Significant nickel discoveries are rare, but when they do occur the market greatly rewards them. In March of last year, Chalice Mining (OTC:CGMLF) was trading around US$.08. Then Chalice announced a major nickel discovery hole at its Julimar project in Western Australia that hit 19m at 2.59% nickel, 1.04% copper, 8.37gpt palladium and 1.11gpt platinum. Shares immediately began to soar. Due to the company's continued success with the drill bit over the past year, it recently cost US$3.70 to buy a Chalice Mining share. This nickel discovery propelled Chalice Mining's market cap over US$1 billion and provided a potential gain of 4,500% for those who owned Chalice shares pre-discovery.
A similar opportunity for a potential world-class nickel discovery is hidden in one of Canada's best nickel development companies, FPX Nickel Corp. (FPX:TSX.V; FPOCF:OTC). FPX Nickel is primarily known for its Baptiste nickel deposit, which is a PEA-stage development project, located in its 100%-owned Decar nickel district in British Columbia. But CEO Martin Turenne shared in a recent Mining Stock Education interview that he does not believe the market has realized the Decar nickel district's massive exploration potential that is about to be drilled this year:
The Decar land package is large. We do think of it as a district. It covers 245 square kilometers. So within that, the Baptiste deposit, which supports the PEA and it's one of the largest nickel deposits in the world, represents only about 1% of that land mass. So there's massive exploration potential that we've identified in geological reconnaissance work throughout the rest of the project that suggests there could be multiple deposits of that scale within the land package. Most notably at the Van target, where we have delineated a drill target there based on outcropping surface samples of bedrock that covers an area about three square kilometers of outcrop. So that is the target scale. By way of comparison, the lateral footprint of Baptiste is only about two and a half square kilometers. And the other thing that we see at Van is not only is it larger in its scale conceptually at surface than Baptiste, but the grades are higher. The grades are about 10% to 15% higher in surface samples (0.16% DTR Ni).
Van has never been drilled. It had been previously inaccessible to us due to dense forest in the area, which has been cut away by the logging companies that are active in our area. So that's allowed us to go in to take those samples and to initiate this summer the first ever drill program at Van with a potential to delineate or to demonstrate that we have another world-class ore body within the land package. And I think that's something that investors, oftentimes I find when I talk to them, they aren't even aware that we have that. And it certainly, we think not at all reflected in our share price.
We have an initial plan for about 3,000 meters of drilling, which doesn't sound like a lot. However, this style of mineralization is disseminated and very homogeneously distributed, which means that you can do very wide-spaced drilling and prove up tonnage very quickly. Just to give you a sense, we've done about 32,000 meters of drilling at Baptiste and proved up a resource that's about two and a half billion tonnes. So the amount of tonnage per meter drilled there, that ratio is very, very high. And it's due to that sort of very homogeneous distribution of this style of nickel mineralization that we have, which means a couple things. One, we can be very efficient with our dollars and prove up tons very quickly. And the other thing about this style of mineralization is that the visual returns that you get as you're pulling core up, tell you a lot. And so it gives you great flexibility from a drilling standpoint to expand programs or to move the drill around as need be without having to wait sort of that two to three month period for assays to understand what you in fact have.
The Van target will be diamond-drilled in June or July this year and FPX Nickel has all the permits already in place. If the visual inspection of the core looks positive, Martin shared that "we will be well positioned to potentially expand the program very quickly if we like what we see." Drilling at the Van target is capable year-round but it is most cost efficient from May to October.
FPX Nickel is fully funded for its 2021 exploration and development and has the cash to expand the Van target drill program if results warrant it. The company has CA$5.9 million in the treasury now with 2021 budgeted expenditures of about CA$3.8 million which including drilling, metallurgical programs, other work programs and G&A.
Not only does the Baptiste deposit's fundamental value undergird FPX Nickel's current share price and provide investors downside protection if the Van target's drill holes disappoint, but Martin also believes Baptiste provides investors with further share price upside. He points out that when compared with its peer group the Baptiste deposit is grossly undervalued and due for a further upward rerating:
The 2020 PEA that we just completed showed a net present value on a Canadian dollar basis after tax of, in excess of 2 billion Canadian dollars. And we currently have a market cap of around just over 100 million Canadian dollars. So we trade at about 5% of our project value in our study. Typically base metal projects at this stage of development in the PEA to PFS stage, they often will trade at 15% to 20% of their project value.
FPX Nickel's management has done an excellent job maintaining a share structure that protects its investors' upside. There are zero warrants outstanding. And although FPX Nickel first IPO'd twenty-five years ago, it only has 181 million shares outstanding and has never done a share consolidation or rollback. This speaks to management's discipline around dilution and concern about protecting potential outsized gains for its investors.
The FPX Nickel investment value proposition is compelling and offers mining speculators a lower risk opportunity to participate in a potential world-class nickel discovery. Chalice Mining's nickel discovery last year propelled its share price upward an astounding 4,500%. And if FPX Nickel's Van target drilling this year has even a fraction of the success Chalice Mining experienced, then FPX Nickel shareholders could be greatly rewarded by the market.
Bill Powers is the host of the Mining Stock Education podcast that interviews many of the top names in the natural resource sector and profiles quality mining investment opportunities. Powers is an avid resource investor with an entrepreneurial background in sales, management and small business development. His latest interviews can be found at MiningStockEducation.com.[NLINSERT]
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