Fathom Nickel: Investor Update and Macro Nickel Discussion
A very successful series of above-ground exploration programs has grown the scale and potential of Gochager in a very real way. CEO Ian Fraser discusses the Aug. 26 news release detailing this info.
tl;dr:
Coming at you this time from my role as Fathom Nickel’s IR guy. Fathom has recently released another update, further defining how much potential their Gochager Lake property has. This one - link here - demonstrates that the prospective land the historic Gochager deposit is situated in is up to 25X larger than previously understood.
CEO Ian Fraser joined me once again for a live webinar where he walked through the news release and its significance. Below you will find the recording of the webinar, my own personal thoughts, and my time-stamped summary of the webinar.
Part 1: The Webinar
Part 2: The Article
2.1. Nickel Macro Discussion: Nickel at a Crossroad
2.2. Fathom Nickel: Gochager Lake’s Potential Continues to Grow
2.1. Nickel Macro Discussion:
Nickel at a Crossroad
Nickel has been in for a tough ride lately. Indonesia all on its own has altered the course of the entire global market with its HPAL laterite revolution, and its partnership with China has ensured they will maintain a tight grasp moving forward. This has already had major, real, impacts, such as BHP shuttering its Australian nickel business for at least the next couple years.
And, just to rub salt in the wound, the green energy/electric vehicle revolution hype machine seems firmly derailed. EV uptake continues to accelerate, mind you, but maybe not as fast as the more breathlessly optimistic analysts were predicting. Hype outstripped reality’s ability to match it, and now we have seen the pendulum swing back the other way as the crowd chases momentum elsewhere (and for good reason, to be fair - are you following the price of gold?).
And this has had a predictably negative impact on nickel juniors. Some are simply done, nursing an ever-shrinking pot of capital. Others have been caught up in the “reverse split and name change” recycling process. Others have pivoted to other metals. And for those who have had the project and market support to stay the course, even success in the form of strong exploration and drill results has by and large struggled to break through the general market malaise.
And yet, I can’t help but feel that this is a perfect example of a contrarian investing opportunity. Those aforementioned pendulum swings always end up overcorrecting. I believe, ultimately, as the saying goes, that rumours of nickel’s death will end up having been greatly exaggerated. Let me explain myself a bit.
Consider that Canada, the USA, the EU, and more have all declared nickel a critical metal of the highest importance. This is no doubt a response to the near-total Chinese dominance over minerals and metals that has been established over the past couple of decades, and further exacerbated by concerns over just how much the west wants to remain reliant on that Chinese dominance to fuel its continued economic development and growth. Because suddenly China’s designs on establishing its own global political and economic hegemony has the west slowly closing ranks in response.
And while maybe this emerging concern exists still mostly in the realm of ideas, China is starting to flex its muscles on this front in a very real way. Take here as evidence China’s graphite export restrictions from last fall and now the recent antimony export restrictions as proof also of their emerging willingness to leverage their dominance and produce potentially monumental geopolitical consequences.
And there is clear government support for this focus on critical metals, slow as it has maybe been in developing. The Canadian federal government has begun to announce funding being doled out in support of critical metal projects.
Thus far, though, it is the Americans leading the charge in prioritising North American (including Canada here) critical metals. Examples abound of their funding of exploration and development projects - take a look below at a timeline provided by a US DoD official at a recent mining conference. It is told through the focus of Fireweed Metals, but scan the list of minerals present - many and varied, and significant sums of cash..
Now, ask yourself if you see geopolitical tensions with Russia and China significantly easing anytime soon or, rather, if you think such tensions might continue to slowly ratchet up. And if those tensions continue to build, what do you think happens to lists like the above? The truth is we are still in the very early moves of this geopolitical chess match, but pieces are already on the move, and a chain of causal events has already begun.
Add to this now the decided lack of domestic nickel exploration options. There just aren’t that many nickel projects advancing in the North American pipeline. So even while governments' assert their critical priority, there just aren’t the tonnes available to make it happen.
And, keeping it brief here, there are other issues facing the North American nickel industry, and that is the emerging need for feed. Vale’s Sudbury operations, for example, has seen shrinking production ever since it bought out Inco in 2006. However, the mining giant faces significant environmental reclamation costs and responsibilities if they were to ever actually shutter their smelter. They will soon need new feedstock options if they wish to avoid those expensive responsibilities. Which circles back to the lack of options currently available within North America.1
The point here is that while nickel is currently in a bind, I also think this is the worst of it. North American nickel - supply and demand - simply isn’t going away. Western governments have signaled a clear need more production.
So while it is impossible to ignore the impacts of Indonesian HPAL production, I rather think that such a momentous upheaval necessitates some sort of material response by the west.
Nickel is either critical or it isn’t. Chinese control of critical metals either is or is not a huge issue. The powers that be are either serious when they say onshoring critical minerals supply is a key goal or they aren’t. All this actually matters quite a bit to western governments, or it doesn’t at all. It is easy to cynically dismiss political talk and (in)action, but I rather think this is one topic that is only going to loom bigger and bigger in western politics as time goes on. Resource independence matters.
And don’t forget, Indonesia still needs to make money. Which is to say, nickel prices seem to have found some support at low-but-not-drastically-so prices, riding just around the 25 year average. I have heard discussions that Indonesia’s goal is a spot price around US$17,000-$19,000/t. Which adds support to the notion that we might be in the bottom now. And events like BHP’s shuttering of its Australian nickel business ends up being part of the solution as the supply glut leads to supply restriction. As can be said so quippily, the best cure for low prices is low prices.
I am going to move past this vein of thought for now, and will similarly sidestep the “what” of what this all looks like if it were to actually transpire - tracking carbon emissions through the supply chain, two-tier pricing, tariffs, quotas, etc. etc.
Indonesia is unquestionably a massive development that in the short term has put some serious hurt on North American nickel projects, but I fundamentally believe that this is not the end of the story.
I will also say I have plans to build up a more developed and formal collection of my thoughts on nickel, as it is a deserving, interesting, critical, and controversial topic. But today is not that day. Rather, I just wanted to square away my basic understanding of where nickel is today, as the macro is obviously a critical part of any nickel story presently.
Now, onto Fathom.
2.2. Fathom Nickel:
Gochager Lake’s Potential Continues to Grow
I will try to be brief here, as I think the interview and summary tell the tale, but good news continues to flow out of Fathom Nickel. Since the end of the previous drill campaign, Fathom has put a substantial amount of above-ground work into expanding the knowledge base of their Gochager Lake project, and it has paid off very positively. Previous updates from this summer have demonstrated expansion on both a local and a regional level.
This most recent news release continues this trend in an emphatic fashion.
CEO Ian Fraser’s thesis about Gochager has long been that there is much more waiting to be found at it, but I think even he is surprised by how it is developing. Suddenly, a geochemical footprint matching the Gochager deposit is multiple km long and 100s of meters across stretching up and down from the deposit itself. Suddenly, there is a huge (600m+ long), highly anomalous target (might it be a dyke?) aligning between the geochem work and the VTEM sy.
The geo soil sampling map itself tells an awfully exciting story, as there are huge, very elevated Ni (and Cu, and Cr) hits up and down this new corridor. Consider below:
From my eyes, Fathom Nickel has very successfully demonstrated a markedly improved blue sky potential for Gochager. The upper bounds of what is possible to be discovered just got pushed outwards. For one thing, the huge swaths of gabbro they have apparently to work within is a potential prize all on its own, seeing as other nickel projects are moving forward with cut-offs between 0.15% 0.3%. But most critically, it keeps the door wide open to discover the true prize - needle-moving grade.
The chance for a truly new, and substantial, discovery, remains firmly in the cards for Fathom. And, HPAL or no HPAL, major Ni+Cu+Co polymetallic discoveries will always find market love.
The road has been tough, and there is still rough patches ahead no doubt, but Fathom continues to explore effectively and with a degree of technical expertise that is enviable to many companies its size or even bigger. This combination of ability and potential is why I continue to be excited by Fathom, even as the market slowly grinds its market cap downward.
With a financing imminent (I will be taking part in a significant way - please contact me if you are interested), I am excited for the day that the market can again focus on the considerable long-term exploration potential and quit punishing the company for short-term financing needs.
For a more thorough dissection of today’s news release and its significance, please read on below for a summary of my conversation with Ian:
Part 3: The Summary
Timestamps are links to the part of the webinar in question.
00:00 Intro and Housekeeping
02:55 Intro to News Release and its Significance
1960s deposit known to be smallish and not very high grade. Lots of historical data is missing, so Fathom has had to build up its layers of data.
16 holes, 5000 meters – a parabolic learning curve through it.
Yeah. Okay. Well, thanks, Matt. And thanks for all those attending. Yeah, I think it's important to just sort of back up.
Understanding the rocks and their composition.
Unique to Gochager is that the mineralised gabbros have very high Chrome content. Helps with exploration.
Discussion of Chrome and Nickel values and correlation – allows them to pinpoint prospecrtive areas.
Same types of rocks as at the historical deposit have been found 800m away from it,
09:10 Container rock and a major new target developed through geochem
So this container rock of lower-grade (but still potentially up to ore-grade) gabbro would itself potentially add to a resource, but critically, it increases the potential number of high-grade breaches/lenses/chutes/plumes/veins lurking within to be found.
All this gabbro container rock – Geochem samples matching and exceeding Gochager itself are all over.
One occurrence to the NE – was a very straight shot of 600m of 98th percentile Ni in-soils. Cu and Co and sulfide minerals are all present, in addition to the Ni and Co inherent in the magma. Might this be a faulted dyke/feeder breach? (3 different people’s sampled the anomaly, so the probability of contamination of some sort (so straight and so anomalous in size and grade) is low
Returning out there again to compile more data.
14:30 These new targets exceed Gochager in grade and size on the Geochem maps.
Lots of companies say they have increased their area of prospectivity without much evidence to support it.
But we have opened up a very large corridor of prospectivity in a very real way.
Increases the upper bounds of potential for this project. Both in terms of scale and grade.
There is 3 or 4 or 5 km of potentially prospective strike length now
Gochager as we know it is a very different project than it was before this summer’s ground campaign.
The new camp (and its location) is very advantageous for exploring these areas.
21:30 Geophys and other above-ground work
VTEM data overlays nicely – there is a mag high that corresponds very nicely to the areas of elevated nickel.
Pyrite and pentlandite would produce such a mag high.
Gochager historical deposit occurs in a break in one of these mag high trends.
Evidence suggests there are more of these pull-apart zones – another has been IDed a few km to the north.
There is an anomaly we believe is a sulfidic iron formation.
Dr. Peter Lightfoot has helped immensely with the analysis.
Work from 2022 interpreting a potential thrust fault system running SW-NE now aligns very nicely with this new mineralised corridor. Lots of interpreted exploration targets, the closer ones of which seem to align with other layers of data now collected.
Lots of the targets are clustered – the interpreted thrust that they surround would be a beautiful conduit for magmas to work their way up.
28:30 Similarities to major nickel mines
Dr. Peter Lightfoot understands that all the magmas in the region have come from a common source.
Speculation that it might even be the same at Mall Lake
The crustal contamination seen at Gochager is similar to what is seen at Raglan or Norilsk or Thompson, etc.
The fact that this interpreted fault lines up so nicely with emerging data gives them more confidence in the targets they are developing.
33:00 The advantage of exploring the historical deposit first.
Having the historical Gochager deposit to work from is very advantageous because it lets you understand what to look for elsewhere. The data we have acquired and lessons learned from drilling and exploring the historical deposit now informs our further exploration and our data layers of historical Gochager are critical in calibrating our exploration elsewhere now. We know what to look for.
We just have so many more tools at our disposal now than they did in the 1960s.
35:00 Peter Lightfoot’s thoughts.
He is surprised that this small deposit of 0.3% Ni is changing so much.
Dr. Lightfoot thinks the disseminated mineralisation is underrated.
Open pits for smaller Ni projects being planned currently using a 0.3% cut-off.
And of course the huge projects go even lower – 0.15% or 0.2%.
And while everyone – including Peter – is excited by the potential for discovery of grade, think about the tonnes that 4.6km of strike and 100m in thickness would bring to the table. Suddenly that is very, very big.
Dr. Lightfoot is very encouraged and excited. Brings up the comparisons to major nickel projects himself.
and we're going to be focused on the high grade. But, you if you have 4 .6 million, I'm sorry, 4 .6 kilometers of stride and just, you know, hypothetically, if that 4 .6 kilometers is potentially our container,
This story continues to develop, even if the market is waiting for a financing and announcement of drilling.
The Fathom team is extremely encouraged by these results.
Don’t forget Trembley-Olson – there are multiple km of soil anomalies there with Plat/Palladium.
We also know that the source of those in-soil are nearby based on our Geochem results.
41:45 Audience questions and final thoughts
A question about future potential drill locations.
We have many targets in and around the old deposit itself
But that new, large, linear feature is hard to not prioritise.
Gochager – eays pickigns to find more chutes of high-grade. But that potential dike is blue sky potential.It is a good problem to have, but the results of these surveys have made Fathom step back and reconsider its priority targets moving forward.
So still a general focus on proximal BHEM targets, but leaving room for exploration elsewhere.
Reducing/eliminating the need for a helicopter is big. Makes it much cheaper. Dragging the rig is much more economical.
The focus is maximising our odds of success by building targets the right way – high-confidence data produces high-confidence targets and results.
Hang in there. It’s been a tough go, but we are excited and are confident that good things will result from our work.
Alright, that’s it for me. I really do believe in what Ian and Fathom is building. There are smart people on Ian’s team doing smart work.
Otherwise, I am fully back in the swing of things now - I have interviews and site visits and all the rest planned and due to be released. So hang on while I get this JRI machine up and running at full speed again.
And, as always, thanks for reading.
-Matthew from JRI
For more on this, check out Mark Selby’s interviews over at Crux.