Conic Metals Corp. (TSXV: NKL): 8.56% JV Interest in the Ramu Nickel Cobalt Operation in Papua New Guinea and a Portfolio of 11 Nickel and Cobalt Royalties, Interview with Anthony Milewski, Chairman and Justin Cochrane, President and CEO
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By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
on 11/21/2019
We learned from Anthony Milewski, Chairman, and Justin Cochrane, President and CEO of Conic Metals Corp. (TSXv: NKL) that they were spun out of Cobalt 27 at the end of October, with an 8.56% joint venture interest in the Ramu Nickel Cobalt operation, in Papua New Guinea, as well as a portfolio of 11 nickel and cobalt royalties on some world-class exploration and development projects, in both Canada and Australia. Thirdly, Conic Metals' assets contain US$5 million in cash, along with about a million and a half of equity investments, one of which is a 7% interest in Giga Metals Corporation, another nickel cobalt project in British Columbia. We learned from Mr. Cochrane that Conic Metals Corp. is focused on being a leading investment vehicle for battery metals.
Ramu Nickel Cobalt project
Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Justin Cochrane, who is President and CEO of Conic Metals Corp.
Justin, could you give our readers/investors an overview of your Company and also what differentiates Conic from others?
Justin Cochrane: Absolutely. And as always, Dr. Alper, thanks very much for having us on today. Conic Metals was spun out of Cobalt 27, at the end of October. Through that transaction, Conic Metals was formed and now holds a number of key assets. The first being an 8.56% joint venture interest in the Ramu Nickel Cobalt operation in Papua New Guinea, which we'll talk a little more about later. Conic Metals also has a portfolio of 11 different royalties. These are nickel and cobalt royalties on some world-class exploration and development projects in both Canada and Australia. The third group of assets today would be US $5 million in cash, along with about a million and a half of equity investments, one of which is a 7% interest in Giga Metals Corporation, which we believe is a world-class nickel cobalt project in British Columbia.
Those are our three groups of assets. What differentiates Conic from others is our focus on being a leading investment vehicle for battery metals. Our focus is on nickel and cobalt. In Canada, there aren't a whole lot of pure play nickel and battery metals investment vehicles, with operating assets. Our joint venture interest in Ramu is a mine and refinery that's been operating since 2012. It spent the last three years operating above nameplate capacity, and MCC is an operator of that project. It's in the first or second quartile of the nickel cost curve, being one of the top 10 nickel projects in the world. It has an exceptionally long mine life, we think well over a 30 year mine life, based on the reserves and resources today, which is on less than 15% of our exploration license.
So the Ramu operation in PNG is an absolute world-class operation! And we have tremendous upside scenarios to that operation with our joint venture partners in MCC.
Dr. Allen Alper: That sounds excellent. Sounds like Conic is in a great position for cobalt and nickel.
Anthony Milewski: Yeah, we think we are, and why nickel and cobalt? Nickel, this is a metal that has seen tremendous demand, mostly from the stainless steel sector in China that continues to grow at a rate of about 4% a year. Looking at the next decade, we see a significant growth in demand for nickel from lithium ion batteries and battery makers around the globe. Most of that is going to feed electric vehicles, and energy storage systems, and other consumer electronic applications.
We have a nickel market today, where only roughly 5% of the market goes to supply the electric vehicle supply chain. That is expected to increase to up to 50 to 60% of the nickel market over the next decade, to service electric vehicles and energy storage. So you have massive growth of mega-factories and giga-factories being built around the world. There're actually 70 mega-factories that are currently in construction around the globe, 46 of which are in China.
Two years ago, only 17 of those mega-factories were under construction. We now have 70 mega-factories under construction. There is going to be a significant demand in the next handful of years that hits us, as electric vehicles take off.
Dr. Allen Alper: Sounds exciting! Sounds like you're well positioned and it's a very strong, growing market, with a great need and great demand. So that sounds excellent.
Justin Cochrane: Yeah! We think so! As you think about the market cap of our company and where we should be trading, our interest in Ramu should be generating free cash flow of about 20 to 25 million US dollars a year. If you take a typical base metals multiple, if that's 8, 10, 12 times, as a royalty and streaming company, you see some of these royalty and streaming companies trading upwards of 30 times cash flow. So at 25 million dollars US of cashflow, we think there's going to be tremendous upside in the valuation of our Company.
Dr. Allen Alper: Oh, that sounds great. Sounds like it'll be a great opportunity for investors. Could you tell our readers/investors a little bit about your background and the Management Team and Board?
Justin Cochrane: Absolutely. My background is in the royalty and the streaming space. I've spent the better part of 20 years of my career in royalty and stream financing, M&A and corporate finance. I started my career as an investment banker for a decade and I was covering the royalty and streaming space. I left that in 2010 and joined Sandstorm Gold. Sandstorm's one of the world's largest precious metal streaming companies, and I ran their corporate development group for five years. Then I left Sandstorm to join Anthony in starting Cobalt 27 several years ago. I was President and COO of Cobalt 27, and now President and CEO of Conic Metals.
Anthony Milewski is the Chairman of the Board. He's really had a distinguished career in the metals and mining industry, always as an investor. He was originally with a hedge fund out of New York called Firebird Capital, then went to Pala as one of their Managing Directors on their private equity portfolio, and then with me started Cobalt 27 several years ago. Anthony was the Chairman and CEO of Cobalt 27.
There are three other individuals who are part of the Management Team. Mr. Martin Vydra, who spent over 30 years with Sherritt International Corp. He joined us about a year and a half ago and is our Executive Vice President and head of our strategy division. He’s the one who's looking at our investment strategy in both nickel and cobalt, as he spent his entire career in that space.
Conor Kearns is our CFO. He was with us at Cobalt 27 as our VP of Finance. Previously, for the decade before that, Conor was the CFO of a company called EFT Canada, which is an electronics payment business. He is just a top-notch finance individual.
And finally, we have Craig Lennon who is Conic’s head of Asia Pacific and is responsible for managing our Ramu JV Interest. Craig was formerly the Managing Director and CEO of Highlands Pacific and prior to that was Highlands CFO, having spent 19 years with Highlands in total. Highlands which was acquired by Conic Metals in May this year and Craig has vast experience working in Papua New Guinea and working with our Chinese partners MCC.
So those are the five key individuals on the Conic Metals team.
Dr. Allen Alper: That sounds great. Great team, great experience and well-balanced. So that's really great. Could you tell our readers/investors a little bit about your share structure? I know you're just getting listed, but you'll have a good number of shares issued and outstanding.
Anthony Milewski: Yes, Conic Metals will have about 83.5 million shares outstanding. Management and Board owns about 8% of the Company, so a big stake in the business, which will certainly align our interests with that of our shareholders. Pala will remain as a shareholder, but they've gone below the 10% threshold. So they'll own 9.9% interest in the company.
On closing the transaction, Conic would have had a 40 cent share price on that 83.5 million shares. So roughly, call it a Canadian $35 million market cap, with US$25 million in attributable, free cash flow from Ramu, we think there's tremendous upside in that market cap.
Dr. Allen Alper: Yes, sounds like there's a great opportunity for investors. Could you tell our readers/investors the primary reasons they should consider investing in Conic?
Anthony Milewski: Absolutely. At a value of 40 cents a share, which is where we closed at the end of October, that is roughly valuing us at about one times our joint venture cashflow in Ramu on a first, second quartile asset, over 30 year mine life, with, we think has tremendous exploration upside and an opportunity for MCC to double capacity at the project, which doesn't cost us a penny.
So significant upsides both from production and exploration and long mine life. We think, from a valuation perspective, there's tremendous upside. Secondly, our focus on the battery material space. There are not a lot of operating cash flowing, pure play, battery metal investment vehicles in Canada, with a focus on nickel and we are one. With that and the experience of the team, we'll be looking to grow that investment portfolio and see a number of opportunities to do that.
But the focus for us will be getting investors to recognize the value of our Ramu joint venture interest. We haven't really had a chance to get in front of investors and talk about Ramu, because we were in the middle of our previous transaction with Cobalt 27 when Ramu was acquired. We need to get out and talk to investors and get them to realize the value potential of Ramu, which is tremendous.
As a team we've proven our ability to raise capital and execute on investment opportunities, both in previous careers and at Cobalt 27, and we're going to continue to do the same at Conic Metals.
Dr. Allen Alper: Well, those sound like excellent reasons for our readers/investors to consider investing in Conic Metals. Is there anything else you'd like to add, Justin?
Justin Cochrane: I would like to add, as a royalty and streaming company, there will be tremendous opportunities for us to grow that royalty and streaming portfolio, and so that will be a focus for the Company. Even more significant, will be focusing on that Ramu project and working with our partner, MCC, to maximize value from Ramu. We think there'll be a number of interesting opportunities to maximize that value, and that becomes a big focus for our Management Team. With an 8% ownership interest in the Company ourselves, we are exceptionally well aligned with our shareholders, to get the share price up and to maximize value from the investment portfolio that we have.
Dr. Allen Alper: That's great. It's good to see a team with skin in the game, so that's excellent.
Justin Cochrane: That's right. Yeah, absolutely. Thank you for the opportunity to share our accomplishments with you and your readers/investors.
Dr. Allen Alper: We’ll publish your press releases as they come out so our readers/investors can follow your progress.
http://conicmetals.com/
Conic Metals Capital Corp.
4 King Street West, Suite 401
Toronto, Ontario
Canada
M5H 1B6
Tel: 647.846.7765
Email: info@conicmetals.com
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