Metals One — First by name, first by nature

Metals One (LSE: MET1)

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Research: Metals & Mining

Metals One — First by name, first by nature

Metals One is a junior metals explorer with assets in Finland and Norway. After listing on the London Stock Exchange last year, it has moved quickly to double the resource at its Black-Schist project in Finland, on which it is now completing a preliminary economic assessment (PEA) by the year’s end. We calculate that the existing resource is currently capable of supporting a low capex, low opex bio-heap leach mine (akin to its neighbour Terrafame) to produce c 14,000tpa nickel sulphate for the EV battery market over c 20 years and could be in production as early as 2030 at a carbon intensity of 1.75t CO2 equivalent per tonne of nickel sulphate (cf c 40–90t/t Ni for nickel pig iron, c 40t/t Ni for HPAL and <10t/t Ni for traditional nickel sulphide processing routes).

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Metals One

First by name, first by nature

Initiation of coverage

Metals and mining

24 September 2024

Price

0.50p

Market cap

£2m

US$1.2788/£, A$1.9300/£

Net cash at end-December 2023

£0.8m

Shares in issue

361.5m

Free float

c 55%

Code

MET1

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(32.3)

(44.7)

(87.7)

Rel (local)

(31.6)

(45.0)

(88.6)

52-week high/low

4.25p

0.53p

Business description

Metals One is developing the Black-Schist project in Finland and the Råna project in Norway, with the aim of becoming a key source of strategic metals to the EU. Both projects have the potential to produce ‘class 1’ high-purity nickel and are either adjacent or analogous to other world-class deposits.

Next events

Black-Schist PEA

Q424

H124 results

September 2024

EU Strategic Project status application

c Q125

FY24 results

June 2025

Analysts

Lord Ashbourne

+44 (0)20 3077 5724

Andrew Keen

+44 (0)20 3077 5700

Metals One is a research client of Edison Investment Research Limited

Metals One is a junior metals explorer with assets in Finland and Norway. After listing on the London Stock Exchange last year, it has moved quickly to double the resource at its Black-Schist project in Finland, on which it is now completing a preliminary economic assessment (PEA) by the year’s end. We calculate that the existing resource is currently capable of supporting a low capex, low opex bio-heap leach mine (akin to its neighbour Terrafame) to produce c 14,000tpa nickel sulphate for the EV battery market over c 20 years and could be in production as early as 2030 at a carbon intensity of 1.75t CO2 equivalent per tonne of nickel sulphate (cf c 40–90t/t Ni for nickel pig iron, c 40t/t Ni for HPAL and <10t/t Ni for traditional nickel sulphide processing routes).

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/23

0.0

(1.6)

(1.77)

0.00

N/A

N/A

12/24e

0.0

(1.0)

(0.35)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Black-Schist on the fast track

The Black-Schist project is located in a historical mining district in Finland. As such, it is in neither an environmentally sensitive area, nor a national park, nor an area with an indigenous Sami population. It is highly scalable, in that more exploration can relatively easily delineate additional resources in an orebody that has been likened to a coal seam (in geometric terms). Metals One’s priority is to get the Black-Schist project into production at the earliest opportunity. To this end, its PEA will be transformative in that it will form the basis of the company’s application for Strategic Project status under the EU Critical Raw Materials Act, making it eligible for funding from the €500m EBA Strategic Battery Materials Fund as well as fast-track permitting and grants for non-dilutive funding. After that, its second prospect, Råna (currently the subject of a farm-in by Australia’s Kingsrose), although some way behind in terms of development, could prove to be another Voisey’s Bay.

Valuation: Undervalued by almost any measure

With net assets of £8.8m, we calculate that Metals One had a book value per share of 4.24p as at end-FY23 and that it will have a book value, as at end-FY24, of 2.56p/share, to which its shares are currently trading at a significant 80.3% discount. At the same time, its US$14.17 per tonne of in-situ nickel resource rating is at a 42.0% discount to the updated global average of US$24.41/t implied in our report Gold stars and black holes. It also appears to afford little or no premium for Metals One’s other assets (eg Råna, which we calculate could be worth 0.35p/share in due course), its location in Europe’s (and one of the world’s) premier mining jurisdictions or the significant potential to expand resources via additional exploration (note that the company is targeting 3x growth in its Black-Schist project resource alone to c 200Mt). Given its location and stage of development, we calculate that Metals One’s share price is currently discounting an NPV for its Black-Schist project of only US$4.1m. Any higher when the results of its PEA are announced in Q4 and we would expect Metals One’s shares to re-rate accordingly.

Company description: Clean European nickel specialist

Metals One is developing the Black-Schist project in Finland and the Råna project in Norway, with the aim of becoming a key source of strategic metals to the EU. Both projects have the potential to produce ‘class 1’ high-purity nickel and are either adjacent or analogous to other world-class deposits.

History

Metals One was incorporated on 26 January 2021. During 2021 and 2022 it undertook a number of seed funding rounds, while optioning up project acquisitions until July 2023, when it transformed itself into its current incarnation upon completion of the acquisitions of Metals One Finland (M1F) – a Finnish based company with rights to the Black-Schist project – and Scandinavian Resources Holdings Pty Ltd (SRH) – a company incorporated in Australia with operations in Norway – for a combined consideration including 140m shares (see Exhibit 1, below). Simultaneously, Metals One listed on AIM with the issue of 44m shares at a price of £0.05 to raise £2.0m net of expenses.

At the time of their acquisitions, M1F (formerly known as Finnaust Northern Mining Oy) and SRH were largely dormant exploration companies with neither workforces nor material assets. A summary of the total considerations for their acquisitions is as follows:

Exhibit 1: Metals One consideration for M1F and SRH (£)

M1F

SRH

Total

Amount settled in cash

100,000

50,000

150,000

Amount settled in shares

4,000,000

3,000,000

7,000,000

Deferred consideration (shares)

1,000,000

250,000

1,250,000

Deferred consideration (cash)

185,000

50,000

235,000

Amount settled via the issue of warrants

79,432

79,432

158,864

Transaction costs

45,854

84,696

130,550

Total

5,410,286

3,514,128

8,924,414

Source: Metals One.

The Black-Schist project

Metals One acquired an existing inferred resource at the R1 target of its Black-Schist project at Rautavaara in Finland of 28.1Mt of Talvivaara-type mineralisation at a grade of 0.19% Ni (53,800t of contained metal), 0.10% Cu (27,900t), 0.01% Co (3,400t) and 0.38% Zn (180,000t). At the same time, it had a (JORC) exploration target of 16–24 Mt at its P5 target at Paltamo at grades of 0.18–0.27% Ni, 0.09–0.13% Cu, 0.01–0.02% Co and 0.33–0.50% Zn and a longer-term ambition of potentially defining up to 200Mt of resources in the area.

At almost exactly the same time as its listing, on 25 July 2023, Metals One entered into a subscription and shareholders’ agreement with Gunsynd, pursuant to which Gunsynd agreed to subscribe for such number of shares in the capital of Metals One Finland (which holds the Black-Schist project) as was equal to 25% of the voting rights of Metals One Finland, at an aggregate subscription price of £1m over four tranches of £0.25m. On 16 November 2023, Gunsynd duly subscribed for its initial 6.25% tranche for an aggregate price of £0.25m. Metals One then commenced drilling at its Black-Schist project in December.

In May 2024, Metals One raised a further £0.895m via a placing to investors of 89.5m shares and terminated the Gunsynd agreement with an option to regain 100% ownership of the Black-Schist project and fund its own work programme. As part of the termination agreement, Metals One has been granted a three-year option to re-acquire the 6.25% of Metals One Finland currently held by Gunsynd for an aggregate consideration of £0.25m (ie the consideration originally paid by Gunsynd) payable, at the discretion of Metals One, either wholly or partly in cash or shares at the greater of the placing price (1p) or the 30 day volume-weighted average price prior to exercising the option (note that such shares will be locked-in for a period of 12 months from the date of their allotment and issue).

Shortly afterwards, on 16 July 2024, Metals One announced a resource estimate of 29.0Mt of Talvivaara-type mineralisation at its P5 target at a grade of 0.18% Ni (52,000t of contained metal), 0.08% Cu (24,000t), 0.01% Co (3,500t) and 0.33% Zn (96,000t) – effectively doubling its total Black-Schist project resource (see ‘Resources’ on page 10). 

Råna project history

On 8 August 2023, Metals One’s Råna project partner and operator, Kingsrose Mining (ASX: KRM), announced that it had completed the acquisition and interpretation of a number of magnetotelluric geophysical surveys (Spartan MT) at the Rånbogen prospect. These are significant, as Spartan MT surveys are able to identify areas of low resistivity (high apparent conductivity), which may represent nickel-copper-cobalt sulphide mineralisation. Highlights of the surveys included:

The identification of four strongly conductive zones over a strike length of 1.8km at the Rånbogen prospect that are highly prospective for massive sulphide nickel-copper-cobalt mineralisation.

Three of these anomalies (Rånbogen 01, Rånbogen 02 and Rånbogen 04) are hosted within pyroxenite and peridotite lithologies of the Råna intrusion. These lithologies are highly resistive and therefore the conductive responses have a higher likelihood of being associated with sulphide mineralisation.

Rånbogen 02 correlates well with historical drilling on the northern margin of the conductive anomaly, which returned a best intercept of 17.5m at 0.53% Ni, 0.12% Cu and 0.05% Co from 101m down-hole depth (in hole SH004), including 2.5m at 1.13% Ni, 0.24% Cu and 0.10% Co (see Kingsrose’s ASX announcement dated 18 January 2023).

Rånbogen 03 is a steeply south-dipping, very strong conductor located at the basal contact between the intrusion and footwall gneiss, which is known to contain conductive graphitic rock units. The base of the intrusion is also a highly prospective setting for the accumulation of massive sulphides.

Where the conductive anomalies extend to surface, they display a strong correlation with massive and disseminated nickel-copper sulphide mineralisation identified in historical rock chip sampling.

As a result, Kingsrose put in place a programme of ground-based and downhole electromagnetic (EM) surveys in order to accurately identify drill targets and switched its drill rig to a helicopter portable system, such that it could be easily transferred from the Bruvann mine to Rånbogen to test the conductive targets. Drilling started shortly thereafter and highlights from its 5,000m diamond drilling programme are shown below. In general, the results confirmed the presence of high-grade, semi-massive, nickel-copper-cobalt sulphide mineralisation and a broad zone of disseminated sulphide mineralisation at Bruvann, located within the Arnes prospect, while demonstrating that mineralisation in the area is also open along strike from existing mine infrastructure. The results included:

2.5m at 1.00% Ni, 0.14% Cu and 0.08% Co from 173m down-hole depth in hole 23BRU001, including 1.0m at 1.94% Ni, 0.18% Cu and 0.18% Co (NB this intercept is located 20m south-west and along strike from a historical massive sulphide drill intercept, which is itself located 70m south of the inferred position of historical underground workings).

50.0m at 0.43% Ni, 0.10% Cu and 0.02% Co from 471m in Hole 23BRU003 (NB this intercept is located 20m down dip from broad zones of mineralisation identified in historical drilling and underground mining, which is open and undrilled to the west and down dip).

A high-grade massive and breccia sulphide zone in hole 23RAN002 that returned 9.3m at 1.0% Ni, 0.3% Cu and 0.10% Co from 177m, within a broader upper mineralised zone, which returned 26.2m at 0.7% Ni, 0.2% Cu and 0.06% Co from 169m, as well as a lower mineralised zone that returned 2.7m at 0.9% Ni, 0.1% Cu and 0.08% Co from 282m.

Two semi-massive to massive sulphide zones in hole 23RAN001, 150m north-west along strike from 23RAN002, which returned 2.4m at 0.8% Ni, 0.2% Cu and 0.10% Co from 66m, within a broader mineralised interval of 10.2m at 0.4% Ni, 0.1% Cu and 0.05% Co from 64m and a semi-massive sulphide lens that returned 1.3m at 0.6% Ni, 0.3% Cu and 0.09% Co from 168m.

Hole 23RAN004 intercepted 1.4m at 1.8% Ni, 0.2% Cu and 0.19% Co from 234m at a location 60m up dip and 40m east of the massive sulphide zone intercepted in hole 23RAN002.

Similarly, hole 23RAN005 intercepted three zones of mineralisation, including 13.3m at 0.4% Ni, 0.1% Cu and 0.02% Co from 151m as well as 0.3m at 1.3% Ni, 0.3% Cu and 0.12% Co from 215m and 0.6m at 0.8% Ni, 0.1% Cu and 0.09% Co from 228m.

Hole 23RAN006 was drilled to test a 750m long, east-west striking elongate magnetotelluric conductor with a coincident EM plate and intercepted a new zone of massive sulphide mineralisation named ‘Malmhaugen’, located 1.1km east-north-east of Rånbogen; in total, it intercepted three zones of sulphide breccia including 5.2m at 0.4% Ni, 0.2% Cu and 0.11% Co from 63m and 11.5m at 0.3% Ni, 0.1% Cu and 0.07% Co from 127m.

Hole 23BRU005 was collared in gneiss targeting an EM plate in a zone that was previously considered un-prospective, but instead extended mineralisation by 200m to the west along strike from the Bruvann mine with a blind, narrow, high-grade nickel sulphide intercept of 2.6m at 1.0% Ni, 0.1% Cu and 0.03% Co from 415m, including 0.6m at 3.2% Ni, 0.3% Cu and 0.07% Co from 417m.

To date in 2024, Kingsrose has performed mapping and geophysical surveys in order to generate a pipeline of drill targets and recommenced drilling in August via a contractor, Arctic Drilling AS, focused on two targets, comprising shallow, highly conductive EM anomalies immediately down dip from mineralised nickel-copper-cobalt massive sulphides at surface.

Geography

Metals One’s two projects – Black-Schist (comprising the Paltamo and Rautavaara areas) and Råna – are strategically located within Europe’s Nordic region, in Finland (an EU member state) and Norway (an EEA and EFTA state, but not within the EU). Via the ports of Helsinki and/or Oulu in Finland, in particular, and Lulea and/or Pitea in Sweden, it has access to the Baltic Sea and thence, via the north German ports, to the heart of the German auto-manufacturing industry. Via the northern Norwegian port of Narvik, it also has access to the Atlantic basin and markets further afield.

Exhibit 2: Metals One project locations

Source: Metals One

In terms of local geography, the Rautavaara (R1) and Paltamo (P5) prospects are located in the Northern Savonia and Kainuu regions of eastern Finland, respectively. The regional mining and processing centre at Sotkamo lies between the two project areas approximately 90km north of Rautavaara and 50km south of Paltamo. The regional city centre of Kuopio (population 120,000) is approximately 100km south of Rautavaara, while the port of Oulu (population 210,000) is approximately 145km north-west of Paltamo. There is a regional commercial airport at the Kainuu regional capital of Kajaani (population 36,000), 43km south-west of Paltamo. The two project areas of Paltamo and Rautavaara are separated by the Talvivaara mine, operated by Terrafame.

Exhibit 3: Black-Schist regional geography and geology

Source: Metals One

Geology

Black-Schist project

The Precambrian Fennoscandian Shield is the most richly endowed area of mineral resources in Europe, and Finland currently has over 40 mines producing metallic ores and industrial minerals. Base metals, gold, platinum group metals and industrial minerals are the main commodities extracted and the mining industry is a significant contributor to Finnish GDP. As a result, Finland is one of the most active countries in Europe, in terms of mining, with at least 40–50 companies engaged in mineral exploration. There is also a significant mineral processing industry, which includes nickel, copper, zinc, cobalt, ferrochrome, steel and stainless steel.

A large amount of detailed geological information on the Black-Schist project, specifically, and the Kainuu Schist Belt, generally, is contained within CSA Global’s competent person’s report, dated 18 July 2023 and hosted on Metal One’s website, of which the following is a very abridged summary.

Rautavaara

The Geological Survey of Finland (GTK) carried out detailed work in the Talvivaara–Rautavaara area from 1979 to 1984. Initially, this comprised five reconnaissance diamond drillholes completed over 879m at Rautavaara (average 176m/hole), which intersected wide zones of low-grade sulphide mineralisation within Black-Schist material. Other work included ground magnetics, slingram EM and gravimetric surveys and airborne magnetics and EM flown on a 200m east-west line spacing in 1983. GTK also conducted regional bedrock mapping in 1996. Between 2009 and 2010, detailed magnetic surveys were completed over the Rautavaara R1 (Pappilanmaki) prospect by Western Areas and Magnus Minerals (FinnAust). Given that it gave a magnetic response, the pyrrhotite contained in the sulphidic black shales thereby allowed potential direct targeting of sulphide targets and six target areas (R1 to R6) were thus duly identified. Subsequent drilling by FinnAust between 2009 and 2011 resulted in a further 57 drillholes primarily at the R1 target from 7,520m of drilling (average 132m/hole). From the results of this drilling, a mineralisation and geology envelope was determined with an apparent folded strata of mineralised black shale around a core of highly altered and deformed serpentinite interpreted to represent a peridotite ultramafic fragment.

Exhibit 4: Simplified cross-section of R1 deposit

Exhibit 5: Geological wireframes interpreted by Western Areas – Rautavaara R1 deposit

Source: Metals One, CSA Global, Armitage (2012)

Source: Metals One, CSA Global, Haywood (2011)

Exhibit 4: Simplified cross-section of R1 deposit

Source: Metals One, CSA Global, Armitage (2012)

Exhibit 5: Geological wireframes interpreted by Western Areas – Rautavaara R1 deposit

Source: Metals One, CSA Global, Haywood (2011)

The nickel-zinc-copper-cobalt mineralisation is strata-bound, hosted within the high-grade metamorphosed and intensely folded Black-Schist. The main mineral assemblage in the Black-Schist is quartz, mica, graphite and sulphides. Accessory minerals include rutile, apatite, zircon, feldspar and garnet. At least three stages of ductile folding have been discerned, which was the result of the regional Svecofennian closure that has resulted from the formation of isoclinal folding along the belt.

Pyrite and pyrrhotite are the dominant sulphide minerals within the Black-Schist deposits at Rautavaara, similar to the Talvivaara deposit. The sulphidic nickel-zinc-copper-cobalt deposits are hosted by highly sulphidic-graphitic muds and turbiditic wackes, which have undergone a high degree of metamorphism. Pyrite, pyrrhotite, chalcopyrite, sphalerite, alabandite and pentlandite occur both as fine-grained disseminations (<0.01mm) and as coarser grains in quartz sulphide veins. In the mineralised Black-Schist, spheroidal fine grained (<0.01mm) pyrite contains more nickel and less cobalt than in the coarse-grained pyrite.

Recent results from Metals One’s eight diamond drillholes at the R1 Hook target within the Rauta 9-11 licence area of the project identified significant intersections of mineralised black schists in all eight holes, while also demonstrating geological continuity with the company’s existing resource at R1 (see Exhibit 8). A total of 1,551m (average 194m/hole) were drilled along what, according to ground and airborne geophysical surveys, appeared to be a fold structure to the east of the company’s existing R1 resource. Highlights of the programme were:

Hole RAU0002, which intercepted 14.7m of mineralised black schists from 50m (0.18% Ni, 0.01% Cu, 0.01% Co, 0.57% Zn).

Hole RAU0003, which intercepted 11.0m of mineralised black schists from 199.5m (0.22% Ni, 0.01% Cu, 0.01% Co, 0.55% Zn).

Established geological continuity between R1 Hook and the existing R1 resource, supporting future resource expansion.

Confirmed synformal nature of the structure, indicating significant potential to the east and prompting the company to extend the current permit area in that direction.

The best thickness and grades were intersected on the eastern limb of the main R1 Hook fold. This observation, together with confirmation of the synformal nature of the limb, dipping steeply to the south, suggests significant potential for further mineralisation to the east, beyond the boundary of the company's existing permit. As a result, Metals One has lodged a reservation to secure this area, known as Kirkkosuo (see Exhibit 7), with the intention of confirming the extension of the structure and mineralisation with a limited diamond drill programme in due course.

Paltamo

GTK carried out detailed work in the Paltamo area from 1972–82. Work included base of till geochemical sampling, ground magnetics, slingram EM and gravimetric surveys and airborne magnetics and EM flown on a 200m east-west line spacing in 1982. Regional bedrock mapping was also performed by GTK in 1990–99. FinnAust subsequently drilled 5,911m in 25 drillholes (average 236m/hole) on the P5 target area from 2010–12 and intersected copper-cobalt-zinc-nickel mineralised black shales. Some of the more notable intersections within the mineralised black schist were:

100.6m at 0.15% Ni, 0.41% Zn, 0.13% Cu from 16 m in hole M343211R305,

133m at 0.16% Ni, 0.44% Zn, 0.09% Cu from 42 m in hole M343211R322, and

192m at 0.13% Ni, 0.35% Zn, 0.08% Cu from 40 m in hole M343211R325.

Until Metals One’s acquisition of the licences in July 2023 however, no further exploration activity nor ground geophysical surveys had been performed since 2012 and no airborne EM surveys had been flown over the property since 1982.

The P5 JORC exploration target was originally estimated by a previous permit holder using portable XRF measurements correlated to a sample of chemical assays. However, it did not assay several of the mineralised intersections in the cores, which resulted in a lower category JORC exploration target of 16–24Mt. Hence, Metals One’s assessment of the P5 JORC exploration target historical data suggested an opportunity to increase the volume of, and confidence level in, this mineralised structure. Consequently, its work programme focused on elevating the confidence levels in P5 by completing the chemical assays of all mineralised intersections of the 5,911m drilled across the target, which subsequently enabled it to commission Mining Plus to produce a new mineral resource estimation, underpinned by the more accurate data (see ‘Resources’ on page 10).

Significantly, previous explorers, including GTK, had intersected similar mineralisation elsewhere along the belt, suggesting geological and grade continuity, which offers the potential for further expansion of the P5 resource and the development of other targets within the belt.

Råna

Exploration by Kingsrose during 2023 demonstrated the discovery potential of Råna. By applying a new geological model, coupled with modern geophysical techniques, it has discovered new mineralised bodies at Rånbogen and Malmhaugen and blind mineralisation within ultramafic intrusive rocks extending beneath the gneiss country rock at Bruvann in an area previously considered as un-prospective. Key geological features identified at Råna include:

Scale: the intrusive complex covers 70km2 and hosts widespread outcropping mineralised occurrences when the lower, ultramafic lithologies are exposed – particularly around its northern, eastern and southern contacts. Many of these areas have seen no modern exploration; however, Kingsrose has observed the same host lithologies and mineralised settings seen at Rånbogen and Bruvann as far to the south-east as Eiterdalen, where rock chips grading up to 1.8% Ni have been collected, indicating the potential for sulphide nickel mineralisation across the entire intrusive complex.

High nickel tenor: estimations of the nickel tenor (ie the concentration of nickel within the sulphide minerals) are reported to yield averages in excess of 4% Ni across all significant intercepts to date.

Multi-phase intrusion: re-logging of historical drill core and mapping has allowed Kingsrose to reinterpret the geology of Råna. Whereas historical interpretations were of a singular, fractionated and layered intrusion, reinterpretation of the data has recognised that Råna represents a composite chanolith intrusive complex, which developed and grew via multiple injections of mafic-ultramafic magmas and entrained sulphides. This conclusion has expanded the exploration area as mineralisation is seen at multiple levels within, and cutting across, the intrusive complex. Note that this is particularly the case at Rånbogen, where repeated stacked lenses of ultramafic peridotite and associated sulphide mineralisation are injected over at least 400m of elevation and exposed over a 1.6km surface profile.

Mineralised textures: multiple intrusive episodes give rise to a variety of sulphide textures, including massive zones, veins, breccias and semi-massive net textures, which are all features observed in analogous deposits globally (eg Voisey’s Bay in Canada).

Work by Kingsrose to date has only covered a small area of the intrusion, with a number of high-priority targets remaining to be tested, including:

Shallow, strongly conductive anomalies at Ranboden located at the northern contact between peridotite and host gneiss coincident with nickel-copper mineralised massive sulphide outcrops.

Down-dip and along strike from holes 23RAN001 and 23RAN005.

Strongly conductive EM plates and magnetotelluric anomalies located at the contact between peridotite and graphitic gneiss at Arnesfjellet, which is a similar geological setting to the sulphide mineralisation at Bruvann.

Licences

Metals One’s original licences in Norway and Finland are shown below:

Exhibit 6: Metal One exploration licences

Licence name

Number

Interest

(%)

Date granted

Expiry date

Holder

Black-Schist project

Finland, Rautavaara S

ML2020:0026

100

28 November 2023

27 November 2027

Metals One Finland

Finland, Rauta 9–11

ML2012:0169

100

15 November 2023

14 November 2026

Metals One Finland

Haapaselkä

ML2014:0002

100

19 December 2023

18 December 2026

Metals One Finland

Råna project

Arnes

0066/2019

100

7 March 2019

6 March 2026

Narvik Nickkel AS

Rånbogen

0069/2019

100

7 March 2019

7 March 2026

Narvik Nickkel AS

Bruavatnet

0067/2019

100

7 March 2019

8 March 2026

Narvik Nickkel AS

Source: Metals One

In Q423, the company undertook a regional assessment of the Kainuu Schist Belt to identify additional mineral targets. Via an analysis of historical assays and geophysical data, and by applying its prospectivity model, it identified several targets in proximity to its existing R1 resource in Rautavaara and P5 target in Paltamo, which it quickly secured with the submission of three additional exploration applications and four reservation applications, representing a total area of 15,004.13ha (cf 704.37ha under its existing licences in Exhibit 6, above).

Exhibit 7: Metal One supplementary permits

Licence name

Status

Area (ha)

Haapaselkä 2

Exploration application

586.88

Hankamäki

Exploration application

549.73

Korpimaki

Exploration application

589.01

Kirkkosuo

Reserved

72.56

Paltamo

Reserved

7,543.73

Perakorpi

Reserved

1,145.12

Rautavaara

Reserved

4,517.10

Total

15,004.13

Source: Metals One

In contrast to the image of Europe as being bureaucratic and hostile to extractive industries in its permitting regime, Metals One reports that all of its applications were processed within a timeframe of just two months. Having recently completed a community roadshow, it also reports that the two communities most local to its Black-Schist project are hugely supportive of the company and the project with respect to permitting and re-zoning.

Resources

On 16 July 2024, Metals One announced a maiden JORC inferred mineral resource at the P5 area of 29Mt to more than double the overall resource at its Black-Schist project in Finland to 57.1 Mt:

Exhibit 8: Black-Schist project mineral resource estimate

Area

Category

Tonnage

Grade

Contained metal

Attributable

Mt

Ni (%)

Cu (%)

Co (%)

Zn (%)

Ni (kt)

Cu (kt)

Co (kt)

Zn (kt)

%

Ni (kt)

R1

Inferred

28.1

0.19

0.10

0.01

0.38

53.8

27.9

3.4

180.0

93.75

50.4

P5

Inferred

29.0

0.18

0.08

0.01

0.33

52.0

24.0

3.5

96.0

93.75

48.8

Total

Inferred

57.1

0.18

0.09

0.01

0.35

105.8

51.9

6.9

276.0

93.75

99.2

Source: Metals One, Edison Investment Research, Mining Plus. Note: 100% basis.

The increased resource will now form the basis of a PEA on the upgraded project, to be led by Wardell Armstrong International, which is expected to be completed in Q424.

Next steps

Having doubled its resource earlier this year, Metals One has announced that it has awarded the contract to undertake a formal PEA for the Black-Schist Ni-Cu-Co-Zn project to Wardell Armstrong (WAI), a long-established British engineering and environmental consultancy. WAI will commence work on the PEA immediately and it is expected to be completed in Q424.

The primary aim of the PEA is to evaluate the economic viability of the project based on resources contained within the R1 and P5 deposits and to deliver an early level study that includes a preliminary economic evaluation of the Black-Schist project. Among other things, the PEA is expected to identify:

probable mining and processing schemes,

capital and operating cost estimates,

general features and parameters, and

technical parameters requiring additional examination or test work.

Once completed, the PEA will form the basis of the company’s application for Strategic Project status under the EU Critical Raw Materials Act. In this eventuality, it would be eligible for fast track permitting and grants for non-dilutive funding (see ‘Financials’ section, below).

Analogue

From Exhibit 3, it can be seen that by far Metal One’s closest analogue, from a geographical perspective, is Terrafame. Terrafame has Europe’s largest nickel ore reserves and uses a bio-heap leaching process to produce battery chemicals and, in particular, nickel sulphate. Resources are estimated to be sufficient to support production for 50–60 years.

The roots of Terrafame’s operation date back to 1977, when the GTK discovered a substantial ore deposit in the region. After been reconnoitred by Outokumpu in the 1980s, the deposit was eventually put into production on 1 October 2008 by Talvivaara Kaivososakeyhtiö Oyj. After a number of environmental breaches, the Finnish government founded Terrafame and took control of the mine in 2015. After considering closure, it instead refinanced the mine in 2016 and sought external financing from Trafigura in 2017 (which has subsequently been converted into equity), at which point the decision was made to focus on the production of EV battery chemicals rather than metallic nickel for the stainless-steel market. After the requisite construction period, Terrafame started the ramp-up of the battery chemicals plant in June 2021 and, shortly afterwards, signed its first large-scale co-operation agreement to supply nickel sulphate to Renault for more than 200,000 EVs per annum. This was followed, shortly afterwards, by similar agreements with Stellantis (Chrysler-Fiat-Citroen-Vauxhall etc) and Umicore.

Production in 2023 was close to the previous year’s record level in terms of both stacking ore and nickel production, despite disruptions from higher than average rainfall and a period in which the plant ran at reduced capacity owing to a halt in the Chinese battery market and the fall in the price of battery chemicals.

Exhibit 9, below, makes a comparison between Terrafame and Metals One on the basis of their resources and also demonstrates the latter’s potential earning power relative to the former on the basis of their supposed mining rates. For these purposes, we have assumed that Terrafame is capable of producing c 65,955tpa contained nickel over 55 years and that Metals One is capable of producing 5,400tpa contained nickel over c 20 years at a rate of 3Mt mined ore per annum from a series of shallow (c 200m) pits – the difference between the two being a factor of 12.2x.

Exhibit 9: Terrafame

Terrafame

Metals One

(and pro-rata)

Resources (2022)

1,451Mt @ 0.25% Ni, 0.52% Zn, 0.14% Cu and 0.019% Co

57.1Mt @ 0.18% Ni, 0.35% Zn, 0.09% Cu and 0.01% Co.

Production capacity

Nickel sulphate (tpa)

170,000

13,919

Cobalt sulphate (tpa)

7,400

606

Balance sheet (2023)

Total assets (€m)

1,242.6

Total liabilities (€m)

524.2

Total equity (€m)

718.4

Income statement (2023)

Net sales (€m)

560.9

45.9

EBITDA (€m)

82.9

6.8

Underlying EBITDA (€m)

99.4

8.1

Depreciation (€m)

61.0

5.0

Underlying EBIT (€m)

38.4

3.1

Cash flow statement (2023)

Cash flow from operating activities before changes in working capital (€m)

99.1

8.1

Other

Year-end employees

842

69

Total personnel on site (2023)

c 1,900

156

Site lost-time injury frequency rate (2023)*

4.8

CO2 footprint (t CO2/t NiSO4)

1.75

1.75

Source: Terrafame, Metals One, Edison Investment Research. Note: *Per million hours worked.

Among other things, Terrafame’s multi-year agreements to supply low-carbon and fully traceable nickel sulphate for use in EV batteries to Renault, Stellantis and Umicore mark the first steps towards the development of a robust, transparent and sustainable European battery cluster. Also in June 2023, Terrafame signed an agreement with Fortum to develop a pilot operation to use metals recycled by Fortum from EV battery black mass in Terrafame’s battery chemicals production. Under the terms of the agreement, Fortum will supply Terrafame with nickel and cobalt recovered from used EV batteries at the Harjavalta recycling plant, which Terrafame will then use to produce battery chemicals for new EV batteries. The aim of the project is that, by 2029, 6.9% of the nickel sulphate produced by Terrafame will be derived from recycled material (above the 6% level required by the EU Batteries Regulation blending obligation). At the end of their useful lives, the batteries will then be recycled again, thereby closing the cycle of recovered raw materials.

Preliminary valuation considerations

Metals One book value

With net assets of £8.8m attributable to shareholders, we calculate that Metals One had a book value per share of 4.24p as at end-FY23 and that it will have a book value, as at end-FY24, of 2.56p/share, to which its shares are currently trading at a significant 80.3% discount. While it is possible for the shares of junior metals explorers to trade at a discount to book value, we would observe that this is quite rare and that the discounts are also, on average, quite small. Within this context, it is also worth noting that the overwhelming majority of Metal One’s assets and net assets are accounted for by its exploration assets and its investment in associates (ie SRH).

In-situ valuation of Black-Schist resources

At a share price of 0.504p, Metals One’s market capitalisation is £1.8m, or US$2.3m, giving it a forecast enterprise value of £1.1m, or US$1.4m as at end-FY24. With contained resources of 105.8kt Ni, this equates to a resource multiple of US$14.17 per attributable tonne of in-situ resource nickel. This compares with the average in-situ value that we calculated in our report Gold stars and black holes, published in January 2019, of 0.15% of the spot price of nickel, which, at the current price of the metal, equates to US$24.41/t. As such, Metals One’s rating is at a 42.0% discount to the global average, notwithstanding the location of its resources in one of the world’s premier global mining destinations (see Exhibit 10, below) and/or the potential for their expansion.

Black-Schist PEA

Also in Gold stars and black holes, we calculated that companies with completed preliminary economic studies commanded valuations between -4.8% and 50.7% of attributable project NPV, with an average of 11.7% (see Exhibit 166 on page 82 of the report). On that basis alone, we would regard Metals One as justifying its current share price in the event that the NPV of its PEA is US$12.0m. Once again however, this calculation affords no premium for the fact that the company’s project is located in Finland. According to the Fraser Institute, Finland is the most attractive destination for mining investment in Europe and ranks in the top quartile of jurisdictions, globally, on a par with the Yukon and above Idaho, British Columbia and the Northwest Territories:

Exhibit 10: Fraser Institute survey of mining investment attractiveness, by jurisdiction (2023)

Source: Fraser Institute

The mean Fraser Institute investment attractiveness score for all jurisdictions is 56.56, which is between the scores for Serbia and California (in Exhibit 10, above). If this is deemed to attract an average valuation of 11.7% of attributable NPV, and the top and bottom halves of the sample are presumed to attract valuations with respect to the average and pro rata to their scores, then a company with an average project in Finland at PEA stage of development may be expected to attract a valuation of 34.0% of attributable project NPV. Adjusting for sovereign risk in this way (as well as PEA stage of development), we would regard Metals One as justifying its current share price in the event that the NPV of its PEA is only US$4.1m. By extension, anything higher would imply potentially significant upside.

Kingsrose farm-in to Råna project

The agreement between Metals One and Kingsrose allows for the latter to earn up to 75% in SRH via the staged expenditure of up to A$15m in the Råna project in Norway over eight years. In addition to its expenditure commitments, Kingsrose will also issue 4.5m Kingsrose shares (currently worth A$0.2m at a Kingsrose share price of A$0.035) and pay A$1.0m in cash to SRH in stages.

Once the farm-in is complete therefore, Metals One will hold 15% of the project, with Kingsrose holding 75% and the remaining 10% being held by Global Energy Metals Corporation (TSXV: GEMC). At that point, the value of Metals One’s interest could be calculated as 15% of at least A$15m, or A$2.25m, or £1.17m, or 0.35p per Metals One share (excluding the cash and share payments made directly to SRH by Kingsrose).

In the meantime, however, on 4 September, Metals One announced that Kingsrose had satisfied the conditions precedent to the second stage of the agreement between the two companies, by incurring A$3m of expenditure and completing 5,000m of drilling at Råna, with the result that it has earned a 51% interest in the project, with Metals One’s interest reducing to 39%. At the current time therefore, Metals One’s interest could be calculated as 39% of at least A$3.0m, or A$1.17m, or £0.6m, or 0.18p per Metals One share (excluding the cash and share payments made directly to SRH by Kingsrose).

Simultaneously, Kingsrose has announced its intention to proceed to earn its third milestone interest of 65% in Råna by incurring a further A$4.0m in exploration expenditure. In this case, Metals One’s interest could be calculated as 25% of at least A$7.0m, or A$1.75m, or £0.9m, or 0.27p per Metals One share (excluding the cash and share payments made directly to SRH by Kingsrose).

While Kingsrose might appear to have the typical profile of a junior metals’ explorer, in fact it had A$26.23m in cash as at end-June 2024 and is one of BHP’s preferred exploration partners having entered into a series of exploration alliance agreements with the major in May, whereby BHP will provide funding for regional mineral exploration in northern Norway and central and southern Finland. Kingsrose has specifically excluded Råna from the agreement. In summary however, the alliances will proceed in three stages being, firstly, a Project Generation Phase, during which BHP will sole fund up to US$20m in regional generative exploration over up to four years across belt scale areas of interest in Norway and Finland for the exclusive right to select targets to become Defined Projects. Following the Project Generation Phase is an Earn-In Phase, during which BHP may earn up to 75% in any or all Defined Projects in two stages by sole funding a further up to US$36m in exploration over the next seven years. Finally, during the Joint Venture Phase, BHP will have the right to establish a joint venture over any Defined Project, jointly funded by both parties, pro rata. During the final stage, should either party’s interest fall below 10%, its interest in the joint venture will be converted into a 2% net-smelter royalty. BHP will allocate A$7.75m to exploration activities prior to 31 March 2025. Kingsrose will operate the alliances during the Project Generation and Earn-In Phases and will be entitled to charge a management fee to cover overhead costs associated with the alliances.

Financials

Metals One had net cash of £0.8m on its balance sheet as at end-FY23. Since then, we calculate that it has raised £1.2m net of expenses via the issue of equity. Assuming that it burns cash in FY24 at approximately the same rate as in FY23 (ie c £1.0m pa), we estimate that it will have net cash of c £0.7m on its balance sheet as at end-FY24 and that it will probably therefore return to the markets to conduct a placing in H125 in the aftermath of the publication of its Black-Schist PEA.

Efficient equity funding available

In January 2024, EIT InnoEnergy (supported by the European Institute of Innovation & Technology, EIT) and Demeter Investment Managers launched a fund dedicated to the development of a resilient and diverse battery raw material supply chain in Europe. With an initial target size of €500m, the EBA Strategic Battery Materials Fund is intended to build upon the success of the European Battery Alliance (EBA250) in its mission to create a resilient European battery industry. In its own estimation, the fund has been launched in an environment of ‘soaring’ European demand for batteries, which is exposing ‘significant’ gaps in the upstream mining and processing sectors of the EU’s battery material supply chain. In line with the EU’s Critical Raw Materials Act’s requirements to decrease the EU’s overreliance on foreign supply, the fund aims to boost domestic capacity for strategic battery materials, including lithium, nickel, cobalt, manganese and graphite. Consequently, at least 70% of investments from the EBA Materials Fund will be dedicated to projects increasing EU domestic production from mining, processing, refining and recycling in EU and neighbouring countries and it will be able to take positions of up to 20% in publicly listed companies. In contrast to its goal however, there is currently something of a dearth of qualifying projects in Europe. In this respect, the Black-Schist project’s PEA will be transformative in that it will form the basis of the company’s application for Strategic Project status under the EU Critical Raw Materials Act, making it eligible for funding from the fund as well as fast-track permitting and grants for non-dilutive funding.

Exhibit 11: Financial summary

£'000s

2023

2024e

Year end 31 December

UK GAAP

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

Cost of Sales

(1,604)

(1,006)

Gross Profit

(1,604)

(1,006)

EBITDA

 

 

(1,604)

(1,006)

Operating Profit (before amort. and except.)

 

(1,604)

(1,006)

Intangible Amortisation

0

0

Exceptionals

0

0

Other

0

0

Operating Profit

(1,604)

(1,006)

Net Interest

(0)

4

Profit Before Tax (norm)

 

 

(1,604)

(1,002)

Profit Before Tax (FRS 3)

 

 

(1,604)

(1,002)

Tax

0

0

Profit After Tax (norm)

(1,604)

(1,002)

Profit After Tax (FRS 3)

(1,604)

(1,002)

Average Number of Shares Outstanding (m)

99.1

285.0

EPS - normalised (p)

 

 

(1.77)

(0.35)

EPS - normalised and fully diluted (p)

 

 

(1.09)

(0.29)

EPS - (IFRS) (p)

 

 

(1.62)

(0.35)

Dividend per share (p)

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

9,011

8,993

Intangible Assets

5,707

5,707

Tangible Assets

0

0

Investments

3,304

3,286

Current Assets

 

 

989

741

Stocks

0

0

Debtors

238

0

Cash

751

723

Other

0

18

Current Liabilities

 

 

(832)

(235)

Creditors

(832)

(235)

Short-term borrowings

0

0

Long-Term Liabilities

 

 

(85)

0

Long-term borrowings

0

0

Other long-term liabilities

(85)

0

Net Assets

 

 

9,083

9,499

CASH FLOW

Operating Cash Flow

 

 

(884)

(1,200)

Net interest

(0)

4

Tax

0

0

Capex

(287)

0

Acquisitions/disposals

(273)

0

Financing

2,156

1,168

Dividends

0

0

Net Cash Flow

711

(28)

Opening net debt/(cash)

 

 

(40)

(751)

HP finance leases initiated

0

0

Other

0

0

Closing net debt/(cash)

 

 

(751)

(723)

Source: Metals One accounts, Edison Investment Research


Contact details

Revenue by geography

Ecclestone Yards
25 Ecclestone Place
London SW1W 9NF
United Kingdom
+44 7392 750200
www.metalsone.com

N/A

Contact details

Ecclestone Yards
25 Ecclestone Place
London SW1W 9NF
United Kingdom
+44 7392 750200
www.metalsone.com

Revenue by geography

N/A

Management team

Non-Executive Chairman: Alastair Clayton

Chief Executive Officer: Jonathan Owen

Mr Clayton has over 25 years’ experience in the mining and exploration industry, identifying, financing and developing mineral, energy and materials processing projects in Australia, Europe and Africa. He is a qualified geologist, having obtained a BSc (Hons) in geology from the University of Western Australia, and holds a graduate diploma in finance and economics from the Securities Institute of Australia. He was a director of Extract Resources, representing Kalahari Minerals, in its c £1.25bn takeover by CGNPC and also of Artemis Resources during its admission to AIM in 2022 and Primorus Investments.

Jonathan is a mining engineer with over 25 years’ experience in building businesses and driving successful outcomes within global organisations. He is a fellow of the Geological Society and an associate of the Camborne School of Mines. He has held leadership positions in mining operations and mineral exploration across a range of commodities and jurisdictions. He is also the founder and principal of Trans4Mine, a leading operations transformation consultancy supporting the mining and metals industry.

Chief Financial Officer: Daniel Maling

Independent Non-executive Director: Craig Moulton

Daniel is a chartered accountant and member of the ICAEW and a fellow of the Chartered Accountants of Australia and New Zealand. He has over 25 years of executive experience managing and advising AIM, ASX and TSX natural resources companies on corporate finance, business development and strategy. Among other positions, he was corporate finance and business development manager for Cambrian Mining, which merged with Western Coal before being bought by Walter Energy for US$3.3bn in 2011. He is also the original founder of Metals One and negotiated the acquisition of the company’s core projects in Finland and Norway.

Craig is a geologist and mineral economist with over 30 years’ global experience across the mining value chain from greenfields exploration to project development studies and financing. He worked for more than half of his career with major mining houses such as Rio Tinto and Cleveland Cliffs. Among other positions, he is a director of Moulton Metals and a non-executive director of First Development Resources. Previously, he was CEO of Northam Resources, as well as being managing director of Nebari Partners, NickelSearch and Cobra Resources. He graduated from the University of Western Australia in 1992 with an honour’s degree (geology) and holds a masters in mineral economics (with distinction) from the Curtin University.

Management team

Non-Executive Chairman: Alastair Clayton

Mr Clayton has over 25 years’ experience in the mining and exploration industry, identifying, financing and developing mineral, energy and materials processing projects in Australia, Europe and Africa. He is a qualified geologist, having obtained a BSc (Hons) in geology from the University of Western Australia, and holds a graduate diploma in finance and economics from the Securities Institute of Australia. He was a director of Extract Resources, representing Kalahari Minerals, in its c £1.25bn takeover by CGNPC and also of Artemis Resources during its admission to AIM in 2022 and Primorus Investments.

Chief Executive Officer: Jonathan Owen

Jonathan is a mining engineer with over 25 years’ experience in building businesses and driving successful outcomes within global organisations. He is a fellow of the Geological Society and an associate of the Camborne School of Mines. He has held leadership positions in mining operations and mineral exploration across a range of commodities and jurisdictions. He is also the founder and principal of Trans4Mine, a leading operations transformation consultancy supporting the mining and metals industry.

Chief Financial Officer: Daniel Maling

Daniel is a chartered accountant and member of the ICAEW and a fellow of the Chartered Accountants of Australia and New Zealand. He has over 25 years of executive experience managing and advising AIM, ASX and TSX natural resources companies on corporate finance, business development and strategy. Among other positions, he was corporate finance and business development manager for Cambrian Mining, which merged with Western Coal before being bought by Walter Energy for US$3.3bn in 2011. He is also the original founder of Metals One and negotiated the acquisition of the company’s core projects in Finland and Norway.

Independent Non-executive Director: Craig Moulton

Craig is a geologist and mineral economist with over 30 years’ global experience across the mining value chain from greenfields exploration to project development studies and financing. He worked for more than half of his career with major mining houses such as Rio Tinto and Cleveland Cliffs. Among other positions, he is a director of Moulton Metals and a non-executive director of First Development Resources. Previously, he was CEO of Northam Resources, as well as being managing director of Nebari Partners, NickelSearch and Cobra Resources. He graduated from the University of Western Australia in 1992 with an honour’s degree (geology) and holds a masters in mineral economics (with distinction) from the Curtin University.

Principal shareholders

(%)

Bluejay Mining

18.98

Metals One Employee Benefit Trust

9.5

M. Blakeman Esq.

6.93

SI Capital

6.15

Shard Capital

5.74

Global Investment Strategies

5.68

J. Ikin Esq.

5.32


Appendix: Background on the nickel market

History

Since 1950, nickel demand has increased by c 4% per annum (in excess of world GDP growth), primarily driven by 6.1% per annum growth in stainless steel output, which accounts for approximately 70% of demand. One of the earliest applications of nickel was the production of armour plate and, as a result, nickel came to be regarded as a strategically important metal by both the Eastern and Western blocks during the Cold War. All nickel in the United States was put under US government control during the Korean War and, from 1951 to 1957, it acquired nickel for the national strategic stockpile. Consequently, there was a severe shortage of nickel at the time for civilian purposes and prices rose gradually from 1950 to 1957 – four years after the ceasefire. A period of oversupply then followed during which quoted producer and merchant prices for nickel stagnated.

In 1966, Western Mining discovered nickel sulphide mineralisation at Kambalda in Western Australia, triggering an extensive exploration boom. Two years later, in 1968, the start of a prolonged series of labour strikes effectively shut down the Canadian nickel, copper and iron ore industries. At the time, Canada was by far the world’s largest producer of nickel, with Falconbridge and Inco alone accounting for 48% of world output. In addition, the strikes occurred at a time when global stocks were low and demand was restricted by available supply. As a result, the nickel price appreciated 43% in 1968 and then again in 1969, when Canadian output dropped by a further 20%.

This marked a seminal point in the history of nickel in that it prompted a sharp increase in the exploration and development of known nickel deposits – especially laterites – and in 1970 projects equating to 42% of total contemporary production were proposed. Nickel prices rose slightly from 1970 until 1975. However, between 1969 and 1974, new mines and processing plants were commissioned in Australia, Canada, the Dominican Republic and New Caledonia. In reality, only 71% of the expected increase in production in 1970 was ever realised. Nevertheless, the cumulative effect of these new production facilities eventually began to be felt at a time when demand was weakening (partly as a result of the cessation of US military operations in Vietnam). Finally, the Soroako mining and smelting complex was commissioned on the island of Sulawesi in 1977. Higher production therefore coincided with slower economic growth in the western world in the aftermath of the first oil shock and combined to reduce nickel prices sharply. This weakness was maintained until the Inco strike of 1978–79.

The effect of the Inco strike was compounded by the fact that major producers had been operating at only 55–60% of capacity to reduce inventories. During 1979, Inco raised its Port Colborne price for cathode six times. However, this strength proved to be only a brief respite from the more general environment of oversupply and prices quickly resumed their downward trend. Under the influence of the second oil shock (1979–82), demand for nickel fell 8% in 1981 alone – the first time since the 1940s that demand had declined for two consecutive years.

A tale of three crises

Prices remained low until 1986, during which time producers reduced world production capacity and at least five operations were closed. In the following two years, however, they staged a remarkable turnaround, rising from their lowest ever real price in 1986 to their highest level of the century in 1988, when the market suffered the first of three major liquidity traps when the London Metal Exchange (LME) official ring descended into chaos as one trader bid up the cash price from US$10,000/t to US$15,000/t with not a single offer. Trading was subsequently suspended, while the LME board held an emergency meeting. Owing, as it did, more to a transient shortage of stainless steel scrap at a time of increased demand than to underlying supply-demand fundamentals, the price quickly corrected and, although western demand for nickel grew continuously between 1985 and 1991, the LME price declined every year from 1988 until 1994.

Exhibit 12: Nickel price, 1945–2023 (US$/t, annually)

Source: Edison Investment Research, United States Geological Survey (USGS), Bloomberg

The collapse of the Soviet Union in 1989 and the subsequent downsizing of its military-industrial complex caused its nickel demand to plummet from 180,000 tonnes in 1989 to just 20,000 tonnes in 1997 and 18,000 tonnes in 1998 (when the South-East Asian currency crisis erupted). In addition, there was a sharp increase in Russian exports of stainless steel scrap to the European Union, leading to a rise in nickel supply into the western markets from former communist countries. While this excess supply was absorbed into the market until the mid-1990s, it maintained an effective cap on the nickel price with the result that, by the end of the decade, there had been no new greenfield developments of nickel projects since 1986. At this point, the development of high-pressure acid leach (HPAL) technology was transforming the apparent economics of production from nickel laterites and new projects equating to approximately 12% of worldwide production were proposed – mostly in Australia.

While these initially had a depressing effect on the nickel price, the cumulative effect of a lack of investment in productive capacity for more than 10 years at a time when demand from the emerging economies of China and India was soaring, caused nickel prices to leap from under US$6,000/t in 2001 to almost US$55,000/t in 2007 in the second major short squeeze of the post-war age. This move was further exacerbated by below-par production from the proposed laterite projects of the late 1990s, which were at least partially responsible for keeping the market undersupplied.

From a deficit of 41,000 tonnes (approximately 3% of supply) in 2006, the nickel market returned to a surplus of 37,200 tonnes in 2007 as a result of the stainless steel industry cutting back production levels and thereby reducing demand by around 2% and causing prices to drop by almost two-thirds to 2009 – exacerbated by conditions in financial markets – before retracing approximately 38% of their fall in 2010–11. Thereafter, however, prices resumed their slide, dipping below US$10,000/t in 2016 as the world grappled with the aftermath of the global financial crisis, before stabilising once again in 2018–20 prior to the COVID-19 pandemic, albeit at levels that did little to incentivise new productive investment in the sector.

In common with many other metals, nickel had a relatively buoyant pandemic as concerns about reduced demand from China quickly gave way to concerns about reduced supply from China. In anticipation of a subsequent increase in supply from Indonesia, however, a number of market participants were induced to take on large short positions towards the end of the pandemic as a hedge against falling prices. When Russia unexpectedly invaded Ukraine and threatened to compromise large Russian exports of nickel from Norilsk to the West, the market instead spiked, causing a number of shorts to have difficulty in delivering physical metal and to miss subsequent margin calls amid extreme price volatility as the price was briefly squeezed over US$100,000/t. In the end, trading on the LME was suspended for over a week and some US$12bn in orders were cancelled in nickel’s third major short squeeze of the post-war era. Since then, prices have settled back to a level they first hit in late 2003 in the run-up to the 2007 crisis, at c US$16,276/t.

With the effects of the March 2022 short squeeze now waning, the market is forecast to revert to a condition of surplus in 2024. In response, however, some of the largest (especially laterite) projects of the new millennium, such as Koniambo, Ravensthorpe and Goro, are now either transitioning to care and maintenance, closing or seeking new funding, holding out the possibility that any condition of oversupply will be short-lived.

Exhibit 13: Nickel price, January 2015 to present (US$/t, daily)

Source: LSEG Data & Analytics

Nickel sulphides versus laterites

Both nickel sulphides and nickel laterites have been mined and processed for over a century. Technologically, however, while often deeper, nickel sulphides have proved to be much the easier ores to process. In particular, their ability to produce a floatation concentrate reduces the size of the facilities required to treat the ore. Geologically, however, sulphide replenishment has lagged rates of ore depletion for several years, with the result that they account for only 27–40% of known resources and, unless new major discoveries are made soon, sulphide production appears destined to decline in both relative and absolute terms. Thus, whereas production of nickel from laterites accounted for less than 10% of the total in 1950, it accounted for 28% in 1968, 42% in 2003 and 58% by 2013. Some sources put its current contribution to global supply as high as 70%, although note that 70% of Class 1 nickel, containing 99.8% Ni, is still produced from sulphide ores.

Nickel laterites are the product of intense tropical weathering of ultramafic sulphides into oxide layers and fall into two broad categories. To date, the most commonly exploited have been the saprolite (or silicate) laterites, which are amenable to standard pyrometallurgical processes. The second type, which are amenable to HPAL techniques, are limonite ores, which are high in iron.

Laterites are almost invariably found at shallow depths in large, flat, tabular deposits. However, the weathering process (which is ultimately responsible for concentrating the nickel) also leads to variability in the thickness, grade, chemistry and mineralogy of the ore body. In extreme conditions, this may require a different processing method for each of the layers of mineralisation. In addition, laterites tend to be located in remote areas, which require a large amount of initial infrastructure development. While saprolites are conducive to traditional processing via standard techniques, processing limonite laterites is via one of two methods, historically via the Caron process or, more recently, via HPAL.

In the Caron process, residual moisture in the ore body has to be driven off before the material is calcined and melted at c 1,600°C. As a result, the process is both highly energy intensive and highly capital intensive (as well as having high reagent costs). Moreover, only limited upgrading of laterite ores is possible before processing and the plant, tailings and slag deposition areas must therefore be scaled for large tonnages. Finally, nickel recoveries are relatively low and most laterite smelters do not recover cobalt, which is a valuable by-product. As a result, the Caron process is not now regarded as an economically viable method of bringing nickel to the market, with Moa Bay in Cuba being the only large-scale operation in the world still using this method of processing.

By contrast, the exploitation of limonite laterites depends on the HPAL process. This involves leaching the ore in sulphuric acid at an elevated temperature of c 270°C and a pressure of c 600 pounds per square inch (c 41 atmospheres) in titanium-lined autoclaves. Having been effectively solvent-extracted, the nickel is then electro-won from solution by standard hydrometallurgical processes, with typical recoveries in excess of 90% of the nickel and cobalt contained in solution. To date, however, almost none of the deposits brought into production using the HPAL technique have lived up to their initial design specifications. The problems have been multifarious, ranging from a surfeit of clay (making leaching difficult) to unsuitable materials being chosen for the high-temperature, high-acid environment of the plant. As a result, only about 61% of the new laterite capacity envisaged in the late 1990s has been realised. Moreover, far from being the low-cost producers that they were forecast to be, cost overruns have meant that the HPAL producers have tended to occupy the upper, rather than the lower, reaches of the historical cost curve. Nevertheless, since they account for the majority of known nickel resources (within which there is approximately twice as much limonitic, HPAL amenable-type ore as saprolitic pyrometallurgical type ore), production from laterites – especially from HPAL limonites – seems destined to have a significant impact on the supply of nickel in the future.

New applications

Globally, more than c 2.5Mt of primary nickel is produced and used annually in the form of nickel metal, ferronickel, nickel oxides and, increasingly, other nickel chemicals. Nickel is also readily recycled in many of its applications, and large tonnages of secondary or ‘scrap’ nickel are used to supplement newly mined metal.

Primary nickel production is generally divided into two main product categories: Class 1 (containing 99.8% Ni) and Class 2 nickel (containing less than 99.8% Ni). Class 1 nickel accounts for c 40% of primary nickel production and comprises a group of products including electrolytic nickel metal, powders, briquettes and carbonyl nickel. Class 2 nickel comprises ferronickel and nickel pig iron (NPI, c 10–15% nickel), which typically have a lower nickel content and are used in the production of stainless steel, in which producers take advantage of the inherent iron content of their product to accept an iron-rich nickel alloying agent. China began producing NPI in 2005 in different forms and grades and this has displaced significant volumes of traditional products such as nickel metal and stainless steel scrap in the manufacture of stainless steel in China and Indonesia, in particular.

Batteries

Stainless steel production continues to make up c 70% of nickel’s demand applications. As with a number of other commodities, however, the prospect of a global transition to a low carbon economy holds out the prospect of rapid growth in what has hitherto been a niche area of the market. Although electric vehicle (EV) market share is still small relative to that for traditional vehicles, it is likely to increase in the coming years as major economies transition away from fossil fuels towards clean energy. President Joe Biden has signed an executive order requiring that 50% of all new vehicle sales in the US be electric by 2030. China, the world’s biggest EV market, has a similar mandate set at 40%, while the European Union is also seeking to have at least 30m zero-emission vehicles on its roads by then. According to the International Energy Authority’s (IEA’s) Global Electric Vehicle Outlook, if governments are able to ramp up their efforts to meet energy and climate goals, the global EV fleet could reach as many as 230m by the end of the decade (cf c 20m currently) and mineral demand would need to grow by c 30 times by 2040 to meet the various governments’ climate goals. As such, EV sales are expected to experience a compound annual growth rate of c 40% per year until the end of 2025, when EV penetration is expected to reach 15%. After that, EV market share is expected to rise further, reaching 35% by 2030.

Within this context, nickel will benefit not only from increased EV sales and market penetration, but also from an increased proportion of nickel contained in the batteries required to power them. Two lithium-ion battery chemistries dominate the market for EV batteries, namely nickel-manganese-cobalt (NMC) and nickel-cobalt-aluminium (NCA). NMC battery chemistry is used by almost every automobile manufacturer in the world except Tesla, which uses NCA chemistry. Either way, however, nickel is used to increase energy density in a battery, while cobalt is used to increase its stability. As a result, research suggests that, in the immediate future, the evolution of the NMC lithium-ion battery will be towards a more nickel-rich cathode. Hence, whereas NMC battery chemistry started at a 1–1–1 ratio of nickel-manganese-cobalt, it has evolved into a 5–3–2 ratio, and in the future, as technology advances, it is expected evolve further to a 6–2–2 ratio and then an 8–1–1 one. At c 45kg of nickel per vehicle, this suggests that demand for nickel from EV lithium-ion batteries could increase from c 70,000t (or c 3% of the market) in 2018 to c 600,000t (or 24% of the market) by 2025. Thus, in the longer term, the IEA predicts that growth in demand for nickel from clean energy applications in 2040 could be as high as 7–19x its level in 2020, which compares with 13–42x for lithium, 8–25x for graphite, 6–21x for cobalt, 3–8x for manganese, 3–7x for rare earths and 2–3x for copper.

An environmental penalty?

Lithium-ion batteries utilising nickel-rich cathodes require high-purity nickel, typically in the form of nickel sulphate. As the main feed for EV battery cathodes, nickel sulphate is currently manufactured by dissolving Class 1 nickel in sulphuric acid. Initially, it was thought that only the nickel ores that went to make Class 1 nickel products (ie sulphide ores) could be used to make the nickel sulphate on which NMC lithium-ion batteries depend. Last year, however, Harita Nickel became the first company in Indonesia to announce that it had processed lateritic ore into a mixed hydroxide precipitate (MHP) via HPAL, which is an alternative route to nickel sulphate for the battery industry. Another alternative is the use of nickel matte (c 70–80% nickel) and, in 2022, China’s CNGR Advanced Materials announced that it is to invest in three new projects in Indonesia to produce nickel matte, adding to the two nickel matte projects that it already has on the island of Sulawesi. However, the process is highly energy-intensive and polluting and almost invariably fails to meet western ESG standards. According to international consultant Wood Mackenzie, the extra pyrometallurgical step required to make battery-grade nickel from nickel matte adds to the energy intensity of NPI production, which is already the highest in the nickel industry at c 40–90t CO2 equivalent per tonne of nickel for NPI, compared to less than 40t for HPAL and less than 10t for traditional nickel sulphide processing routes.

Why Indonesian nickel may be unavailable in Europe

It is unlikely that this new capacity will reach western markets since much of it is subject to offtake agreements. Indonesia is the world’s largest producer of nickel, with 43 smelting facilities in operation, 28 under construction and 24 more being planned and accounting for approximately half of global production. After it banned exports of raw nickel ore in 2020, China’s NPI producers started investing in upstream processing capacity in Indonesia itself. As a result, Indonesian NPI is now being used as a feedstock for China’s stainless steel industry and represents the largest volume category of trade between the two nations. Similarly, China’s nickel matte imports have increased sharply (with Indonesia accounting for 93% of the total), while imports of MHP have quadrupled from c 0.34Mt in 2020 to 1.32Mt in 2023, of which 63% originated in Indonesia.

While the expansion of Indonesian capacity may put a cap on the price of nickel, the government official overseeing the industry is reported to have stated that, while prices were unlikely to rise above US$18,000/t in the foreseeable future, neither should they drop below US$15,000/t, being the price at which Indonesian smelters would be forced to cut production.

Peak to trough nickel

Since 1945, by Edison’s interpretation, the nickel price has experienced 16 bull markets (of which four were long and seven were large – defined as being an overall upward movement of more than 50% in aggregate) and 16 bear markets (of which three were long and seven were large – defined as being an overall downward movement of 33.3% in aggregate). In percentage terms, the largest bull market occurred between 2001 and 2007 (see Exhibit 14) and resulted in a 533% increase in the price of nickel, while the largest bear market occurred between 1988 and 1993 and resulted in a 62% decrease in the price of nickel (see Exhibit 12). Over the entire period of 78 years, from 1945 to the present, the price of nickel has risen, on average, by 4.1% per year (geometric average), which compares with a 3.7% average rate of US CPI inflation over the same timeframe. Since January 2002, the rate of nickel price performance has accelerated to an annual average of 4.8% pa although, at the current time, bear market conditions appear to be prevailing in the ongoing aftermath of the March 2022 crisis:

Exhibit 14: Nickel price, January 2002 to present (US$/t, monthly)

Source: LSEG Data & Analytics

On average, each bull market increased the price of nickel by 79.0%, while each bear market decreased it by 27.0% (simple averages). Taking the (average) price of US$25,617/t in 2022 to be the most recent peak of a bull market, an average bear market decline would see the price bottom out at US$18,697/t (which it has already surpassed), while a bear market to match the worst in post-war history (1988–1993 in the aftermath of the 1988 crisis) would see it bottom out at US$9,820/t. By contrast, if 2024 proves to be the nadir of the current bear market, then an average bull market price rise should see the price recover to US$30,560/t over the course of the next two and a half years.

Real nickel

Between 1945 and 2023, the average real price of nickel has been US$19,400/t and, with the exception of the crises in 1988 and 2007 and briefly in 2022, has rarely moved more than ±US$10,000/t from that average level (the standard deviation of prices about the mean being US$9,476/t).

Exhibit 15: Nickel price, 1945–2023 (US$/t, annually, real and nominal)

Source: Edison Investment Research, USGS, Bloomberg

On average, each bull market increased the (real) price of nickel by 66.9%, while each bear market decreased it by 27.3% (simple averages). Taking the (average) price of US$28,210/t in 2022 to be the most recent peak of a bull market, an average bear market decline would see the price bottom out at US$20,502/t (which it has already surpassed), while a bear market to match the worst in post-war history (1988–1993 in the aftermath of the 1988 crisis) would see it bottom out at US$8,797/t in real 2024 US dollar terms. By contrast, if 2024 proves to be the nadir of the current bear market, then an average bull market price rise would see the price recover to US$28,502/t in real 2024 US dollar terms over the course of the next two and a half years.

Nickel price regression analysis compared with oil

The production of nickel is extremely energy intensive. If the price of a barrel of crude oil can be considered a proxy for energy input costs generally – which it could historically – then it might be expected that there would be a close correlation between the price of nickel and the price of crude oil. This is indeed the case, with a regression analysis between the two returning a Pearson product moment (correlation) coefficient between the two of 0.85 (on a scale between +1 and -1) for the period from 1945 to the present.

Exhibit 16: Nickel price (US$/t) cf the oil price (US$/bbl), 1945–2023

Source: Edison Investment Research, USGS, Bloomberg

As a result, the future price of nickel can also be estimated in terms of the future price of crude oil by using regression techniques, of which the following is a summary:

Exhibit 17: Nickel price predicted with respect to the crude oil price (US$/t and US$/bbl)

Price of crude oil (US$/bbl, nominal)

50

70

90

110

130

150

Implied price of nickel (US$/t, nominal)

12,226

16,322

20,418

24,512

28,610

32,706

Source: Edison Investment Research

Given the number of data points in this analysis, the result can be said to be statistically significant; that is, there is less than a 5% probability that the observed relationship occurred as a result of random chance. However, it remains to be seen whether the correlation will be maintained if the world transitions to net-zero carbon, in which case we may see the nickel price begin to correlate to a new proxy for energy costs in the future (eg lithium). In the meantime, for nickel to rise back to its long-term real average price of US$19,400/t would require an oil price of US$85.03/bbl (cf US$81.07/bbl at the time of writing).


General disclaimer and copyright

This report has been commissioned by Metals One and prepared and issued by Edison, in consideration of a fee payable by Metals One. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

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London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Metals One and prepared and issued by Edison, in consideration of a fee payable by Metals One. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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