Last week I caught up with Mark Jarvis, CEO of Giga Metals. We talked about the nickel market, China’s role within the electric vehicle movement, and what’s next for Giga Metals.
On The Next Bull Market Move we have a returning guest. We have Mark Jarvis, who is the CEO of Giga Metals. How are you today, Mark?
I’m very good, thanks Kerem
Let's get your thoughts on the nickel market today. Before the call we were having a brief discussion about where the nickel price currently is and the inventories from the LME, as they continue to fall. So what does this tell you about the stock piles for nickel and the likelihood of maybe a possible supply disruption scenario for the nickel market in the future?
Well, I think it's coming. The only question is timing. We track LME inventories because LME is the main market. Shanghai is a market for class one nickel, but it's much smaller. Inventories on the LME have gone from 460,000 tonnes three years ago, to 190,000 tonnes today. Currently the inventories seem to be dropping by about 30,000 tons a quarter. 190,000 tonnes in a nickel market that's about 2.1 million tonnes per year is about four weeks' supply.
Historically whenever inventories get below two weeks' supply, and particularly less than one week supply, then the nickel price starts to get very volatile. It goes shooting up and it falls down. It goes shooting up again. It's a very volatile commodity once it gets going. And so, I'm just watching these inventories drop and thinking ... I think within a year things are going to start getting interesting with nickel.
What are your thoughts on China and how that market will help push EV adoption?
Well, I think with the Chinese, for one thing they really need EVs, because it is so polluted there. I don't know if you've ever been to Beijing or Shanghai, but it's just horribly polluted and that's driving things. Then to buy an internal combustion engine vehicle in Beijing, you actually have to win a lottery.
Whereas if you've got the money, you could walk onto a dealership and drive an electric vehicle off the lot. So it's just very easy. There are incentives built in, but there are also negative incentives for choosing internal combustion engine vehicles. But the other aspect of the Chinese is that they have been very busy locking up supplies of raw materials. In the Congo they're huge players in cobalt and they're also locking up nickel supplies.
So there's starting to be some concern regarding this - I've heard this both from South Koreans and from the Japanese, that they better get busy because the Chinese are grabbing everything they can. The South Koreans and the Japanese are big players in the battery business. If they want to compete, they need to start locking up supply, as well. And they realize that. We've been talking to a number of strategics, frankly, and it's getting very interesting. We were talking to a car company recently and they are starting to realize that unless they can secure supply, and the car companies are particularly concerned with nickel, then they will be hostage to the market.
And so, when nickel does get spikey, as it does when it gets in short supply, the pricing of their vehicles and their profit margins could be hostage to the nickel market. Some of the smarter companies are starting to look upstream and saying, "How can we secure supply where we know what the price will be in the longterm?" And I think I've got an answer for them.
You briefly mentioned Japan. I understand earlier in the year you went to Japan. Can you talk to us about that?
Well, I was in Tokyo and Osaka with Martin Vydra. And Martin was 31 years at Sherritt. He's an engineer, so he understands all of the process steps to finished products extremely well. At Sherritt, Martin did due diligence on every single large undeveloped nickel deposit in the world, including all the HPALs. Of the large undeveloped deposits in the world, he likes ours the best. That's why he joined our Board.
During the latter part of his career at Sherritt, he was marketing nickel and cobalt to end users and so he knows the Chinese. He knows the Japanese trading houses very well. He knows the South Koreans. And so we visited the trading companies in Tokyo and even a very large battery company in Osaka. There is interest. With the Japanese, things take time. It takes multiple visits and I don't think anything is going to be concluded until we've got our pre-feasibility study done. However, we're doing all the work ahead of time so that when we come out with the pre-feasibility study, some of these strategics will be able to make a quick decision. That's what we're setting up.
I can also tell you that Martin Vydra is in Asia right now. He's visiting with some of the Chinese end users, but he's also going to be in Tokyo. In Tokyo he's going to meet our other new director, Bob Morris.
Bob is an extremely interesting guy. He was in charge of worldwide marketing for base metals for Vale. Vale is the largest producer of nickel in the world. They're the Brazilian iron ore company that bought Inco. He ran a portfolio that ranged up to $7 billion a year, copper, nickel, cobalt and precious metals. He has also looked at every large, undeveloped nickel deposit in the world from his perch at Vale. And he likes our deposit the best of everything that's out there. I find that incredibly validating and encouraging.
Before he was in charge of worldwide sales at Vale, he was in charge of Asian sales of base metals and he lived in Tokyo for five years. So, all of the trading houses know him extremely well. He and Martin are going to be visiting a couple of the trading companies this week, the ones that have expressed the most interest. They're going to inform them of our progress.
As we begin to wrap up Mark, can you tell us what plans you have for the rest of the year for Giga Metals and beyond that?
Well, we're really focused on metallurgy and geo metallurgy. Within a couple of months we'll have a new geological model and we will announce a new 43-101 resource, where we increase the proportion of measured and indicated within our resource. We've done all the resource drilling that we need to do to have everything that we want to mine in either the measured or indicated category. We've done all the resource drilling that we need to do to take this project to pre-feasibility and all the way to feasibility. So that will be the next event and that's in a couple of months.
We're also going to be doing some metallurgical optimization work and, as a byproduct of this work, we're going to create a lot of concentrate, which we will have available as samples for potential partners. A lot of the people we've been talking to have been requesting concentrate samples so they can do their own test work on it. We'll be able to supply that towards the end of this coming summer. We'll have quite a bit of sample ready for them. And then by the first quarter of next year, we'll have a pre-feasibility study. That's the goal.
Well, thank you very much for your time today Mark.
Thank you very much, Kerem. Appreciate it.
The Next Bull Market Move
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I am currently a shareholder of Giga Metals.