Alliance Nickel Ltd. (AXN:ASX) "is strategically well-positioned to meet the growing demand for nickel and cobalt sulfates of the booming electric vehicle market," purported Arrowhead analyst Sumit Wadhwa in a June 12 due diligence and valuation note.
Substantial Return on Investment
As such, Arrowhead has a fair share value range on this Australian mining explorer of AU$0.70–1.10, noted Wadhwa. Alliance's current share price is AU$0.094.
These figures imply a significant potential return for investors of 645-1,070%.
Strong Project, Offtake Agreements
Wadhwa presented the factors supporting his claim about Alliance being primed to capitalize on demand from the global electric vehicle battery space.
1) The company's flagship asset NiWest, a nickel-cobalt project in Western Australia, is one of the highest-grade undeveloped nickel laterite resources in the country. Alliance plans to commence early construction work by Q1/24, start production in H2/25, and reach nameplate capacity in 2026.
2) The NiWest project economics are favorable, Wadhwa wrote. According to a prefeasibility study updated in July 2022, the project's after-tax net present value discounted at 8% is AU$1.6 billion, and the internal rate of return is 19.9%. These projections are based on Measured and Indicated resources from only three of NiWest's seven deposits.
3) Significant upside at NiWest exists.
"There remains a significant opportunity to optimize the grade profile and increase the annual production/operating life of the NiWest project," Wadhwa wrote.
This would require incorporating the Inferred resources within the three deposits and the Measured, Indicated, and Inferred resources of the four other deposits, Wanbanna, Murrin North, Waite Kauri, and Mertondale. It also would take further drilling, which Alliance has started. In April, it launched an infill drill program at Mt. Kilkenny to upgrade the existing Inferred resource.
4) Alliance has two offtake agreements already in place. One, signed just last month, was with Stellantis, a leading player in the electric vehicle market, for 40% of supply of nickel and cobalt sulfates from NiWest for the first five years of production. Per this share subscription agreement, Stellantis is to pay Alliance AU$15 million (AU$15M). Stellantis already paid the first tranche of AU$12.7M and is expected to pay the second in Q3/23.
The second is a non-binding framework agreement for the future offtake of battery-grade nickel and cobalt sulfate and project financing with VinES. Vietnam-based VinES focuses on research, development, and manufacturing of battery cells and battery technologies.
Next Steps To Advance NiWest
Wadhwa pointed out what Alliance has yet to do to move NiWest to the production phase.
One hurdle to overcome, he noted, is "raising adequate funds for the project." As such, Alliance continues to pursue various options. It is continuing discussions with Australian banks and financial institutions and intends to divest its gold assets to generate some cash.
Also, the company is working on a definitive feasibility study and final engineering, on track for completion in Q4/23. Alliance has chosen Ausenco Engineers to perform the engineering work.
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- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Arrowhead Business and Investment Decisions, Alliance Nickle Ltd., June 12, 2023
Analyst Certifications I, Ayushi Saraswat, certify that all the views expressed in this research report accurately reflect my personal views about the subject security and the subject Company, based on the collection and analysis of public information and public Company disclosures. I, Sumit Wadhwa, certify that all the views expressed in this research report accurately reflect my personal views about the subject security and the subject Company, based on the collection and analysis of public information and public Company disclosures.
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