Samsung SDI Invests in Canada Nickel, Ignoring Short-Term Market Oversupply

Author: Stjepan Kalinic | January 16, 2024 12:10pm

South Korean battery manufacturer Samsung SDI (KRX: 006400) announced a $18.5 million investment in Canada Nickel Company (TSXV:CNC), marking the latest investment in the emerging Canadian mining company.

The funds will be used to support Canada Nickel’s Crawford nickel sulphide project in the Timmins-Cochrane mining camp of Ontario.

"As we advance the Crawford nickel sulphide project, it is critical to form long-term partnerships with companies that truly understand how crucial this production is for electric vehicle supply chains across North America and Europe," Canada Nickel CEO Mark Selby said in a news release.

According to the agreement, Samsung will purchase Canada Nickel’s common shares at C$1.57 per share. This gives the battery maker an approximately 8.7% stake in the company upon closing.

Samsung secured the right to purchase a 10% equity interest in the Crawford project for $100.5 million, exercisable upon a final construction decision. This agreement allows Samsung to participate in 10% of the nickel-cobalt production from the Crawford project over its life and an additional 20% of production for 15 years.

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The Crawford project currently hosts the world’s second-largest nickel resource, estimated at 2.46 billion tons at 0.24% nickel. An October feasibility study highlighted an after-tax net present value of $2.6 billion and an internal rate of return at 18.3%. The proposed operation includes two open pits with an on-site mill, with a total capital cost estimated at $3.5 billion.

Samsung’s investment follows other major contributions to Canada Nickel, emphasizing the growing interest in the company’s potential. Last week, Canada’s largest gold producer, Agnico Eagle Mines (NYSE:AEM) invested C$23.1 million for a 12% stake in Canada Nickel. Before that, British mining giant Anglo American (LON: AAL) also made a substantial investment in Canada Nickel, reflecting the industry’s confidence in the Crawford project.

These investments come at a turbulent period for nickel, which ended 2023 as the worst performer among the metals — dropping 45% in value on the London Metal Exchange.

Looking forward, commodity analysts aren't expecting an improvement. South East Asia Iron and Steel Institute reported that BMI research revised its 2024 forecast from $20,600/t to $20,000/t, citing a persistent supply glut, weak demand in mainland China and limited growth prospects.

BMI's research aligns with an earlier ING report about growing supply from Indonesia; however, the firm anticipates a shift to a deficit by 2028 due to rising demand from the electric vehicle battery industry.

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Posted In: AAL AEM CNC TSXV:CNC