Grid Metals Landing Page
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A battery metals junior with a new lithium discovery and an advanced-stage nickel project, just in time for the EV revolution
Grid Metals Corp. (TSX-V: GRDM)
Grid Metals Corp. (TSX-V:GRDM)
The story at a glance:
- Perfectly positioned for the EV revolution: Grid Metals is sitting on a large and growing resource of nickel and an emerging lithium discovery, just as prices soar
- A history of success: The company rose to a $100 million market cap back in 2008 with a fraction of its current asset base—its projects have only gained in value since
- Undervalued and overlooked: With share prices nearing a 24-month low, but exploration news supporting a potential breakout, it’s the perfect entry point for the stock
Battery metals are the future, and Grid Metals is here to capitalize
The electric vehicle revolution has arrived.
Canada, California, and most of Europe have pledged to phase out internal combustion engine vehicles by 2040 or earlier.
China, the European Union, and the United States have announced ambitious sales targets for electric vehicles (EVs).
And the biggest auto manufacturers in the world, including GM, BMW, Volvo, and Audi are committed to investing over US $150 billion across the current decade.
This all results in a situation in which Bloomberg NEF forecasts EV sales to quadruple to 14 million units by 2025, representing 16 percent of the global market.
No one can say for sure how or whether a complete transition to EVs will ever occur. But in our opinion, it isn’t a matter of if, but how soon.
As investors take notice and scramble to capitalize on this tectonic shift, big-name battery metals miners are getting a lot of attention.
But, as always, for those comfortable with a high level of risk in their portfolio, more aggressive leverage to battery metals prices lies in the junior mining sector.
And we believe that one overlooked company, Grid Metals Corp. (TSX-V: GRDM; OTCQB: MSMGF), is a strong contender amid the sea of pretenders in the space.
To come to this conclusion, we’ve analyzed Grid Metals using our signature framework for examining junior mining stocks. It’s a useful set of criteria to keep in mind whenever you’re doing your due diligence in the resource extraction sector.
The five M's of mining success for exploration stocks:
Macro: Is there a genuinely catalytic trend underpinning the commodity? Is it a good time to invest?
Mines: Is the company’s project in an area with a history of precious metals success? What has the company found so far? What does the company plan to do differently from the deposit’s previous owners?
Management: Does the management team behind a company have what it takes to bring about a successful outcome for investors? Do they have a history of serial success? Do they have concrete experience in the specific field in which they now operate?
Movement: What will cause price movement for shares in the company in the coming months or years? Where do your returns come in?
Money: What is the company’s share structure? How much cash does it have on hand?
Macro: The battery metals market is booming
We’ve already covered some of the drivers behind the surge in EV adoption, but of course, even without the numbers in front of you, you can look around and see the cultural shift.
In Super Bowl 2018, there were 12 car ads, zero of them featuring an electric vehicle. During Super Bowl 2022, seven of nine vehicle advertisements were for EVs. EV ad spend by manufacturers more than tripled between 2019 and 2021, with ad airings jumping four-fold.
It’s also worth noting that most of the EVs featured in Super Bowl 2022 aren’t yet available—these manufacturers are using one of the country’s biggest cultural touchstones to signal their coming electrified transformations.
But if you’ve driven in any major city and seen the slew of Teslas humming around, you probably don’t need convincing that electric vehicles are the future. But how does this translate to markets in the metals used to manufacture the batteries needed to propel these cars?
Because we’re focusing on Grid Metals, we’ll focus on the metals they’re primarily focused on: nickel and lithium.
Nickel
Nickel is currently on a roll.
Prices for the base metal surged more than 16 percent last year, exceeding many analysts’ expectations. In October, they finally cracked through the US$20,000 per tonne mark, a milestone not hit since 2011.
The metal continued to climb, and at the time of writing, it is trading around $25,000 per tonne, a high not seen since the beginning of 2011, 11 years ago.
With much of the demand for nickel driven by its use in stainless steel, the price of the base metal dropped sharply at the beginning of 2020, damaged like many other base metals by COVID concerns.
Part of the metal’s recovery is due to simple supply-demand economics as the COVID economy stabilized. But another story that has been unfolding over the past few years is the increasing demand for nickel sulfate in many lithium-ion batteries.
Many analysts see a “balanced market” for nickel in 2022, without a supply deficit or oversupply, though disruptions from Russian supply and supply bottlenecks are two potential risks that may augment the price. Either way, the medium-view trend is toward increasing demand.
Lithium
Lithium prices have skyrocketed over the past year, jumping over 553 percent to an all-time high of around US$68,000 per kilogram in Chinese markets.
With EV sales rising at a historic rate, lithium suppliers are scrambling to keep up with demand. S&P Global Market Intelligence predicts that lithium supply will rise to 636,000 tonnes of lithium carbonate equivalent this year, up 28 percent from last year. But demand is expected to outstrip that huge increase in supply, rising to 641,000 tonnes, up 27 percent from last year.
Clearly, this is a compelling supply-demand thesis for any investor interested in following macro trends.
Mines: A core project that just keeps getting more valuable
Of course, none of these macro trends would matter if Grid Metals didn’t have projects positioned to capitalize on them. Luckily, the company has steadily been building a resource base for over a decade.
Grid Metals’ flagship project is the Makwa Mayville nickel-copper project, 145 kilometres from Winnipeg, Manitoba.
The project contains two separate open-pit resources (dubbed “Makwa” and “Mayville”) containing NI-43-101 resources of nickel-copper-platinum group metals, each defined enough by drilling to include in engineering studies for the project.
A 2013 resource estimate pegged the combined prospective project with an NI 43-101 indicated resource of 203 million pounds of nickel, 276 million pounds of copper, and an inferred 24 million pounds of nickel and 55 million pounds of copper, along with a substantial resource of platinum-group metals and cobalt.
The report estimated an after-tax net-present value of CA$97.4 million (7.5% discount) based on a nickel price of just US$8.50 per pound. At the time of writing, nickel is trading at US$11.29 per pound.
Today, with current prices, the value of the projects’ in-situ resources is estimated at ~US$4 billion, with the potential to expand both deposits.
In 2008, Grid Metals—then called Mustang Minerals Corp. (TSX-V: MUM)—garnered a market cap of over $100 million based almost entirely on Makwa nickel project.
Since then, the outlook for nickel has improved dramatically with the strong demand for use in EV batteries, and the company has added the larger 43-101-compliant Mayville copper-nickel deposit. Now, exploration for even more resources is underway.
Starting in 2022, the company has been busy drilling the Makwa deposit, with an initial 14 holes completed and awaiting assay results.
But Mayville-Makwa isn’t the company’s only project.
Immediately adjacent to the Mayville deposit is a highly prospective lithium exploration project called the Donner Lake Lithium Property. The project is 75 percent owned by Grid, and drilling is underway.
The project is located in the Winnipeg River pegmatite field, which hosts the world-class, currently producing Tanco Mine.
Grid’s first drill campaign at this property started in 2018, with the results showing a deposit of continuous, high-grade lithium-bearing pegmatite—a preferred type of lithium feedstock.
Grid has now commenced drilling at Donner Lake at a second known lithium-bearing pegmatite deposit, one that hasn’t been drilled since 1955. It hopes to build up an initial resource estimate from both pegmatite deposits.
With lithium prices at record highs, and successful junior miners with lithium projects capturing market capitalizations six to seven times Grids’ for projects at similar stages, this is a potentially transformative time for the company. Prospects for any company with a quality lithium project are excellent.
Grid Metals’ other projects are in earlier stages, but still interesting.
These include the Bannockburn Nickel project, with potential for a bulk-tonnage nickel deposit and a highly prospective palladium property near Sudbury – East Bull Lake, where the Company has drilled some wide intercepts of palladium mineralization.
All in all, the above paints an encouraging picture of Grid Metals’ projects, with potential to develop its PEA-stage Makwa-Mayville nickel-copper PGM project into through feasibility and into a producing asset. Meanwhile, Grid’s discovery stage, emerging lithium project with ongoing drilling is bound to attract attention on its own.
Management: Sector experts with extensive resource-specific experience.
Still, projects and macroeconomics alone cannot make a mining company successful. It also requires the expertise of a skilled management team to drive it forward.
Grid Metals is led by its President, CEO, and director Robin Dunbar. Mr. Dunbar is a longtime industry veteran who has focused on nickel and platinum-group exploration and management for over 20 years.
In addition to his current role at Grid Metals, Mr. Dunbar has broad industry experience, currently serving as a director of McEwen Mining Inc. (TSX: MUX) (Market Cap: $US408M). He also worked as a director for Western Areas Ltd. (Market Cap: $AUD1.15B) — an ASX-listed nickel producer — for 10 years.
Grid Metals’ lead geoscientist is Dr. Dave Peck, the company’s VP of exploration and business development.
Dr. Peck was the former VP of exploration for North American Palladium Ltd., before it was acquired by Impala Platinum for a whopping CA$1 billion.
He also served as the former global nickel commodity leader for the Anglo American PLC exploration division, where he displayed his keen knowledge on battery metals.
It’s exactly this kind of serial success that creates value in junior mining companies, so it’s certainly encouraging to have a geologist of Dr. Peck’s caliber on the Grid Metals team.
Money: A massively undervalued opportunity, especially compared to previous valuations.
Grid Metals rose to a CA$100 million market cap in 2008, long before it had laid the kind of groundwork it has on its current projects.
And yet, the company now sits at a CA$11.6 million market cap, having fallen due to low commodity prices in the past several years.
The stock has been steadily increasing in liquidity over the past year. Positive news including successful financings, drill plans and results, and a strong outlook for lithium and nickel have driven shares up four cents to 14 cents per share at the time of writing.
With concrete plans to advance its nickel-copper project, and a continued focus on adding new resources, Grid is poised to uncover the value at its key projects—projects which drove the company to tremendous success before. Today, it looks like Grid Metals is the perfect under-the-radar stock opportunity for those interested in battery metals.
Movement: Active drilling and development = near-term newsflow.
Junior miners live and die by two things: development progress on key projects, and drill results.
Both of these are on the way for Grid Metals in 2022.
At the PEA-stage Mayville-Makwa nickel-copper project, the company has already signed an agreement with the local Sagkeeng First Nation greenlighting its exploration activities, often a huge hurdle for mining companies.
Meanwhile, drilling and exploration will continue through the winter months and into spring, both at the Makwa nickel property and the Donner Lake Lithium project. Drill results from both projects have the potential to spark a re-rate, and while this can go both ways, it’s worth noting that the company remains at the low end of its peer group based on its current nickel projects alone.
The investment thesis for Grid Metals is simple: battery metals are poised to be tremendously in demand in the coming years, and the company is sitting on projects with the necessary resources, and the potential to be developed into significant mining assets attractive to the mining industry.
From our perspective, it’s wildly undervalued, and definitely worth a closer look from anyone looking for development-stage exposure to nickel, and early-stage exposure to lithium—two key battery metals.
It’ll certainly be on our watchlist for the coming months, and we’d encourage you to keep an eye on it as well.
To learn more about Grid Metals Corp. (TSX-V: GRDM)