From The Maven Letter: 20 March 2024
AEMC’s share price has struggled of late. Talking with management, they think it is the usual: people aware the company will need to finance soon sell their stock (keeping their warrants if they invested in a previous financing) to raise cash to buy in the next financing. It’s a tough reality of junior mining because the people who do this believe in the story – they wouldn’t be going through this process focused on stocking up on warrants if they didn’t – but they are capital constrained so they have to sell to buy.
And junior miners must finance regularly, which encourages the pattern to repeat.
The investment thesis remains unchanged, and in fact has been bolstered by AEMC’s accomplishments to date. The idea was always that AEMC was going to be able to define a massive nickel sulphide resource at the Nikolai project in Alaska in relatively short order (two field seasons!) and with relatively few holes. One field season and a historic data dive later, they have already defined a deposit that’s 4.3 km long and hosts 8 billion pounds of nickel in a zone that dips perfectly 45 degree (fits a pit nicely). It has a higher-grade core that could be mined with a strip ratio of almost zero. And with another season of drilling the deposit should grow significantly, likely to a similar contained metal count (and a higher average grade) to Canada Nickel’s Crawford deposit. CNC is valued at $260 million; AEMC trades today at $27 million. I will continue to hold AEMC for that comparison alone.
As bonus, AEMC will also drill some high-grade targets this summer. All this low-grade nickel had to come from somewhere. That ‘somewhere’ is likely a feeder system of high grade massive sulphide mineralization. AEMC has been working through that hunt for the last 18 months and is ready to drill a couple targets. A hit on one of those would attract lots of attention.
The nickel price slid all through 2023, which of course hasn’t helped AEMC. New processing technologies that make it possible to create high purity nickel from laterite and deposits are the reason. Those processes are incredibly energy intensive, so they are cost and green-appeal limited. For now, it looks like the nickel price has bottomed, though time will tell.|
This is the Maven Letter, a newsletter about the metals and mining space. Gwen has been ahead of the mining space curve for years. Check out her newsletter below