SPC Nickel Corp (TSX-V:SPC, OTC:SPCNF) told investors it has entered into an agreement with Vale Canada Limited designed to consolidate and unlock the full potential of the adjacent and contiguous West Graham and Crean Hill 3 nickel-copper deposits located in the world-class Sudbury Mining Camp.
The company said the agreement grants it the right to acquire a 100% interest in the surface and mineral rights of the Crean Hill 3. In consideration, certain rights and royalties will be extended to Vale across the combined project, it added.
"The signing of this agreement with Vale represents a transformative growth opportunity for SPC Nickel and its shareholders,” SPC CEO Grant Mourre said in a statement. “Over the past 12 months, we have been working closely with Vale to develop an agreement that is mutually beneficial for both parties.”
READ: SPC Nickel moves closer to defining near-surface nickel resource at Lockerby East project
“The consolidated West Graham and Crean Hill 3 deposits give SPC Nickel, as operator, the ability to optimize synergies during the exploration, development and production stages of the project,” Mourre added. “We are very excited about the opportunities that this agreement brings to SPC Nickel and are looking forward to getting drills turning on the property in 2023.”
SPC noted that the West Graham and Crean Hill 3 deposits constitute the eastern and western contiguous portions of a large near-surface nickel-copper sulphide deposit at the base of the Sudbury Igneous Complex.
The properties are located adjacent to the past-producing Lockerby and Crean Hill Mines, approximately 20 kilometres (km) southwest of the City of Sudbury, Ontario and Vale's Clarabelle Mill. Haul roads and high-voltage electrical power infrastructure are present at the property boundary.
"With the addition of the Crean Hill 3 Property, we see a path for SPC Nickel to significantly grow the West Graham Deposit into a high-quality nickel-copper asset in one of the top nickel mining camps in the world,” Mourre continued. “Our recently completed drill program at West Graham has provided the technical team with a firm understanding of the types of mineralization we expect to define on the Crean Hill 3 Property and, more importantly, the controls on mineralization that we expect to guide us to higher-grade opportunities across the combined project."
West Graham property highlights:
- The West Graham Deposit occurs on SPC's 100% owned Lockerby East Property, which also hosts the past-producing Lockerby East Mine; and
- The unmined near-surface West Graham nickel-copper deposit contains over 47,000 tonnes of nickel and 34,000 tonnes of copper in indicated and inferred resources as defined in a technical report published by First Nickel Inc. in 2009 that supported an indicated mineral resource on the property totaling 8.55 Mt grading 0.45% nickel (Ni) and 0.31% copper, along with an inferred mineral resource of 2.0 Mt grading 0.38% Ni and 0.30% copper.
SPC said it recently completed an 18-hole, 5,200-metre (m) drill program which has expanded the extent of the high-grade mineralized zone within the West Graham Deposit while also adding confidence in the continuity of the resource. Results from this drilling campaign include 82.6m grading 0.68% nickel equivalent in hole WG-22-008.
Crean Hill 3 property highlights:
- SPC said historic drilling completed by Vale (formerly Inco) between 1958 and 1960 returned mineralized intersections of similar thickness and grade compared to the adjacent West Graham Deposit. Highlights include hole 146740 which returned 44.48m grading 0.60% nickel and 0.27% copper from 436.89m, including 2.29% nickel and 0.30% copper over 4.42m;
- The company noted that preliminary modelling of historic drill intersections suggests that the mineralized zone hosted on the Crean Hill 3 property extends from the SPC-Vale property boundary to the west for over 600m; and
- Mineralized surface outcrops, interpreted to represent the up-dip extension of the West Graham Deposit, outcrop along the exposed contact of the Sudbury Basin. Mineralized grab samples, with values of up to 1.56% nickel and 1.21% copper, were collected by the company on the Crean Hill 3 property.
Key terms of the agreement
SPC said it can earn a 100% interest in the Crean Hill 3 property from surface down to an elevation of 264.3 metres below mean sea level (a total of 550 vertical metres) under the following terms:
- Deliver to Vale a Feasibility Study for the project by the deadline of June 30, 2026;
- SPC shall have the right, at its sole discretion to extend the deadline to June 30, 2028, provided it has completed a NI 43-101 compliant Pre-Feasibility Study for the project by the Feasibility Study Deadline; and
- Pay Vale C$1 million in cash at the Feasibility Study deadline.
Rights and royalties extended to Vale:
Upon earning a 100% interest in the Crean Hill 3 Property, SPC said it will grant Vale certain rights and royalties over the combined project. These include:
- SPC grants Vale a 1% net smelter return (NSR) on the combined project;
- SPC grants Vale a net profits royalty (NPI) at a rate of 37%, on net profits generated from the project during each quarterly calculation period. The NPI shall only be payable provided that the net present value of all after-tax net profits earned in the calculation period exceed zero at an 8% discount rate, reflecting an 8% return on capital for SPC Nickel;
- Vale will retain a right of first refusal over the sale of the project or any part thereof by SPC Nickel;
- Vale will retain a right of first refusal for any ore produced from the project;
- Vale will retain a right of first refusal on any concentrates that are produced from ores derived from the project through a mill wholly owned or controlled by SPC Nickel or an affiliate; and
- If SPC Nickel or an affiliate makes an investment decision to construct or acquire a smelter, Vale will have the right to purchase metal concentrates equivalent to those produced from the ore derived from the project.
The Sudbury Mining Camp is the second largest nickel camp in the world, with over 130 years of continuous production. Since the discovery of the original ore deposits, over 11.1 million metric tons of nickel and 10.8 million metric tons of copper, together with by-products of cobalt, silver, gold and platinum group elements have been mined from the deposits.
SPC Nickel is a Canadian public corporation focused on exploring for nickel, copper and platinum group metals. The company has 100% owned exploration projects Lockerby East and Aer-Kidd in the historic Sudbury mining camp and holds an option to acquire 100% interest in the Janes project located approximately 50 km northeast of Sudbury. In addition, the company recently acquired over 45,000 hectares covering a considerable proportion of the highly prospective Muskox Intrusion in Nunavut.
Contact the author at stephen.gunnion@proactiveinvestors.com