Forget Cobalt, This Metal is the Investment for the EV & Green Revolutions

There’s a lot of media coverage about cobalt and lithium and how valuable they are in the electric vehicle revolution. Fair enough; after all, most EVs are powered by Lithium-ion (Li-ion) batteries. But what if you knew that there is another metal that is just as – and probably even more important – than either cobalt or lithium? What if you found out there is a shortfall of supply of this metal? We bet that you’d be interested in learning more.

The good news is that there is such a metal. It’s nickel (Ni). There’s a case that Li-ion batteries should be called Ni-ion batteries (or at least Li-Ni-ion) due to the importance of nickel in the cathodes that are critical to function of the rechargeable batteries that are not only used in cars, but all sorts of electronics (like the phone, tablet, or laptop you are probably reading this on) and other parts of our daily lives that we take for granted that are so entrenched in society.

Specific to a typical EV battery (NMC532), the metals required are:

• 17 pounds of lithium carbonate
• 30 pounds of cobalt
• 44 pounds of manganese
• 77 pounds of nickel

Now consider how much extra nickel needs to be produced each year if indeed the International Energy Agency is correct in a report estimating some 150 million EVs will be on the road by 2030.

Two Bits on Nickel

Nickel is rarely used in its pure form, but it is irreplaceable when combined with other metals to produce alloys, such as stainless steel and cast iron, that are superior to any of the component metals individually. In the electric vehicle (EV) space, older Li-ion batteries had cathodes that were approximately one-third nickel. New technology to increase density and vehicle range has raised the percentage to at least 60% nickel in cathodes. Other emerging tech, such as the newest types of nickel manganese cobalt batteries are comprised of nearly 80% nickel.

Cathodes are one of five integral components (anode, separator, electrolyte, and lithium ions being the others) in a rechargeable battery. Cathodes are the part that store and release energy. Due to its properties, nickel is the optimal product for this application (scientists have tried many other metals and nothing works as well, that’s why nickel is the go-to industry-wide).

So, more nickel is used in a Li-ion battery than cobalt and it is also used in other parts of electric cars and trucks because of its value to the steel industry. Even if a manufacturer uses good aluminum in production, it can’t get away from nickel, as with AA7075 aluminum alloy, 0.35% (weight %) of nickel is added to make the alloy better (stronger, better weldability, etc.)

The Upcoming Need is Staggering

That said, it is logical that, 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. That is still piddling to the number of cars that will need to be on the road by 2050 if the U.S. is to meet its Net Zero Emissions goals that stipulates the banning of internal combustion engine cars 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. Some of the biggest companies and brightest minds agree that more nickel mines must come online as decarbonization and electrification of the world accelerates. BHP Group Ltd. (NYSE: BHP), the world’s biggest miner, sees unprecedented demand for nickel on the horizon, predicting nearly a four-fold surge in need for the metal by 2050. 

In Fathom Nickel Inc.’s (CSE: FNI)(OTCQB: FNICF) (FSE: 6Q5) latest corporate presentation, a single image spells out the fact that the outcries for more lithium should be paralleled by those for nickel, which is facing a nearly identical supply shortfall as demand shoots from 2.5 million tonnes (Mt) in 2019 to 9.2 Mt by 2050.

The European Commission’s Joint Research Centre is onboard with this impending imbalance. Data from a Roskill study showed supply increasing 56% by 2030. Not bad, but a real problem when considering that demand is forecast to synchronously balloon 400%. The report also noted a little more domestic gloom by pointing out that there aren’t many new development ready nickel deposits throughout Europe. Furthermore, some nickel production has been linked to sketchy mining practices and environmental issues in jurisdictions that are known to turn a blind eye to non-compliance.

Write it Down…Nickel Production is Coming Home

Through 2021, Canada ranked seventh in the world with an estimated 2 million tonnes of nickel reserves, out of about 95 million tonnes estimated globally. With some more exploration, that total will almost certainly increase, and it will do so with the assistance of the federal government. In fact, Ottawa has earmarked $1.6 billion for investment designed to hasten the production of critical metals necessary for EV production. Canada has a long, rich mining history and has a golden opportunity to fortify its economic future by getting in front producing critical metals like nickel (and cobalt, copper, lithium, etc.) is exactly where politicians are looking.

Not to speculate too much, but what is likely to happen is the giants like BHP Group Ltd. (NYSE: BHP), VALE S.A. (NYSE:VALE), Rio Tinto Plc (NYSE:RIO) and Anglo American plc. (OTCQX:NGLOY) are going to watch the juniors like Fathom Nickel (CSE: FNI)(OTCQB: FNICF) let them prove what they have in the ground and then may come calling for some partnerships. It’s nothing fancy; it’s just the M.O. of majors to let juniors do the early heavy lifting to de-risk their investment later.

You Can Bet They Already Know About Albert Lake and Gochager Lake

The Albert Lake Project consists of a stunning 90,144 hectares of drill-ready exploration lands with over 80,000 hectares currently unexplored. The Albert Lake property in north-central Saskatchewan is a premier asset that boasts some of the highest-grade nickel ever mined in Canada. It is host to the historic Rottenstone Mine, a high-grade, open pit Nickel (Ni) Sulphide mine that produced an average grade of 3.23% Ni from 1965 to 1969. The high-grade deposit also produced 1.83% Copper (Cu) and 9.63 g/t Palladium-Platinum-Gold (Pd‐Pt‐Au).

Historic drilling results suggested a mineral resource for the Rottenstone deposit of approximately 45,400 tonnes grading 2% Ni, 1% Cu, and 5.5 g/t Pt+Pd + rhodium.   Post-production drilling has confirmed the deposit remains open along strike; south-southwest of the historic mine. Fathom Nickel is in the process of proving out the extension of the deposit using modern exploration technology, namely BHEM (borehole electromagnetic surveys)

The company showed prescient, shrewd judgment in its acquisition of the project in 2015, building its massive land position and robust exploration data package during a down cycle for nickel. Fathom funded exploration programs in 2016, 2018, 2021, and 2022, validating that Rottenstone does not exist in isolation and recently identifying a 300+ meter Bay Area Ni mineralization corridor 400-500 meters north-northwest of Rottenstone. Armed with this new info, the company hypothesizes that Rottenstone is part of a much larger magmatic Nickel Sulphide system.

The hypothesis is supported by drill data showing consistent mineralized intervals up to 18.0 meters thick. Drill results have repeatedly impressed and extended the strike, including cuts of 0.62% Ni, 0.29% Cu, and 0.58 g/t (grams per tonne) Pd-Pt across 13.27 meters; 3.54 meters grading 1.09% Ni, 0.42% Cu, 0.07% Co, and 0.75 g/t Pd-Pt+Au; and 1.01 meters at 1.71% Ni, 1.21% Cu, and 20.76 g/t Pd-Pt+Au as part of a larger intersect of 7.47 meters grading 1.06% Ni, 0.88% Cu, 4.36 g/t Pd-Pt+Au.

Metal-Laden Trans Hudson Corridor

If you haven’t heard of the Trans Hudson Corridor before, do some research. It’s thousands of miles long, wide, and chock full of a variety of metals. In mining, the Homestead Mine in South Dakota at the southern end of the corridor was one of the largest, high-grade discoveries ever in North America, producing gold for about 100 years before it finally closed in the late 20th Century. In reality, the original mine may have been shuttered, but there is some serious exploration activity in the area suggesting that mine isn’t remotely close to have given up all its gold yet.

Further to the north, the Trans Hudson Corridor makes a sharp right turn. Fathom Nickel has its projects and massive land position near that turn and has a mounting data pile providing evidence it is in a premier location.

The mineralization of the historic Rottenstone deposit is unique and contains several notable associated metals. Sample metallurgy also showed favorable metal recoveries of greater than 90% Ni, Cu, Cobalt (Co) and >80% Pd-Pt. PGEs (Platinum Group Elements), which have been minimized in importance under the misnomer of diminishing demand for use as catalysts in fossil-fuel-powered cars as they are replaced by EVs. However, the World Platinum Investment Council begs to differ. In October, the WPIC published a note saying it is “just a matter of time” before platinum demand from fuel-cell EVs, which are ramping up in China particularly, will equal today’s automotive usage.

That detail about PGEs should not go overlooked, as every metal coming from Albert Lake is valuable and in demand.

The geological setting of the Alberta Lake Project is similar to world-class nickel mining camps in the Trans Hudson Corridor, including Thompson Nickel Belt (operating, over 5 billion pounds of nickel produced since 1959), Lynn Lake, and Raglan Nickel Belt (operating, over 39,000 tonnes nickel produced in 2020). Broadly speaking, Saskatchewan has tremendous upside as the province is relatively under-explored for magmatic nickel, VMS-type, and gold deposits.

The Gochager Lake Project is equally as impressive, although a little smaller in size at a still formidable 19,342 hectares about 75 kilometers north of the town of La Ronge. The project is home to an estimated 149+ historic drill holes totaling approximately 27,000 meters. It is subject to historical resource estimates in 1968 and 1990. With the exception of two drillholes drilled in 2018 no exploration activity had occurred since 1990 until Fathom recently put a bit in the ground.

In 1968, the resource was estimated at 4.3 million tons at 0.30% Ni and 0.08% Cu. The 1990 estimate reported an orebody with reasonably well-defined limits containing 1.8 million tons at 0.735% Nickel equivalent (NiEq, 1Ni = 3Cu).

The project is characterized by disseminated Ni Cu+Co mineralization hosted in gabbro containing notable zones of massive sulphide mineralization not fully delineated within the deposit.

Gochager Lake is a historic Ni-Cu-Co open pit resource with significant exploration upside because the historical data is compelling but lacked follow-through exploration.

2023 Updates are Lending to Building Excitement

Drilling at Gochager Lake started early this year that was multi-fold in purpose. One, they are better defining and expanding the known mineralization. Two, they are using BHEM to indicate that the areas around the drill holes contain additional mineralization. In short, BHEM is an important tool being put to use to identify off-hole conductors.

Drill results released last month were compelling, to say the least. Highlights from work at Gochager included continuous nickel mineralization of 1.49% over a length of 58.2 meters, including intercepts as high as 2.95% over 4.2 meters; impressive cobalt grades encountered throughout all zones of mineralization, including a 4.2-meter section grading 0.22%; and an unexpected 3PE (Pt-Pd+Au) anomaly of 28.23 g/t over 0.7 meters in hole GL23003.

Further, BHEM results suggest a continuation of mineralization to depth and possibly along a greater strike extent than previously recognized. Numerous, robust off-hole BHEM conductors are to be targeted in future exploration programs.

While the Gochager assays keep coming in, the company turned its attention to Albert Lake where it targeted several priority regions, including the Tremblay-Olson claims. The Tremblay-Olsen claims were essentially locked within the Saskatchewan Mineral Disposition system since 1987 until Fathom was finally able to acquire them in July 2022, adding a valuable piece of the puzzle on trend to the south-southwest of the Rottenstone Mine.

There is good reason management is excited about this acquisition. Historic grab samples at the claims assayed up to 3.11% Ni, 0.91% Cu, 1.01 g/t Pd, and 0.46 g/t Pt. Historic trenches have exposed a lens of mineralized pyroxenite containing up to 40 percent sulphides. So far, the soil geochemistry, the coincident gradient MAG and MAG inversions, VTEM and AirTEM along with the recently completed gravity survey data defines a very favorable exploration target along trend and to the southwest of the historic Rottenstone deposit.

The first results from the newest exploration were released this month, highlighted by assay and pXRF results recorded from drillholes AL23073 and AL23074 demonstrating anomalous nickel with associated mafic-ultramafic pathfinder elements chromium and magnesium (again, more variety in the mineralization). The anomalous to highly anomalous Cr and Mg, occurring within the drillholes is suggestive of an ultramafic source in the vicinity of the drillholes.

Borehole electromagnetic surveys (BHEM) of both drillholes identified prominent and distant zones of off-hole conductivity in front of and above both drillholes (centered at approximately 80 m in AL23073 and centered at approximately 115 m in AL23074). Drillhole AL23074 detected an additional off-hole response centered at a depth of approximately 270 m.

“Everything is sort of stacking up very, very nicely,” said Fraser in a recent interview with Proactive Investors’ Stephen Gunnion. “It’s sort of a geologist’s dream when you get all the tools aligning. Now we just got to get in there with the drill and find out what’s going on.”

Investors Pour In, More Exploring Could See Ongoing High Interest

One of the biggest hurdles for any small metal explorer is money, as delineating mineralization is an expensive process. Fathom CEO and VP Exploration Ian Fraser commented on that in a press release this month, saying, “We are very encouraged by the confirmation of anomalous nickel within mafic to ultra-mafic rocks encountered during this limited program. Unfortunately, due to significant budget constraints, we were unable to extend the drill program beyond the initial two drill holes at Albert Lake.”

Those words are highly relevant because the company is once again flush with cash. Late in April, it opened a non-brokered private placement financing for aggregate gross proceeds of up to C$2,000,000 that caught the attention of Crescat Capital, which agreed to make a strategic investment for up to 25% of the C$2.0 million, or $500,000. Interest was high, judging by the fact that only a matter of days later the offering was increased to C$3.0 million.

Thrilled by the participation, Doug Porter, President and Chief Financial Officer at Fathom, said, “The additional proceeds from the upsized offering will allow us to expand the extent of the field exploration programs at both the Gochager Lake and Albert Lake Projects. Planning is currently underway to commence field geophysics in early June. A more detailed exploration plan and timeframe will be announced once finalized in the coming weeks.”

With the expectations and delivery of the latest results, shares of FNI hit 28 cents, their highest level since May 2022, where it still only has a C$28 million market capitalization. The robust data sets and land package in a prolific region will likely continue to draw attention to Fathom, which has essentially tripled in value from its low in February, even with the recent consolidation to 12 cents. 

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