Latest / Financial Survival Network / FPX Nickel Becomes a Deep Value Play: USD 2 Billion NPV vs. $67 Market Cap

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FPX Nickel Becomes a Deep Value Play: USD 2 Billion NPV vs. $67 Market Cap · Financial Survival Network

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That annual free cash flow number that you mentioned at almost six hundred million dollars
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US per a year for twenty nine years. I think that crystallizes it almost
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a little bit better. See that this is the type and scale of asset
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that moves the needle for the largest mining companies in the world. This would
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fit very well into the portfolios of the largest miners out there. The Financial
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Survival Network now more than network, the Financial Survival Network ed. Welcome.
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This is Financial Survival Network. I'm your host, Carrie Lutz, and many
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of you out there have sent me emails. I've seen it in the chat
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rooms. You wanted to get in update on FPX Nickel, which the CEO,
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Martin Terrant, long term sponsor of the show. Martin, great to
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have you back on things are happening. I saw that the PFS, the
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preliminary Feasibility study, just got filed last week and it looks pretty encouraging there.
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Yeah, thanks for having us back on there, Carrie, and yeah,
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it's been an exciting time for the company to make terms of our completion
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of that PFS. As you mentioned, it really represents the culmination of a
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long body of work over the last couple of years subsequent to the preliminary economic
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assessment that we did in late twenty twenty. Yeah, I'm happy to delve
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deeper into what that PFS showed and what the road ahead is for FBX.
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Well, I always like to look at the bottom first, the bottom line
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the IRR, and I think memory serves me correct it was almost nineteen percent.
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Yeah, that's right. So at a long term nickel price assumption of
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abud eight dollars and seventy five cents a pound, Yeah, we do generate
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post tax or after tax numbers from an MPV stamp point in excess of two
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billion dollars US and an IRR well over eighteen percent. You know, that
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IRR figure is very robust. You know, a project of this scale and
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scope, one that can be producing nickel for almost thirty years, that is
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an incredibly strong IRR. And you know, one of the other metrics that
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we like to look at is that the ratio of the of the of the
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my life to the payback. That's really something that captures and highlights the positive
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attributes of having a multi cycle asset. So in our case that my life
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is around twenty nine years, the payback's about three point seven years, so
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that ratio of my life to payback is almost eight to one. And you'll
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see there's a good slide in our corporate presentation that shows that that that's really
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peer leading, that that's the highest such ratio of any of the major nickel
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projects out there. And I think it speaks to that multicyclical exposure to the
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nickel price into the nickel market that this that our Baptist project offers. It's
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interesting, you know, looking at the cash flow numbers. You're estimating annual
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you know, pre text cash flow five hundred and seventy eight million US dollars,
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which you know on a on a cap X, which you're estimating at
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at roughly two point two billion, that's a pretty good return. And that
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only gets better because, right, let's face it, the market doesn't give
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you any credit where production past ten years generally in these resource plays. So
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the upside here is in my view, kind of understated, shall we say.
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Yeah, for sure, the effects of discount rates and discounting of future
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cash flows, as you mentioned, does unnecessarily or unduly punish these long life
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projects. And so those NPV and our numbers, while they are very impressive
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for our product. I agree with you, they're almost understate the economic value
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that can be derived here. And that annual free cash flow number that you
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mentioned at almost six hundred million dollars US per a year for twenty nine years,
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I think that crystallizes it almost a little bit better to see, you
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know that this is the type and scale of asset that moves the needle for
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the largest mining companies in the world. This would fit very well into the
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portfolios of the largest miners out there, right. So, yeah, and
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looking at these numbers, you know, obviously you know the mind life is
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also understated as well. So and your capex pretty much from what you're saying,
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is under four years basically is the payback period. So it produces at
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least twenty five years or twenty four years over and above its payoff period with
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a minimal capital expenditure. It really is a compelling case that many of you
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might not really know from looking at the numbers because they are so conservative and
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understated. Yeah, the other point I would make about the capex is that
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absolutely this is a large project, and it really is a major company scale
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project, and we make no bones about that. But one thing that people
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should should look into a little bit more to understand how to value these projects
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is the Canadian federal government passed new legislation earlier this year that includes a critical
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Minerals Extraction and Processing tax credit. That's a thirty percent tax credit on capital
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expenditures to extract and to process critical minerals in Canada. So for every million
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dollars of capital expenditure, the government will actually cover you know, about three
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hundred thousand dollars of that and so yes, that gross capex figure of two
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point two billion dollars is absolutely the case. But then we believe in our
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interpretation of that legislation that the government of Canada will actually you know, cover
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approximately thirty percent of that figure. And that's obviously not insignificant to the economic
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profilogy of the asset. That's huge. I mean, that's basically six hundred
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and sixty million US that we're talking about that Canada foots the bill for.
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Obviously shows you how critical these minerals are that they put that much out and
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you know, you can't even put that in your PFS, I guess because
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you're not supposed to put in tax credits and things like that when you compile
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the number, but then the number has become almost unbelievable Martin. Yeah,
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So to clarify that the economic model in the PF has does incorporate our assumptions
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around how that tax credit will be applied. But to your point, it
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just underscores the kind of the importance of these projects and the importance that the
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Government of Canada is placing on indvans in these projects. Absolutely, all right,
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So moving on to switching up gears, Moving on to other matters.
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Panasonic battery Toyota battery, I should say a deal came forward with them.
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Yeah, So Toyota and Panasonic formed a joint venture company a couple of years
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ago called Prime Planet Energy and Solutions or PPEs. It's a bit of a
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mouthful, but basically it's Toyota's a majority owned electric vehicle battery company. The
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company that they have formed to make batteries for their vehicles with Paasonic, which
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is the leading battery maker in Japan currently. And so this group is currently
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constructing its first EV battery plant in North Carolina, and I believe it's going
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to come online sometime in twenty twenty five or twenty twenty six and thereafter they're
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also thinking about construction of a second battery plant elsewhere in North America. So
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with that comes a real need for PPEs or this Toyota battery company to secure
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supply chains of raw materials of critical minerals that go into making the batteries,
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so lithium and cobalt, graphite, and of course nickel figures prominently in that.
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In the last couple of years, pps has done two memorandums of memoranda
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of understanding with mining companies around nickel. The first was with BHP and the
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second was with us FPX earlier here this year. It was announced in September,
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so that that announcement came at a signing ceremony that we had with representatives
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of PPEs in Ottawa, which is the nation's capital of Canada earlier this year,
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was attended by several prominent ministers at the federal level, both from Canada
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and from Japan. Their their their Minister Economy, Trade and and uh An
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Investment was there and so it was a great event to kind of formalize our
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relationship with PPEs and and happy to talk more about what that agreement means and
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what could lend lend itself to here down at road. So obviously, Toyota
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Motor Company, the largest vehicle producer in the world, currently expanding their ev
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endeavors, so potential future demand. There's just an article the other day that
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they've supposedly perfected a solid state battery Toyota, which means if they really have
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and if it's commercially feasible, they're going to have a near insatiable appetite for
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the metals going into batteries. Yeah, whether in the form of the solid
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state or in the more conventional of Umayan battery formulations. Absolutely, they've said
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that nickel is sort of a high priority for them. You know, the
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agreement that we have with them really establishes a framework for vertical integration of a
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nickel supply chain is to serve in part their nickel requirements for their supply chain.
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So the third member of the third party to that MOLU is jog Mech.
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Jog Mech is the Japanese State Agency for Mineral Expiration, and it's a
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group that we already have a free prior joint venture in place with for expiration
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for the for the particular type of nickel deposits that we're after. Jog Mech
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is playing a critical role as as a representative of the Japanese government in unlocking
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funding opportunities for Japanese industry to invest in critical minerals projects, to secure off
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take and and other forms of rights to future nickel production. And so there
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there's going to be an ability here for us to continue to discuss this the
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strategic opportunities around vertical integration with jog Mech and with the Toyota Battery Company and
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to see what what their opportunities there are for for that collaboration too to come
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fruition to fruition in the form of upstream investment by the Japanese government and by
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PPEs to continue to allow us to advance the Baptiste project at a rapid pace.
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We're talking about Baptiste. We're not even like thinking about Van, Whi's
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probably bigger than Baptiste. I just wanted to add that. But well,
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the attention right now by you of necessity and the market maybe by near sighted
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this is on Baptiste. We've kind of you know, we've kind of forgotten
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all about Van, you know, just asn't decide what's happening with Van right
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now. Yeah, so Van, you know, as you mentioned, is
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a discovery that we meet first from surface sampling and then confirmed into very strong
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seasons of drilling in twenty twenty one. In twenty twenty two, we do
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have the makings of a discovery. They're a mineral deposit that could indeed rival
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or potentially exceed Baptiste in its scale and in its great We did not drill
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at Van next year, but it's certainly something that we would look to do
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as a potential in future. You're to continue to expand that resource and to
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really demonstrate that, you know, beyond the twenty nine year of my life
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Baptiste, there is scope for continued expansion of the what we call the Dakar
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Nickel District for potentially multi decade or multi generational nickel production. Yeah. Sorry,
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just wanted to get that in because you know, like everything has been
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about Baptiste recently, and I think that's important for the future upside of the
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FPX, because whatever happens with Baptiste, in all likelihood, you're going to
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be still have Van to go. So I just wanted to point that out.
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So finally, you relations with first Nations company with First Nations tribes.
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So if you will, stock price taken a bit of hit a hit on
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that front, can you just give us a brief update where we're at there.
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Yeah, So, in the big picture, the mineral claims that date
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far occur in an area that coincides with the traditional territory of four First Nations
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for separate First Nations here in north central British Columbia. And those those nations
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that are centrally impacted are Class the Nation and Benje wou Ten. You know,
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Class the Nation has come out with some public comments stating their concerns about
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mineral expiration and mind development in their territory. We absolutely hear those concerns and
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we take them very seriously. We have had a relationship with with Klaus and
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for the last fourteen years. We've engaged in close collaboration with the elected representatives
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and the and the and the constituent clan heads or KO holders within the nation
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going back for several years. And we we also engage in similar discussions with
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some of those with those neighboring nations that I mentioned, most particularly benche Wu
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Ten. You know, we do have an agreement in place we have had
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an agreement in place coust of Nation. There are certain confidentiality provisions around that
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that prevent us from discussing in great detail exactly what's in that agreement, but
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what I'd say is that we continue to expect that we'll be entering the environmental
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assessment process in twenty twenty four, and we expect that process to really fully
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articulate the impacts of the Baptist project, the environmental mitigations that can be put
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in place, and really looking at some of the enhancements that we can work
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together with these nations to meet to the land base, into the land use
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to really work towards preserving those key areas of cultural and environmental sensitivity and those
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key habitats that are so important to these communities, and we fully acknowledge that
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that's a fundamental part of how we want to develop this project, and we
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look forward to continued opportunities to engage with Clause and National Bitcha, Wooten and
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the other impacted nations to continue to move this project forward, as well as
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close collaboration with both the federal government of Canada and the provincial government of BC
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to support all those discussions going forward. All right, Well, we're always
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optimistic and I'm sure the issues will be resolved favorably to everybody's benefit because projects
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like this don't come along every day, and the fact that it is a
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critical mineral, hopefully that will play a role in the discussions. Yeah,
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for sure, it is a time where we have to recognize as a society
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that we're all using these critical minerals. A lot of that supply of nickel
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is currently coming from places like China and Russia. China and Russia controls something
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like seventy percent of the global nickel supply side, and so diversifying away from
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those sources of nickels is critically important. But at the same time, these
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are projects in Canada that I think can be developed in a way that really
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advanced the theme of reconci with these First Nations groups. And that's that's a
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high priority, and it's it's it's at the core of what our values are
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as a company and be us to and in the end, it's all about
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values. What appreciate your coming on giving us this update. We've been anxiously
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looking forward to it. H check out f p X nickel dot com,
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company's official website, sign up for notifications so you can be up to date
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on the latest developments. The ticker symbols us f P O c F and
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of course in Canada it's f P X Martin. We'll look forward to getting
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an update from you in the future and we'll talk to you soon. Thanks
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again, Kerry really appreciate it. The Financial Survival Network