FPX Nickel Corp. Offers Asymmetrical Investment Opportunity


FPX Nickel Corp. (TSX-V: FPX/OTC: FPOCF) is a junior resource company focused on the exploration and development of the Decar Nickel District located in central British Columbia, Canada. Four targets containing awaruite mineralization have been identified in this 245 square kilometres district. Awaruite is a naturally occurring nickel-iron alloy mineralization. The Baptiste target was the first one to be drilled extensively resulting in a current NI 43-101 resource estimate of 1.996 billion tonnes of indicated resources at an average grade of 0.122% Davis Tube Recovery (DTR) nickel containing 2.4 million tonnes of nickel, plus 593 million tonnes of inferred resources with an average grade of 0.114% DTR nickel containing 0.7 million tonnes of nickel, both reported at a cut-off grade of 0.06% DTR nickel.

The Baptiste Deposit boasts other attractive attributes including proximity to excellent infrastructure and its location in a premier mining jurisdiction. Baptiste is a two-hour drive from Fort St. James on a high-speed logging road and located only five kilometres from rail and 100 km from hydroelectric power. British Columbia’s leading environmental and engineering standards mean that the development would be world class.

Baptiste Project Economics

The following table details the Preliminary Economic Analysis (PEA) results and its assumptions.

Baptiste Project PEA Results and Assumptions (all in US$)

Pre-tax NPV (8% discount rate)$2.93 billion
Pre-tax IRR22.5%
Payback period (pre-tax)3.5 years
After-tax NPV (8% discount rate)$1.72 billion
After-tax IRR18.3%
Payback period (after-tax)4.0 years
Net cash flows (after-tax, undiscounted)$8.73 billion
C1 operating costs 1$2.74/lb nickel
AISC costs 2$3.12/lb nickel
Processing throughput120,000 tonnes per day
Mine life35 years
Life-of-mine stripping ratio (tonnes:tonnes)0.40:1
Life-of-mine average annual nickel production99 million lbs.
Nickel price 3$7.75/lb
Baptiste product payability (% of nickel price)98%
Pre-production capital expenditures$1.67 billion
Sustaining capital expenditures$1.11 billion
Exchange rate0.76 US$/C$
  1. C1 operating costs are the costs of mining, milling and concentrating, on-site administration and general expenses, metal product treatment charges, and freight and marketing costs less the net value of by-product credits, if any. These are expressed on the basis of per unit nickel content of the sold product.
  2. AISC (all-in sustaining costs) comprise the sum of C1 costs, sustaining capital, royalties and closure expenses. These are expressed on the basis of per unit nickel content of the sold product.
  3. Nickel price is based on the average of six long-term analyst forecast prices.

Please note that mineral resources are not mineral reserves and do not have demonstrated economic viability.

FPX offers asymmetrical investment opportunity as the market capitalization of the company does not reflect the fundamental value of the Baptiste Project as detailed in the PEA. The PEA’s after-tax Net Present Value (NPV) is US$1.72 billion. At a share price of C$.65, the company is trading at approximately six percent of this project’s NPV given a fully diluted share count is 230,744,051 shares. FPX would be trading at three to four times its current share price if it were trading on par with similar peers. (See the following chart: Global Base Metals Project – P/NPV.) FPX would be trading at ten times its current share price if it were trading on par to its leading peer. And it is important to remember that this ratio uses the current Baptiste Project NPV. There are numerous reasons to expect that the PEA’s NPV will improve as the project moves toward the Pre-Feasibility Study (PFS). In addition, there are other drivers that should add value to FPX during the next couple of years.

Increasing Nickel Price

The nickel price utilized in the PEA is US$7.75/lb which is based on the average of six long-term analyst forecasts. Nickel’s current price is US$7.80/lb. While acknowledging that forecasting an accurate commodity price in the near-term is a serious challenge, there is little denying that all arrows are pointing toward a secular commodity boom with nickel in the vanguard. There are numerous catalysts for a rising nickel price including a worldwide infrastructure buildout and the rise of electric vehicles (EV) which depend on nickel intensive batteries. The Baptiste Project is special in that its nickel production can be geared toward the traditional stainless steel market or focused on providing battery grade nickel through conversion of ferro nickel concentrate to nickel sulphate. It is likely that battery compatible nickel product will command an increasingly premium price amidst EV market growth. So commercial analysis might determine that production of nickel for battery cathodes is the optimum choice for the Baptiste Deposit. However, there is always a risk that technological breakthroughs result in a move away from nickel heavy battery chemistries or that nickel prices rise too far resulting in thrifting activities which would dampen battery nickel demand. Again, FPX would be protected as a low-cost supplier to the traditional stainless steel market. The project is buffered by its low operating cost of US$2.74/lb which puts it in the lowest quartile of nickel projects worldwide. (See the following chart: Global Nickel Market Cost Curve.)

Security of Supply

Security of supply concerns create another key advantage for the Baptiste Project. The increasing trends of deglobalization and mounting supply chain risks caused by system fragilities and geopolitical conflicts mean that regional nickel supplies become a strategic advantage. The following chart shows how poorly North America fares in nickel production and reserves compared to much of the world.

CountryMine Production 2019Mine Production 2020 (est.)Reserves
United States13,50016,000100,000
Dominican Republic56,90047,000NA
New Caledonia208,000200,000NA
Other countries310,000290,00014,000,000
World total (rounded)2,610,0002,500,00094,000,000

Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2021


1. Data in metric tons of nickel content.

2. The chart identifies land-based resources averaging approximately 0.5% nickel or greater and containing at least 300 million tons of nickel, with about 60% in laterites and 40% in sulfide deposits. Extensive nickel resources also are found in manganese crusts and nodules on the ocean floor, but large-scale ocean mining is a controversial proposition facing significant near-term opposition.

Low Carbon Footprint/Pollution Profile

The Baptiste Deposit’s projected low carbon footprint and pollution profile provide additional reasons for FPX’s nickel to be highly attractive to end users concerned with Environmental, Social and Governance (ESG) compliance. Baptiste will be powered by renewable hydroelectric power. The deposit contains little or no sulphides meaning there will be little acid mine drainage. Initial metallurgical test work demonstrates that the nickel-iron alloy is recoverable using conventional two-stage grinding and magnetic separation followed by flotation concentration. It does not require smelting, thereby greatly reducing energy requirements and potential environmental impact. Importantly, FPX continues to work with the University of British Columbia to demonstrate the carbon sequestration nature of the deposit’s waste rock. This development has the potential to zero out the project’s carbon footprint meaning that nickel produced from the Baptiste Deposit would meet the most stringent government requirements including the impending EU legislation for batteries. Electric vehicles are an important component of the new green economy. Consumers will appreciate that the nickel in their high energy density electric car batteries meets the highest ESG thresholds. Global miners, battery makers and vehicle manufacturers will compete to partner with or acquire producers of green battery metals. Institutions will compete to fund viable investments that meet their ESG targets.

Exploration Opportunity

US$24 million has been spent on the exploration and development of the Decar District since 2010. 82 holes (31,000 metres of drilling) have been drilled in the Baptiste Deposit. It was initially the most accessible target with the largest known surface footprint. The Baptiste Deposit is a world class resource, but it is only the first of four targets identified to date in the 245 square kilometres Decar District. Awaruite mineralization has been identified in the Van, B and Sid targets by petrographic examination, electron probe analyses and outcrop sampling.

The Van target has a larger footprint than the Baptiste Deposit and the nickel grade of the outcropping bedrock is higher. The Van target has not been drill-tested previously as rock exposure was extremely poor prior to logging activity by forestry companies. A 3,000m 10-hole drill program is planned for the Van target beginning in June 2021 with program completion schedule for mid-August and final assays projected to be received by October. Given the homogenous nature of this style of mineralization, it is possible that a Van nickel resource be declared in 2022. A Van Deposit could become the priority for development if it were substantially larger and richer than Baptiste or it could be developed in parallel. There are potential suitors that would look favorably upon a nickel asset with a multigenerational mine life. Either way, successful exploration results would significantly increase the fundamental value of FPX.

In addition, awaruite mineralization was confirmed in the B and Sid targets by the drilling of three holes in 2010 and 2011. All three holes intersected nickel-iron alloy mineralization over wide intervals with DTR nickel grades comparable to the Baptiste Deposit. And additional exploration might lead to the discovery of more targets.

Corporate Leadership

FPX announced on April 12, 2021 the creation of a Technical Advisory Committee (TAC) to provide guidance to management regarding all aspects of the exploration and development of the Baptiste Nickel Project. These senior mining specialists will provide invaluable assistance to the management and directors of FPX. The TAC is comprised of five senior mining professionals:

  • Clem Pelletier is a process chemist/metallurgist by training with more than 50 years of experience in the mining and resource-related environmental consulting industries. He was the founder of the Rescan Group which now part of ERM, the globally recognized, industry-leading mineral processing engineering and environmental consulting firm. He has managed large environmental impact studies and permitting for major projects such as the KSM Project, the Jansen Potash Project, Goro Nickel, the Voisey’s Bay Nickel Project, Escondida, the Ekati Diamond Mine and many others. He is a former Director of Goldcorp and Newmont Corporation and currently serves on the board of Seabridge Gold and is a Fellow of the Canadian Institute of Mining and Metallurgy.
  • Martyn Creaney is a civil engineer with more than 40 years of construction and project management experience. He has been involved in the development of mining projects in Australia, Asia and the Americas including 25 years with Placer Dome where he was Vice President, Design & Construction, overseeing all design and construction activities for the company. For the past 15 years, he has provided senior advisory services to various companies including OceanaGold and Pretium.
  • Rob Pease, P. Geo., is a member of TAC and sits on the board of FPX, Liberty Gold and Pure Gold Mining. Rob founded Terrane Metals which developed the Mt. Milligan copper-gold project located in central British Columbia through final feasibility and commencement of construction before Terrane’s acquisition by Thompson Creek Metals for $650 million in 2010. Rob is a former Director and Strategic Advisor to Richfield Ventures which advanced the Blackwater gold project in central British Columbia until its acquisition by New Gold for $500 million in 2011. Mr. Pease is a Fellow of the Geological Association of Canada.
  • Peter Marshall, P.Eng., is a Director of FPX and a member of TAC. He is the former Vice-President of Project Development for New Gold where he led the completion of the feasibility study for the Blackwater gold project. Prior to joining New Gold, Peter was the Senior Vice President of Project Development for Terrane Metals and was responsible for managing the technical development of the Mt. Milligan copper-gold project from the PEA through to feasibility before its acquisition.
  • Paul Hosford, P.Eng. is a senior mining professional with more than 30 years of experience in metallurgy, operations, project development and commissioning and is a member of TAC. Paul has served in senior metallurgical, project development and project manager roles for Anglo American, Barrick Gold and New Gold. He served as the VP Engineering and Project Manager for Terrane’s Mt. Milligan copper-gold project through the development phase and into project design and construction.

FPX’s board is chaired by Dr. Peter Bradshaw, P.Eng. He is a geologist with 45 years of international mineral exploration experience in more than 30 countries with Barringer Research, Placer Dome and Orvana Minerals. He is a Member of the Canadian Mining Hall of Fame. He is a Director of Aquila Resources and Cofounder and first Chairman of the Mineral Deposit Research Unit at the University of British Columbia. His key discoveries and projects include:

  • Porgera Gold Mine, Papua New Guinea
  • Kidston Gold Mine, Queensland, Australia
  • Misima Gold Mine, Papua New Guinea
  • Big Bell Gold Mine, Western Australia
  • Omai Gold Mine, Guyana
  • Decar Nickel Project, British Columbia, Canada

Martin Turenne, CPA, CA is President, CEO & Director. He is a senior executive with more than 15 years of experience in the commodities industry including more than five years in the mining industry. He has extensive leadership experience in strategic management, fundraising, economic analysis, financial reporting, regulatory compliance and corporate tax. He was formerly CFO of First Point Minerals Corp and held other positions at KPMG LLP and Methanex Corporation. He is a member of the Canadian Institute of Chartered Accountants.

James Gilbert, MBA, is a Director. He has 30 years of experience in investment and transaction execution with more than 20 years focused on the international mining and metals industry. He held senior management positions with Rothschild, Gerald Metals Inc. and Minera S.A., a private mining investment company. His experience covers mergers and acquisitions, debt and equity financing, off-take and specialty refining agreements, joint venture negotiations and strategic marketing. He is a former Director of AQM Copper Inc. which was acquired by Teck Resources in 2016.

William Myckatyn is a Director. He is a mining engineer with more than 34 year of experience. He is the Founder and CEO of Quadra Mining Ltd. and served as its Chairman and subsequently Co-Chairman of Quadra FNX Mining until its takeover in 2012. Previously, he was Chairman, President and CEO of Dayton Mining Corp. where he led the restructuring and merger with Pacific Rim Mining Corp. He is the former President and CEO of Princeton Mining and Gibraltar Mines Ltd. and work more than 17 years for various operations controlled by Placer Dome Inc. and its associated predecessor companies including four separate mines in Australia and the Philippines. He is Director of San Marco Resources and OceanaGold.

Management and Directors hold 39,540,515 shares (18.6% of issued and outstanding) so their interests are strongly aligned with FPX investors. The team demonstrated tremendous leadership stewarding the company through lean times during a commodity bear market. Now that a secular bull market is underway, management closed an upsized bought deal of C$16.1 million on April 7, 2021 at $0.65 per share with no warrants. This continues the positive trend of raising money at ever higher share prices thus mitigating dilution.

Share Price Target

The company has working capital of C$21 million which should be more than sufficient to publish a Baptiste Project PFS by Q2 or Q3/2023. Money will be spent on infill drilling, geotechnical drilling, metallurgical studies and environmental work. There are excellent reasons to project that the results of the PFS will improve upon the PEA. Additional drilling will likely increase the size of the resource, further metallurgical work should result in better recoveries and additional optimization studies should lead to a lower operating cost. And here is a potential bonus factor. The PEA excluded the value of cobalt and iron ore by-products. It may be possible to monetize these by-products as additional process engineering is performed. On April 26, 2021, FPX announced that it was initiating pilot-scale metallurgical testing to validate and optimize the flowsheet parameters outlined in the Baptiste PEA and to identify opportunities to add by-product revenues.

FPX’s share price should rerate as the project is de-risked and other value is generated. Success in exploration and further demonstration of successful carbon sequestration technology would greatly enhance the company’s value. My FPX share price target for Q4/2023 is C$12 based upon a probabilistic analysis of the company’s value-driving parameters. Lack of additional positive exploration results or failure to demonstrate large-scale carbon sequestration technology would lower the share price target to C$8 while success on both of those fronts would make C$16 reasonable. It is my intention to wait for a liquidity event that recognizes the true value of the company. The Baptiste Deposit and the Decar District would make strategic acquisitions for a surprising range of suitors including miners, manufacturers, technology companies and institutions, but it is possible that a green-themed-mania takes the share price to the upper target and beyond prior to actuation of a liquidity event. I would consider reducing or eliminating my shareholding prior to a liquidity event if this scenario were to unfold. Failure to reach the share price target range by Q4/2023 would most likely be attributable to an economic recession and/or stock market rout.


The Baptiste Project as defined by its current PEA would place it in the top ten largest annual output nickel mines in the world while operating in the lowest quartile cost. The company is fully funded to deliver the PFS by Q2 or Q3/2023 and the results of the PFS will likely be superior to the PEA results even if cobalt and iron ore by-products are not monetizable. The drive to a higher nickel price seems likely in the longer term especially as the EV and deglobalization trends continue, but the company is guarded against a decreasing nickel price by its low operating cost. The company’s management, advisers and board are top tier. The new green economy is heavily dependent on metals which means the world needs more ESG compliant mines. The Baptiste Deposit and the Decar District tick all the ESG boxes. Positive exploration results and proving up of the carbon sequestration technology are two additional catalysts that would drive company value. The Rational Speculator is forecasting a C$12 share price target by Q4/2023.

The Rational Speculator holds two tranches of FPX: Tranche #1 at C$.33 and #2 at C$.69. Although my cost basis has been rising, I consider the most recent and more expensive purchase to be better value as the company is fully equipped to execute its plans. I would likely add another tranche if the share price faltered on no negative news. FPX’s share price does not reflect the company’s fundamental value. The next couple of years should prove dramatic for the company.

Best regards

The Rational Speculator


I was a shareholder of FPX prior to publishing The Rational Speculator. FPX is a consulting client. Speculations are high risk propositions, and it is possible to lose your entire investment. Michael Collins/The Rational Speculator is not a Financial Adviser and this article does not constitute financial advice. Do your own due diligence or consult with financial, geological and other professionals prior to making investments in junior resource companies.

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