Not Watching Nickel? That’s a Big Mistake For Your Portfolio

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Wednesday, April 26, 2023

For decades, nickel has been a widely used metal in the manufacturing of various industries like aerospace, automotive, construction, and electronics. In recent years, the demand for nickel has increased due to its use in lithium-ion batteries used in electric vehicles (EVs). This trend is expected to continue, making nickel an attractive investment in 2023 and going forward.

Go shop for an EV and it becomes abundantly clear that the EV race is quietly heating up by the sheer number of cars to pick from today and more in the queue. Tesla (NASDAQ: TSLA) is sensing the pressure as more manufacturers launch competing models, resulting in Tesla making an arguably savvy move to keep customers by lowering prices on its cars. Volkswagen (OTC: VWAGY) is making headway with its ID.4 and its upper end Audi e-tron that saw sales increase 43 percent in Q1 to 34,600 units. After moving 653,957 F-series model trucks in 2022, Ford (NYSE: F) is hoping to make a splash with its all-electric F-150 Lighting. The reality is that electric cars and trucks alike are becoming routine, which should have investors hawking ancillary investment opportunities and the raw materials that these vehicles need is one quick way to get exposure.

Nickel is used in the cathode of lithium-ion batteries, which is the part that stores and releases the energy. As the EV market grows, so does the demand for nickel. According to a report by the International Energy Agency, sales of electric cars hit 6.6 million in 2021, more than tripling their market share from two years earlier. At the end of 2021, the number of electric cars on the road exceeded 16.5 million. Per the Net Zero Emissions by 2050 Scenario, sales of new internal combustion engine-powered cars will cease in 2035. As such, the share of EVs in total sales needs to reach around 60% by 2030 to stay the course and reach net zero CO2 in 2050. 

That means a whole lot more nickel needs to be produced considering the newest formulations of nickel manganese cobalt batteries are comprised of nearly 80% nickel.

In addition to the EV market, nickel is also used in stainless steel production, which is another growing market. The construction and automotive industries are major users of stainless steel, and with the global population increasing, the demand for these industries will only grow.

The supply of nickel has been volatile in recent years, with prices fluctuating due to changes in supply and demand. Indonesia, which is the world's largest producer of nickel (37% of global mined production in 2021), in 2020 introduced a ban on nickel ore exports to promote the development of domestic processing industries. If companies don’t want to order processed and purified nickel on Indonesia’s terms, it is time to look elsewhere.

There are no short cuts for scarcity. In an eye-opening report, Goldman Sachs shows the bull market for nickel is already here with no signs of slowing. After having a prior forecast of LME nickel price reaching $24,000 per metric ton by 2025 (from $16,000 per metric ton in 2021), GS increased its outlook to $42,000. This prediction is based on the expected growth in demand for nickel from the EV market and the tightening of supply.

There are different ways to get exposure, including investing in the nickel futures contracts, buying exchange traded funds (ETFs) like the new Sprott Nickel Miners ETF (NASDAQ: NIKL), and, of course, individual companies like Fathom Nickel Inc. (CSE: FNI) (OTC: FNICF), a company that has seen a nice appreciation in recent months as the company develops its flagship nickel projects, Albert Lake and Gochager Lake, spanning over 108,000 hectares in a historic metal hotbed in mid-to-upper Saskatchewan.

Fathom stock recently hit a nearly nine-month high as it wrapped up a Q1 drilling and exploration program that repeatedly delivered promising data. The company is bringing modern exploration technology to projects that have been explored in recent decades, albeit relatively selective and at shallow depths. 

The historic data indicates Fathom is in the right spot and that previous explorers may have overlooked a premier opportunity. For instance, the Rottenstone deposit at Albert Lake was a target of shallow work in the late 1960’s where it produced nickel (Ni), copper (Cu), and platinum group elements (PGEs) before work was abandoned. The Gochager Lake project is host to a historic, NI 43-101 non-compliant open pit resource consisting of 4.3 million tons at 0.295% Ni and 0.081% Cu2.

Fathom has come to the plate with a 21st Century strategy to not only prove that the resources are there in spades, but far greater than every hypothesized. Using tools like borehole electromagnetic surveys, which can use new or old drill holes to test the local and distant conductivity (read as “metal in the ground”), Fathom has repeatedly produced compelling data indicating not only rock laden with nickel and copper, but also gold, platinum, palladium, and cobalt.

Those of the P.Geo culture will appreciate the most recent data from earlier this month showing continuous nickel mineralization at Gochager Lake of 1.49% over a length of 58.2 meters, including intercepts as high as 2.95% over 4.2 meters; cobalt grades encountered throughout all zones of mineralization, including a 4.2 meter section grading 0.22%; and an unexpected 3PE anomaly of 28.23 g/t over 0.7 meters.

Armed with the data from the last year of exploration, Fathom is planning the next stages of drilling at high priority areas, as well as additional step out work to define the potential boundaries of the mineralization, which to date remains open at strike and depth. This work has investors buzzing, driving the stock from 4.6 Canadian cents in February to as high as 20 Canadian cents early in April. 

After a pullback to 11 cents, the stock is back up to $0.16, as investors are looking for the next catalyst amid a nickel environment that is ripe to see prices keep climbing as supply (especially domestic) struggles to keep up with demand.

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Fathom Nickel Inc. (CSE: FNI) (OTC: FNICF) Full Corporate Write-Up: Click Here.

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