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    FPX   CA3025911023

FPX NICKEL CORP.

(FPX)
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FPX Nickel : Management's Discussion and Analysis for quarter ended September 30, 2021

11/24/2021 | 04:50pm EST

FPX NICKEL CORP.

MANAGEMENT'S DISCUSSION & ANALYSIS

FORM 51-102F1 for the three and six months ended September 30, 2021

This Management's Discussion and Analysis ("MD&A") has been prepared as of November 24, 2021 (the "Report Date") with reference to National Instrument 51-102 - "Continuous Disclosure Obligations" of the Canadian Securities Administrators and contains information up to and including the Report Date. It should be read in conjunction with the condensed consolidated interim financial statements for the three and nine months ended September 30, 2021 together with the audited consolidated financial statements of FPX Nickel Corp. ("FPX Nickel", or "the Company") for the year ended December 31, 2020 and the related notes thereto.

Certain dollar amounts in this MD&A have been rounded for ease of reading. All amounts are expressed in Canadian dollars unless otherwise noted.

The condensed consolidated interim financial statements for the three and nine months ended September 30, 2021 were prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") on a basis consistent with those followed in the most recent annual consolidated financial statements.

Additional information relating to the Company is available for viewing under the Company's profile on the SEDAR website at www.sedar.com.

1. Overview

The Company was incorporated as a junior capital pool company in the province of Alberta on February 2, 1995 and established itself as a mineral exploration company in June 1996. The Company's shares are listed on the TSX Venture Exchange ("TSX-V"), trading under the symbol "FPX". The Company has one wholly-owned subsidiary, First Point Mexico S.A. de C.V., incorporated in Mexico.

FPX Nickel explores primarily for nickel deposits, none of which have been advanced to the point where a production decision can be made. As a consequence, the Company has no producing properties, and no sales or revenues.

The Company's exploration efforts are focused on the exploration and development of properties containing awaruite, a nickel-ironalloy. The alloy typically contains approximately 75% nickel, is widely disseminated and represents a bulk tonnage target that would potentially be mineable by open pit methods should a mineral reserve be delineated. FPX Nickel holds a 100% interest in five awaruite properties: four in British Columbia, and one in the Yukon Territory. During the nine months ended September 30, 2021, FPX Nickel incurred costs of approximately $3,705,000 (Year ended December 31, 2020 - $763,000) in exploring and developing its nickel properties in Canada. For summaries of exploration expenditures by property and by material component, see Section 2 of this MD&A.

FPX Nickel holds a 100% interest in its flagship Decar Nickel District in British Columbia ("Decar" or the "Project") as of the Report Date. From November 2009 to November 2015, affiliated companies of Cliffs Natural Resources Inc. ("Cliffs") spent approximately US$22 million to earn a 60% interest in Decar. On November 18, 2015, the Company closed a transaction with Cliffs to purchase its 60% ownership of Decar, for an acquisition price of US $4.75 million (the "Transaction"). Completion of the Transaction resulted in FPX Nickel owning 100% of the Decar Nickel District. To finance the Transaction, FPX Nickel entered into an arm's-length loan agreement with an individual shareholder of FPX Nickel (the "Private Shareholder"), through which the Private Shareholder lent US $5.0 million to the Company for a

1

FPX NICKEL CORP.

MANAGEMENT'S DISCUSSION & ANALYSIS

FORM 51-102F1 for the three and six months ended September 30, 2021

five-year period at a 6.5% headline interest rate. Of this, 1.5% will be paid currently, on a semi- annual basis, and the remaining 5% interest will be accrued and paid at the end of the loan term. In addition, the Private Shareholder received a drawdown fee equal to 4% of the loan amount and received a 1% net smelter return ("NSR") royalty over the Decar Nickel District.

On September 4, 2019, the Company closed a loan agreement with the Company's Chairman, Peter M.D. Bradshaw, through which a trust controlled by Mr. Bradshaw loaned C$4 million to the Company (the "Bradshaw Loan"). 100% of the proceeds of the Bradshaw Loan were used to make an early re-payment of 50% (the "Partial Repayment") of the principal and accrued interest owing under the terms of the Company's existing loan agreement with an arm's length individual shareholder of the Company (the "Private Shareholder Loan"). On closing of the Bradshaw Loan, the completion of the Partial Repayment and amendment of the Private Shareholder Loan, the Company's long-term debt was as follows:

  • Bradshaw Loan with principal of C$4 million and accrued interest due on September 4, 2025
  • Private Shareholder Loan with principal of US$2.5 million and accrued interest due on September 4, 2022

On October 20, 2020, the Company issued 7,750,037 common shares of the Company at a price of $0.55 per share in settlement of the $4,262,521 principal and interest owing on the Bradshaw Loan, thereby settling the Bradshaw Loan.

On February 11, 2021, the Company issued 5,312,386 common shares of the Company at a price of $0.65 per share in settlement of the $3,453,051 principal and interest owing on the Private Shareholder Loan, thereby settling the Private Shareholder Loan.

On April 7, 2021, the Company closed a bought deal public offering of 24,769,800 common shares of the Company at an offering price of $0.65 per common share for gross proceeds of $16,100,370. The underwriters received (a) a cash commission equal to 6% of the gross proceeds from the offering and (b) a total of 1,486,188 warrants entitling the underwriters to acquire common shares of the Company for a period up to April 7, 2023 at an exercise price of $0.65 per share.

On September 9, 2020, the Company announced the positive results of a Preliminary Economic Assessment ("PEA") for the Baptiste Project at the Decar Nickel District. The PEA was prepared by BBA Inc. of Montreal, Canada with work on mine planning and tailings by Stantec Inc. of Vancouver, Canada. The PEA results and assumptions are as follows:

Table 1 - Baptiste Project PEA Results and Assumptions (all in US$)

Results

Pre-tax NPV (8% discount rate)

$2.93 billion

Pre-tax IRR

22.5%

Payback period (pre-tax)

3.5 years

After-tax NPV (8% discount rate)

$1.72 billion

After-tax IRR

18.3%

Payback period (after-tax)

4.0 years

Net cash flows (after-tax, undiscounted)

$8.73 billion

C1 operating costs 1,3

$2.74/lb nickel

AISC costs 2,3

$3.12/lb nickel

2

FPX NICKEL CORP.

MANAGEMENT'S DISCUSSION & ANALYSIS

FORM 51-102F1 for the three and six months ended September 30, 2021

Assumptions

Processing throughput

120,000 tonnes per day

Mine life

35 years

Life-of-mine stripping ratio (tonnes:tonnes)

0.40:1

Life-of-mine average annual nickel production

99 million lbs.

Nickel price 4

$7.75/lb

Baptiste product payability (% of nickel price)

98%

Pre-production capital expenditures

$1.67 billion

Sustaining capital expenditures

$1.11 billion

Exchange rate

0.76 US$/C$

  1. C1 operating costs are the costs of mining, milling and concentrating, on-site administration and general expenses, metal product treatment charges, and freight and marketing costs less the net value of by-product credits, if any. These are expressed on the basis of per unit nickel content of the sold product.
  2. AISC or all-in sustaining costs comprise the sum of C1 costs, sustaining capital, royalties and closure expenses. These are expressed on the basis of per unit nickel content of the sold product.
  3. The PEA includes certain performance measures that do not have any standardized meaning prescribed by international financial reporting standards ("IFRS") including C1 operating costs and all-in sustaining costs. The presentation of these non-IFRS measures is intended to provide an improved ability to evaluate the underlying performance of the Baptiste Nickel Project and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate these non-IFRS measures differently. Note these figures have not been audited and are subject to change.
  4. Nickel price based on the average of six long-term analyst forecast prices.

Cautionary Statement: The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Furthermore, there is no certainty that the conclusions or results as reported in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

In October and November 2021, the Company released the results of the initial four holes from the maiden drilling program at the Van Target. The results of these four holes confirm a significant new nickel discovery at Van, highlighted by hole 21VAN-001, which intersected 101 m grading 0.150% DTR nickel (0.207% total nickel), starting at an approximate vertical depth of 27 m below surface, among the 8 highest-grading,near-surface intervals in the history of Decar.

2. Exploration Projects

Nickel Projects:

FPX Nickel's exploration program involves a search for disseminated nickel-iron alloy targets that occur in a very specific geological environment found within ultramafic rocks. Awaruite, the nickel-iron alloy of interest, contains approximately 75% nickel, the rest being iron with occasional minor cobalt and copper. The alloy is strongly magnetic and quite dense, two properties which allow for an efficient physical separation of the awaruite into a nickel-iron

3

FPX NICKEL CORP.

MANAGEMENT'S DISCUSSION & ANALYSIS

FORM 51-102F1 for the three and six months ended September 30, 2021

concentrate, using a combination of magnetic and gravity separation. There is virtually no sulphur in the alloy, which eliminates a number of environmental issues typically associated with mining and processing nickel sulphide deposits. Furthermore, because of the virtual absence of sulphur, the concentrates produced when recovering the nickel-iron alloy from the mineralized rock do not require conventional smelting.

The following table provides a summary of exploration expenditures on a property-by-property basis for the year ended December 31, 2020:

Balance,

Balance

December 31,

Acquisition

Exploration

Costs Written

December 31,

2019

Costs

Costs

Recoveries

Off

2020

Canada

Decar

$

8,630,089

$

-

$

762,955

$

(34,657)

$

-

$ 9,358,387

Wale/Polar

1

-

-

-

-

1

Orca

1

-

-

-

-

1

Klow

1

-

-

-

-

1

Mich

864,522

-

-

-

-

864,522

Total

9,494,614

-

762,955

(34,657)

-

10,222,912

The following table provides a summary of the material components of exploration expenditures for the year ended December 31, 2020:

General

Decar

Mich

Exploration

Total

Field Expenses

$

45,228

$

-

$

-

$

45,228

Metallurgical Testing

112,500

-

-

112,500

Assay Testing

667

-

-

667

Geological and Contract Services

36,442

-

-

36,442

Engineering

567,130

-

-

567,130

Claim Staking

988

-

-

988

Other

-

-

1,315

1,315

Total

$

762,955

$

-

$

1,315

$

764,270

The following table provides a summary of exploration expenditures on a property-by-property basis for the nine months ended September 30, 2021:

Balance,

Balance

December 31,

Acquisition

Exploration

Costs Written

September 30,

2020

Costs

Costs

Recoveries

Off

2021

Canada

Decar

$

9,358,387

$

-

$

3,704,688

$

-

$

-

$ 13,063,075

Wale/Polar

1

-

-

-

-

1

Orca

1

-

-

-

-

1

Klow

1

-

-

-

-

1

Mich

864,522

10,080

-

-

-

874,602

Total

10,222,912

10,080

3,704,688

-

-

13,937,680

The following table provides a summary of the material components of exploration expenditures for the nine months ended September 30, 2021:

4

FPX NICKEL CORP.

MANAGEMENT'S DISCUSSION & ANALYSIS

FORM 51-102F1 for the three and six months ended September 30, 2021

General

Decar

Mich

Exploration

Total

Drilling

$

976,373

$

-

$

-

$

976,373

Helicopters

127,943

-

-

127,943

Field Expenses

661,891

-

-

661,891

Metallurgical Testing

362,788

-

-

362,788

Assay Testing

17,324

-

-

17,324

Wages and Benefits

190,288

-

-

190,288

Geological and Contract Services

871,838

-

-

871,838

Engineering

493,534

-

-

493,534

Claim Staking

-

10,080

-

10,080

Other

2,707

-

22,234

24,941

Total

$

3,704,687

$

10,080

$

22,234

$

3,737,001

Decar Nickel District, British Columbia:

The Company's Decar Nickel District claims cover 245 square kilometres of the Mount Sidney Williams ultramafic/ophiolite complex, 90 km northwest of Fort St. James in central British Columbia. The District is a two-hour drive from Fort St. James on a high-speed logging road.

In 1996, the Company entered into an option agreement with a third party to acquire mineral claims in this area. The Company examined the property, collecting several samples for petrographic study and confirming the presence of observed grains of awaruite in serpentine by microprobe analysis. Upon completion of preliminary investigations, the Company dropped the option. In 2007, the Company conducted renewed investigations of nickel mineralization in this region; the Company has held a continuous ownership interest in Decar since first staking claims in the area in 2007.

Decar hosts a greenfield discovery of nickel mineralization in the form of a naturally occurring nickel-iron alloy called awaruite, which is amenable to bulk-tonnage,open-pit mining. Awaruite mineralization has been identified in four target areas within this ophiolite complex, being the Baptiste Deposit, the B target, the Sid target and Van target, as confirmed by drilling in the first three plus petrographic examination, electron probe analyses and outcrop sampling on all four. Since 2010, approximately $25 million has been spent on the exploration and development of Decar.

Of the four targets in the Decar Nickel District, the Baptiste Deposit has been the main focus of diamond drilling since 2010, with a total of 82 holes and over 31,000 metres of drilling completed. The Sid target was tested with two holes in 2010 and the B target had a single hole drilled into it in 2011; all three holes intersected nickel-iron alloy mineralization over wide intervals with DTR nickel grades comparable to the Baptiste Deposit. The Van target was not drill-tested at that time as rock exposure was very poor prior to logging activity by forestry companies.

As reported in the current NI 43-101 resource estimate, having an effective date of September 9, 2020, the Baptiste Deposit contains 1.996 billion tonnes of indicated resources at an average grade of 0.122% DTR nickel, thus equating to 2.4 million tonnes of nickel, and 593 million tonnes of inferred resources with an average grade of 0.114% DTR nickel, containing 0.7 million tonnes of nickel, reported at a cut-off grade of 0.06% DTR nickel. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

FPX Nickel Corp. published this content on 24 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 November 2021 21:49:10 UTC.


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Sales 2021 - - -
Net income 2021 - - -
Net Debt 2021 - - -
P/E ratio 2021 -
Yield 2021 -
Capitalization 99,2 M 99,2 M -
Capi. / Sales 2021 -
Capi. / Sales 2022 -
Nbr of Employees -
Free-Float -
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Number of Analysts 2
Last Close Price 0,46 $
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Spread / Average Target 123%
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Martin Turenne President, Chief Executive Officer & Director
John Christopher Mitchell Chief Financial Officer & Secretary
Peter Martin Devenish Bradshaw Non-Executive Chairman
William Harry Myckatyn Independent Director
James S. Gilbert Director
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