HI GW,I hope you are well.Disclosure: I have been accumulating...

HI GW,

I hope you are well.

Disclosure: I have been accumulating quite a lot of CNJ shares since the Ukrainian war started just over a month ago. Why?

IMHO, since the Ukraine war broke out, Conico and its investors have been dealt a whole new deck of cards i.e. the world now suddenly needs a major new supply of Nickel and asap, and this from countries without sovereign risk (enter Mt. Thirsty in Australia, as well as "potentially" Ryberg in Greenland). In a nutshell, Conico is perfectly placed to meet this demand with Mt. Thirsty in the short term, and "potentially", Ryberg in medium term.

However, it is not only just about quickly filling the gaping global Nickel supply gap that Russia has suddenly created, but also, at what Nickel price i.e. the prices paid for Nickel are already twice as high as what they were only a couple of years ago. In fact, even before Russia suddenly stopped being a major Nickel supplier (Russia supplies about 20% of the world’s class 1 nickel, which is at least 99.8% pure), Nickel was already quickly becoming a critical element in batteries used in electric vehicles. Indeed, the more advanced electric-car batteries become (in order to store more energy) the more Nickel they will need.

The elephant in the room, when it comes to the supply of class 1 nickel, is the Russian nickel-mining company Norilsk Nickel (Norilsk is the world’s largest class 1 nickel producer) and its president Vladimir Potanin, who is Russia’s richest man and a longtime friend of Vladimir Putin. Up until now, Norilsk appear to have dodged all sanctions.

The importance of Norilsk to the European market, as a supplier of Nickel as a raw materials for battery production in Europe, should not be underestimated. If Norilsk were suddenly to be sanctioned, which IMHO is quite possible, this would put the Nickel market under even more pressure and no doubt send Nickel prices significantly higher.

As a background, in 2018, Norilsk established a “strategic cooperation” with BASF to produce the materials for electric-vehicle batteries in Europe, and particularly in Germany. IMHO, there is every chance that BASF are currently seriously reviewing their agreement with Norilsk. I am also sure that the German car manufacturers are probably also having second thoughts, and may also be already looking for alternative Nickel supplies.

This is of course "potentially" a perfect situation for Conico with their Mt. Thirsty Nickel/Cobalt Project in Australia, as well as "potentially", with their Ryberg Nickel etc. Project in Greenland. As you can see, Nickel is the common denominator at both of these Projects, which is great news for Conico (but of course not for the Ukrainian people, who are currently undergoing enormous suffering).

In the two years before Mr. Putin’s Ukraine invasion, class 1 nickel prices doubled. Since the Ukrainian war broke out, the uncertainty about class 1 nickel supply out of Russia has since driven the prices even higher. Indeed, only a couple of weeks ago, this uncertainty led to what is known as a short squeeze (the Chinese nickel producer Tsingshan Holding Group bet that nickel prices would fall and had to cover their positions when prices rallied). Although, the Nickel market is now operating again fairly normally, the Nickel price still remains twice as high as it was only a couple of years ago (currently over US$31,000 a tonne) and the volatility is likely to remain. IMHO, it is only a matter of time before the Nickel price begins trading higher again.

At a Nickel price of US$30,000 a tonne (and a Cobalt price of US$81,000 a tonne), the NPV of Mt. Thirsty will be in excess of A$500 million, which suddenly and massively changes the economic viabilty of Mt. Thirsty i.e. in February 2020, the NPV of Mt. Thirsty was a mere A$44 million, which meant that it was only marginally profitable and therefore probably not worth proceeding with at all (hence the fact that Mt. Thirsty has been "on-ice" for the last two years).

As I said at the beginning of this post, with the outbreak of the Ukraine war, Mt. Thirsty has thus suddenly become a highly attractive "greenfields" project i.e. Conico and its investors have now been dealt a whole new deck of cards! Therefore, it will be no surprise to me at all if Conico's Mt. Thirsty Project suddenly makes a quantum leap forward as a part of a much larger JV (with the adjacent tenement holders in the Mt. Thirsty region) and with a major miner (with deep pockets and the necessary mining and production expertise) calling all the shots.

IMHO, investors have only just started to realise the true potential of this potentially far larger Mt. Thirsty JV, and thus its value to Conico. Therefore, I would suggest that any breakthrough news on this front, will get plenty of investor, as well as global media attention.

Turning to Cobalt, this is a very similar situation since the Ukrainian war started. At the beginning of 2022, Russia's cobalt production was set to rise to 8,000 million tons (from 5,000 million tons). This would have increased Russia's share of global cobalt production from the 5% to 8%. And, the only cobalt producer in Russia is, you guessed it - Norilsk. Therefore, potentially, between 5% and 8% of the global cobalt production could disappear (of course China will probably take up most of this).

Turning back to Greenland (which is the much bigger fish in the Nickel pond), IMHO, if on Thursday Conico announces that TAJ will be heading over to Greenland within the next few weeks, investors will have to quickly reassess this suddenly very new situation i.e. that before the end of the year Conico may just have at least one major tier 1 Nickel prospect on their hands.

Alone the news that TAJ is heading off to Greenland will most definitely receive plenty of investor as well as global media attention. In this regard, it could be very much "game-on" from Thursday morning onwards.

Cheers.