Jul 27, 2020
Stan Sudol to Elon Musk:
5 MIN READ
Stop fretting over potential nickel shortages and back some potential nickel mines.
Elon Musk is practically begging nickel miners to boost production as potential future shortages would severely impact his ability to manufacture electric vehicles, as the metal is a key component for the batteries Tesla Inc. depends on.
Historically, nickel has always been a boom/bust metal due to the fact the world only produces about 2.1 million tonnes of the material a year, as opposed to a more commonly used metal like copper at 20 million tonnes. And roughly only half of nickel production is of the Class-1 type that is used in batteries that run electric vehicles.
Currently, the cost of nickel is nearing a cyclical bottom, hence the reluctance of nickel miners to invest the possible near-billion it takes to bring on a new mine.
Musk is a multi-billionaire and his company stock is at an all-time high. Instead of whining to the mineral industry to invest “their shareholder money” in new nickel production at a time of low returns, here are some suggestions to calm his fear of future shortages:
Stop fretting over potential nickel shortages and back some potential mines
“At the heart of these products are batteries,” says Tesla.
But Elon Musk worries about the nickel needed to make them.
1. Why can’t Tesla start stockpiling Class-1 nickel now during a time of low prices? The American military stockpiled nickel during the 1950s and 1960s as it was in constant short supply due to a booming economy and its use as a critical metal for military production—the Korean conflict, Vietnam War and the Cold War between the U.S.A. and U.S.S.R. What is to prevent the company from stockpiling two or three years’ worth of nickel needed for its car batteries? This would help firm up prices and encourage more exploration or expanded production.
During the 1950s, the U.S. government gave Falconbridge/Glencore a $40-million subsidy—roughly an astonishing $390 million in 2020 dollars—to help develop one of their Sudbury nickel mines and ensure diversity of supply. At the time, INCO supplied almost 80% to 90% of the West’s supply of nickel and the military were terrified of being so dependent on one key supplier. Perhaps subsidizing a few companies that are near production might be the route to go.
2. Polish miner KGHM has a terrific nickel deposit—the Victoria in the Sudbury Basin. They don’t seem to be that interested in developing the project that some analysts feel would need roughly a billion to put into production.
For much of the last century, the Sudbury Basin was basically the Saudi Arabia of nickel mining for the Western world.
Just a quick tangent for any Americans or Canadians who are not “mine literate.” For much of the last century, the Sudbury Basin was basically the Saudi Arabia of nickel mining for the Western world. The communist East had the astonishingly rich nickel mines of Norilsk, located in the isolated wilderness of Siberia. There are still enormous nickel reserves in the Sudbury Basin. Why we are not producing more would practically take an entire book to explain!
Why doesn’t Musk try to buy the deposit from KGHM and hire contractors to build and run his own mine? He would get nickel, copper and some cobalt for his car batteries. In addition, the mine would also provide him with platinum group metals and some gold and silver. If KGHM refuses to sell at a reasonable price, Ontario/Canada might enact some sort of “build/sell it or lose it” legislation!
3. Sudbury junior miner Wallbridge Mining has some very promising nickel properties in the Parkin Offset Dyke in the northeastern corner of the Sudbury Basin. According to the Wallbridge website, “The quality of the mineralization found in the Parkin Offset is high. The average nickel tenor for the mineralization found within the Parkin Offset is approximately 4%, which is comparable to the tenors of some deposits found in the Copper Cliff Offset Dyke.” Some of the Sudbury Basin’s biggest nickel mines, past and present, are on the Copper Cliff Offset Dyke, hence the importance of that statement!
Unfortunately, Wallbridge is not doing any exploration on this property during 2020 as the company is focused on its Quebec gold properties. Who can blame it with the precious metal hitting $1,900 an ounce? Why doesn’t Musk buy an equity position in the junior and fund it to the tune of $20 million or $40 million worth of exploration on the Parkin Offset Dyke?
4. Another junior nickel explorer that might be worth looking at is Canada Nickel and its promising nickel-cobalt sulphide project near Timmins, Ontario. A maiden resource estimate last February showed 600 million tonnes (measured and indicated) at 0.25% nickel and 310 million tonnes (inferred) at 0.23% nickel. As with all junior explorers, financing is always a challenge. Perhaps a significant equity position by Musk in exchange for future nickel and cobalt would ensure Tesla has no problems accessing these critical metals.
For crying out loud, it’s a skinny 300-kilometre gravel road and a couple of bridges. We are not building the Panama Canal or the Pyramids of Giza!
5. And finally there is the enormous mineral potential of the Ring of Fire with a 43-101 nickel deposit owned by junior miner Noront Resources. More nickel deposits may be discovered. Perhaps Musk could chat with Premier Ford and impress on him the importance of shortening environmental assessments and building that road into the Ring of Fire. For crying out loud, it’s a skinny 300-kilometre gravel road and a couple of bridges. We are not building the Panama Canal or the Pyramids of Giza! In the 1940s, the Canadian-Alaskan highway—roughly 2,700 kilometres—was built in eight months. No typographical error folks, less than one year!
The proposed road is on the traditional territories of Webequie and Marten Falls first nations, who both want it built. Hell, Musk should even consider putting a few hundred million in financing that road—I say this only half in jest as both the provincial and federal levels of government might be broke before construction starts.
And Premier Ford might even share the seat on that bulldozer with Musk to start building that vital road which was promised during the 2018 Ontario election campaign.
The Ring of Fire not only has nickel but potentially significant deposits of copper, zinc and various other critical metals along with chromite. And Premier Ford might even share the seat on that bulldozer with Musk to start building that vital road which was promised during the 2018 Ontario election campaign. It’s been a little over two years since the Conservatives have come to power and the patience of the entire sector is wearing thin! Road construction would be a terrific infrastructure investment to help alleviate the pending COVID recession/depression!
6. Sorry about the Ring of Fire road digression. I have not even mentioned the Thompson, Manitoba Nickel Belt, Newfoundland’s Voisey Bay nickel mine and Quebec’s Raglan nickel deposits, all of which probably have some juniors that could use some seed funding to drill near these world-class deposits—as the old saying goes, the best place to find a new mine is in the shadow of a headframe.
So I wish Elon Musk all the best, but please stop complaining about possible Class-1 nickel shortages and perhaps start strategically investing in the Canadian nickel sector yourself, if you really want to ensure that you have access to this vital metal.