonna see how apparent the supply shortfall is. And it’s the supply shortfall particularly in the type of nickel that can be upgraded to class 1 economically.
So, more than half the current nickel supply is ferro-nickel. Where you get units of iron along with the nickel, and that’s a perfect product for the stainless steel business which is currently 70% of the demand for nickel. But you cannot economically upgrade class 2 nickel into class 1 nickel.
What you need for that is what we’ve got, which is nickel sulphides, which is then concentrated using this plain vanilla office shelf technology to create a concentrate which you can then sell to the smelter / refinery and they can turn that into anything they want to turn that into.
So that’s sort of the base case for us, although we will be looking at adding a circuit at the end that can produce nickel sulfates. That’ll be one of the variations we will look at to evaluate the economics of doing that. Our competition to producing class 1 nickel is high pressure, high temperature, acid leeched projects, shortened to HPAL. And those projects are very capital intensive and very tricky.
Generally they’re way over budget and they take over 4-5 years to get up to name plate thruput if ever. Compared to HPAL I think what we’ve got is safer, it relies on technology that’s more tried and proven and I also think that we can come in at a much better cap than HPAL project.
So can you describe what you’re doing later this year for drilling, and what the plans are for the rest of the year?
Well our drilling program has 2 main parts to it. We’ve got two starter pits where we got better than average grade coming right to surface, and they’re drilled off to the measured and indicated category. But between them we’ve got some inferred resources, and you cannot take inferred resources into its pre-feasibility or feasibility study, so we’re gonna drill enough to convert those to measure plus indicated. At least that’s the intent. And then on the strength of that, along with some holes, we’re gonna drill for metallurgical sample, geotechnical drilling that sort of thing. That’s all in support of advancing the project for pre-feasibility. Either second or third quarter 2019.
The other drilling objective would be some exploration. We’ve got three high impact exploration targets that we’re gonna drill this year. In the system, we’ve never found the roots of the system. And the feeder zones, which is where you get massive sulphides, you get high grade.
So this is Voisey’s Bay, Sudbury Basin, you know the sort of thing Garibaldi Resources has been hitting on lately. The roots of our system will falter off. From what we’ve been drilling and transporting and we’ve got 3 unexplained magnetic targets that could be the roots of the system. I’ve been wanting to drill these for six years, during a bad market, we couldn’t raise the money to drill them. Now we’ve got the money we’re gonna drill them. So you’ve got some very real blue sky potential here. These are big targets and if we do hit a massive sulphide in any of them, they completely changes our project. And if we don’t hit, we carry on with what we’re doing and the price of nickel I think will come and lift us.
Fantastic. Earlier on before the interview we were talking about how you and your company survived the bear market in Nickel. Can you explain a bit about what you did to survive and keep the company going?
Well, in December of 2011 we published a preliminary economic assessment, it looked very good, although nickel was at 11 dollars a pound at that point. In 2012 nickel slid to 4 dollars a pound and I just went, I’m not fighting the market. I thought nickel was gonna be down for a while, and so I had to release most of our technical team, downsize our office, I stopped collecting the salary for six years or so and just basically wanted to keep the asset and keep realistic.
Well, the bear market lasted much longer than I thought, much longer than anyone thought it would last. And then last summer we got discovered by an investor named Mike Beck who’s a billionaire and we had exactly what he was looking for. (Collin Kettell from Palisade Global Investments interviewed Mike Beck late last year at his Hard Asset Conference on Jekyll Island - click here to see that interview) A huge deposit that needed slightly higher nickel prices to make it economic.
Mike’s a guy that takes a macro view of the world and then figures out how to make money off it. His macro view is, he thinks electric vehicles are taking over. And he actually ran the numbers, he’s an engineer, he ran the numbers, and went “okay, I wanna be in battery materials. I wanna be in lithium, I wanna be in cobalt and I wanna be in nickel."
And one of the things he did was, along with some friends of his at Pala investments, they put together Cobalt 27. Which is a remarkable feat of financial engineering.
They saw that missing from the market was a vehicle where investors could express either bullishness or bearishness about cobalt. They created, it’s not exactly a cobalt ETF, but it’s very close to that. And I thought that was brilliant. And so when he called us out of the blue, and I did a little bit of due diligence I said, well, this is someone I really wanna be in business with. So we started working together, Pala Investments has gotten involved, Collin Kettell from Palisade Global Investments has gotten involved, Anthony Milewski who is the CEO of Cobalt 27 is involved, he’s very bullish on our prospects and I mean obviously their first love is cobalt, but their second love is nickel. They think nickel is next.
Would you describe to investors your company as a leveraged play on Nickel? An optionality play?
Absolutely. This is where when you have a huge deposit that’s not quite in the money, which exactly describes us. So we’re currently as we speak today, trading at a market capitalization of about 8 million Canadian dollars. And we brought about 4 million Canadian dollars in the Treasury. So if you’re looking for cheap we’re it. If you’re looking for safe, we’re not it. If you’re looking for safe, buy a producer, and if you’re right about nickel you’ll get double or triple your money. But if you’re looking for leverage, I don’t know what the multiple is but it would be several tens of times your money. If you’re right about nickel. And I think that describes us quite fairly.
So one last question before we wrap things up. We talked earlier about the infrastructure surrounding your deposit, and a lot of investors tend to worry that when a major sized deposit is discovered, the infrastructure surrounding that deposit is usually lacking or is in a difficult area to work in, is this an issue for Giga Metals?
Well, all of the infrastructure aspects are sort of baked into the engineering sites, and baked into the financial model. So we’re not near a railhead for example, we’ll be trucking our concentrate to the port of Stewart which is a year round port. All those costs are baked into the model. The power line isn’t right there but it can be brought in there for a cost. And that cost is also baked into the model. So we’re not super close to infrastructure but we’re also not remote.
Yes. And you’re in a very safe jurisdiction as well?
Yes we’re in a good jurisdiction. Canada in general has very high environmental standards. So if you can get your project going, the buyers don’t have to worry about the ethics of buying your product. Not like buying cobalt from the Congo, for example. The other thing is, permitting is politics. Well, I think we’ve got a project politicians can get behind. We’re producing battery metals for a green future. That’s not hard to get behind.And the other thing is we’re doing a bit of research with the UBC about sequestering CO2 and our silicate tailings. That is a research project, may or may not bear fruit, but we’re certainly doing that.
So we wanna produce battery metals for a clean energy future, and we’re researching CO2 sequestration. So I think this will be a very easy project for the politicians to get behind. And I think our permitting will go relatively smoothly.
Okay, thank you very much Mark. Thanks for your time today.
The Next Bull Market Move
For more information on Giga Metals go to https://www.gigametals.com
To watch Collin Kettell’s interview with billionaire investor Mike Beck go to https://www.youtube.com/watch?v=6R6DuOMfaPE
Disclaimer - Interviews are conducted in the name of research and learning from the best. Only you can decide what makes a good speculation/investment.