Sumitomo Metal Mining Canada is investing about $14.5 million in FPX Nickel, which holds the Baptiste greenfield development project in British Columbia.
The private placement of 30.1 million FPX shares is priced at 48¢ per share and will give Sumitomo a 9.9% interest in the nickel junior.
The companies also plan to enter an investor rights agreement that would give Sumitomo the right to participate in future equity financings. A two-year standstill agreement would limit the company to a 14.9% holding in FPX.
“This strategic investment by Sumitomo Metal Mining represents another significant technical validation of FPX’s Baptiste nickel project and underscores our view that Baptiste is a class-leading asset,” said Martin Turenne, FPX’s president and CEO. “SMM is one of the world’s largest nickel producers, with peer-leading expertise in mining, processing and refining products in the stainless steel and electric vehicle battery supply chains. FPX is pleased to be one of SMM’s preferred partners as they look to expand their nickel production profile and diversify their supply chain to allied partners in North America.”
FPX’s Baptiste nickel project is a large greenfield discovery of naturally occurring awaruite (Ni3Fe) located in the Decar nickel district of B.C., northwest of Fort St. James. A prefeasibility study completed last year gave the project an after-tax net present value with an 8% discount of $2.8 billion. Capital costs are pegged at $2.2 billion and the after-tax internal rate of return is 18.6% using a nickel price of US$8.75 per lb. (The current spot price is US$7.20 per lb.)
Sumitomo also has the right to negotiate offtake agreements at market prices for up to 60,000 tonnes of nickel from Baptiste. Any agreements would be secondary to FPX’s May 2023 offtake agreement with Outokumpu Oyj that brought in $16 million and also gave the company the right to negotiate an offtake for up to 60,000 tonnes of nickel.
FPX says it will use the proceeds of the financing for exploration and development activities, ongoing environmental baseline activities, work in preparation for a feasibility study. The private placement is expected to close on Jan. 22.
FPX stock tumbled 10.8% or 3.5¢ by late afternoon in Toronto to 29¢ apiece. It’s traded between 25¢ and 61¢ over the past year and has a market cap of $78.3 million.
