Canada Nickel (TSX-V:CNC; OTCQB: CNIKF) has secured a US$10 million loan facility with Auramet to continue advancing its 100%-owned Crawford nickel-cobalt sulphide project in northern Ontario following the release of its feasibility study, expected before year end.
The feasibility study is now about 85% complete, the Toronto-headquartered miner said in a news release on Thursday.
Canada Nickel CEO Mark Selby said the financing will allow the miner to conduct “post feasibility study work on permitting and detailed engineering that is advantageous for us to complete during the coming winter months and allows us to remain well-funded as we continue to aggressively advance the project.”
Crawford is located within the Timmins mining camp, about 542 km northwest of Ottawa.
The Auramet facility is expected to close on or before Oct. 14. The loan will be due on Jan. 14, 2023, and will carry an interest rate of 1% per month, subject to a 2% arrangement fee.
Auramet, a precious metals trader, will also receive 325,000 one-year warrants with a strike price of $1.52 per share. A four-month hold period will apply to the warrants and shares. The closing of the facility is subject to approval by the TSX Venture Exchange.
Cantor Fitzgerald analyst Matt O’Keefe said in a note that while it’s not ideal for exploration companies to issue debt because it can act as an overhang on the stock price. “That said, Auramet has proven in the past to be a supportive and flexible partner to Canada Nickel (recall that an almost identical deal was struck in December, 2021 and paid off following a $51.6 million financing in March 2022) and demonstrates Canada Nickel’s confidence in the nickel market, a compelling feasibility study and its financing options going forward,” he added.
O’Keefe added that dilution of Canada Nickel shares is anticipated in 2023 for repaying the debt.
A new resource estimate released by the miner in July more than doubled Crawford’s measured and indicated resource estimate to 1.4 billion tonnes grading 0.24% nickel and 6.59% iron for 3.5 million tonnes of contained nickel and 93.9 million tonnes of iron.
Inferred resources added 670.1 million tonnes grading 0.23% nickel and 6.85% iron for 1.6 million tonnes of nickel and 45.9 million tonnes of iron.
At an 8% discount rate, the project would generate a post-tax net present value of US$1.2 billion and a post-tax internal rate of return of 16%, according to the preliminary economic assessment that was released in May 2022. The capital cost was pegged at US$1.9 billion.
The company acquired Crawford in 2020. It also owns 19 nickel targets near the project.
Shares in Canada Nickel were trading at $1.40 as of Thursday afternoon in Toronto. Its shares have traded in a 52-week window of $1.18 and $4.01. It has a market cap of $158 million.