First Atlantic Nickel Secures C$3 Million of Non-Dilutive Funding, Phase II Drilling Imminent
I had the opportunity to receive an update from First Atlantic Nickel CEO Adrian Smith
This morning, First Atlantic Nickel (TSX-V:FAN, OTC:FANCF) announced that it has secured a C$3M dollar investment through the issuance of a non-dilutive unsecured debenture. I spoke with First Atlantic Nickel CEO Adrian Smith to get a full update on the company’s progress, the importance of this morning’s news, and what’s next for FAN.
Goldfinger
Good morning, Adrian. It’s been a while since we sat down for an interview, but First Atlantic has some big news out today. Please tell us about the significance of this morning’s funding news.
Adrian Smith (CEO)
Rob, thanks for having me back here. Yeah, it's definitely been a few minutes. We've been very busy since we last chatted. We've gone through a significant phase of exploration and discoveries on our First Atlantic Nickel project. The Atlantic Nickel project itself is a massive project, so it took some time to do exploration down the 30-kilometer-long trend. But we've fully completed our first phase, and we're moving into our second phase now.
Goldfinger
So phase one is completed. I think it was done at the end of last year, probably right before the Christmas break. I did notice that you got your phase two permits. So does that mean that you guys are ready to get right back out there?
Adrian Smith (CEO)
We are already working in the field and fully underway. We have a full crew building new infrastructure, including a road into the most significant discovery area at the south end of the 30-kilometer trend, in the area we're calling the RPM zone. We identified visual nickel-alloy in the drill core from the first phase program with significant visual nickel alloy mineralization spread throughout the entire hole. The initial visuals were significant, including confirmation in the drill core [using XRF] indicating the presence of nickel. Assays are pending.
We plan to release assays soon. We're confident with what we've seen and the methods we have to identify it, even including microscope analysis identifying the nickel minerals, to enable us to trigger additional funding and advance into a full phase two that is now beginning on the project.
Goldfinger
Yeah, I definitely do want to delve a bit deeper into the RPM zone and the phase two drill program. But first, a big announcement out this morning, big funding announcement. So tell us about that.
Adrian Smith (CEO)
Yeah, it's amazing to be in a position where larger partners, strategic investors and partners are willing to back and put their money behind the company in a way that is strictly designed to benefit the company, and is not meant to be an aggressive or dilutive funding.
So it's a very unique way that we're receiving capital to advance our project that is designed to benefit the company and give the company the ability to go and fund exploration in the field and advance the project without any kind of hindrance. There's no payments or there's no shares issued. So there's no dilution. There's no payback for five years. And there's a very unique debt funding debenture where everything is pushed off. And the idea is that in five years, the company is going to be in a very different position where we anticipate that we're going to have a significant resource and valuation that will allow us to address the loan at that time.
Goldfinger
From a shareholder standpoint, that sounds like great news. What can you tell us about this partner? I'm assuming they're corporate, but I really don't know. Why are they interested in FAN and awaruite? What caught their eye?
Adrian Smith (CEO)
They are a large corporate partner with a technical side that understands the uniqueness of the mineral awaruite and the ability to bypass and totally avoid things like smelting. They see the future of nickel mining at a large scale, in a mining friendly location, with long-term sustainable operations and the cost efficiencies from the uniqueness of this highly magnetic nickel alloy called awaruite.
The ability to magnetically separate, process, and concentrate awaruite on-site to a 60% nickel concentrate is something they understand. They came to the table willing to help and advance this because they believe in the project and the mineralization style, and they are putting their money where their mouth is.
First Atlantic is one of a few companies doing this, and we're in an excellent location, a top mining-friendly jurisdiction. One of the things they reviewed was the ability to push these projects forward. Having permits and the ability to go through the permitting process in a streamlined fashion, coupled with other companies in the area advancing into large-scale operations, was very attractive.
There's a project just south of us that has gone into large-scale mining, is fully permitted, and commercial mining is underway. Seeing that in the region and having the ability to react quickly and turn around new permits and start additional phases of drilling in weeks and months compared to years, gives them the confidence to step behind this project and provide solid backing, allowing us to do that work. We are very happy to have a significant partner like this willing to provide the capital needed to succeed.
Goldfinger
It's a non-dilutive source of funding. There's a five-year term to the loan is what I just heard you say. The loan amount, is that C$3 million?
Adrian Smith (CEO)
Yeah, this initial portion of the loan is C$3 million up front. Cash in hand to be able to go and immediately begin our fully funded phase two drilling program, to expand out and try and determine what the total footprint size of the RPM zone is, and expand that up to the north, covering the Chrome Pond zone, and continue north.
Goldfinger
I'm just curious. I want to probe this a little further. Were they more interested in the magnetic separation and just being able to get to a shippable concentrate much more easily and at a much lower cost? Was that a big attractive point for them to make the investment? Or was it more on the project level that they really like what you guys were doing and the updates from Phase I?
Adrian Smith (CEO)
It's twofold. They understand the economics of mineralization and the potential. They see the potential with the efficiencies and the ability to concentrate and avoid smelting completely, and also considering the issue of where the material needs to go, or not go, once you produce it on site.
Having the ability to concentrate it and not smelt it allows shipping directly to the end user, bypassing the smelting or secondary processing, whether that's high-pressure acid leaching, roasting, or smelting. That is very attractive, but they also believe this project has significant scale potential. When we initially put this project together, we understood to get large partners involved, that it had to be something of merit and something of scale, it had to have size.
When we acquired over 50 kilometers of ultramafic, a large-scale ophiolite, it wasn't small. This was the intent from the beginning to ensure that this could be attractive. Everything within the project that we've been testing is of scale, which they understand and see. That attracts them: the project size, location, and the potential to have multiple zones and deposits within this trend.
Goldfinger
In our first conversation, we discussed some of those advantages the project has in terms of its location right near the Atlantic Ocean, near port access, and obviously you can easily get to the battery manufacturing plants. You know, along the Atlantic Coast pretty easily. And then obviously the fact that you don't need a smelter to process this form of nickel is an enormous advantage. I don’t think you can overstate how big of an advantage that is. But without an ore body, without a deposit that could be profitably mined, it's all just sort of talking points. So let's dig into the phase one program and what the plans are for phase two. So what really stood out for you in the phase one program and where does that lead you to in terms of your planning for phase two?
Adrian Smith (CEO)
This past year has been enlightening. We've gone from a large nickel target over 30 kilometers long, having essentially nothing well-defined with some potential targets based on all the historic work and initial field work, to a discovery. The involvement of Dr. Ron Britten was instrumental to our success. He brought his exploration model that was successful in discovering a 10-billion-pound nickel deposit in British Columbia that's being held back by some political issues.
Dr. Ron Britten quickly trained our workers and geologists in the field and brought them up to speed. We already had an awaruite expert on our team, project geologist Mike Pillar. Together, they identified the most promising zones in the field and discovered some initial float samples in the middle of last summer, quickly recognizing the potential from what they had seen.
Dr. Britten gave the direction, saying this material I found here is what you want. This is what we're looking for. This is what's going to make the cut. Go find more of this. We sent our team back out there with instructions from Ron and with the help of Mike Pillar. They built a picture line by line and area by area, identifying several large areas. Because of that, we were able to drill immediately following that discovery on the ground in the field. We quickly recognized that we were finding the same material in drilling, and not just over four meters, over hundreds of meters.
It's quite a significant area, and we're just tapping into it now. The Phase II program is designed to expand beyond the Phase I and outline the potential of at least one of these large areas. We believe there is potential to have hundreds of millions to billions of tonnes that we can identify in a fairly short period. This can happen with a relatively limited amount of drilling due to the large-scale nature and continuous style of mineralization.
We're talking hundreds of meters step-out on every single hole. No individual hole is designed to be closer than a few hundred meters together. Because of that, we can continuously step out and build significant tonnages and identify large areas, tying them together with relative certainty because it's a continuous mineralization style. That's what we're working towards now. We are excited about that, and our partner is pushing for us to do that. Based on what we've seen so far, we are confident that we can do that this year.
Goldfinger
So the one thing that really stands out when somebody first takes a look at this project is that 30,000 meter magnetic high trend. It's an enormous geophysical anomaly that just sticks out. Obviously, that's showing a lot of iron and nickel, maybe some chrome and maybe a few other metals as well. But it's a very prominent mag high. It stretches over a very large strike extent.
Right now, based upon what I understand from phase one, you had good results at the RPM Zone, or at least you think you had good results at the RPM Zone. You like what you see. You drilled one hole at Super Gulp, but it looks like the RPM is better. And then Chrome Pond, which is a little bit to the north of RPM, seems to be a priority zone for phase two as well. So tell us about where you're going to focus the drilling in phase two and how large of an area is that?
Adrian Smith (CEO)
This entire project is on a scale that's hard to envision when you're looking at a map on a screen or even printing out a large map. It doesn't do it justice. I live outside of the city and drive about 30 kilometers into the city. It takes me about an hour. Try to imagine how far 30 kilometers is. It's an immense amount of area to cover with any kind of exploration or work.
It's difficult to give each area the amount of attention that it needs, because each area is so immense, we have to choose which area should be priority. Initially, this whole project began with Atlantic Lake, which is at the very north end of the project, and progressed all the way down through the super gulp, the big gulp areas, down through the Pipestone and the Chrome Pond and into the RPM Zone that at this moment is the priority, because it's the lowest hanging fruit, essentially, and it's quite delicious-looking fruit. So we want to go and take some bites of that. It's based on what's visually there and what's obviously there at the surface and what we are finding in initial drilling.
That doesn't detract from any of the other areas. It's just the ability, having such a large project to try and tackle. We have the ability to grab this low-hanging fruit, build it up, without even going into detail, just build up what the potential footprint is there, and then show that, hey, this is possible over the super gulp or big gulp areas and back even at the Atlantic Lake area. But as far as we're concerned, based on visuals, the RPM Zone is showing us exactly what we want to see. This is the typical style of mineralization for awaruite nickel-alloy to be consistent on a large scale and magnetically separated from the hostrock to produce a concentrate without needing smelting. So this is our focus now.
We believe that this area isn't just confined to the RPM, it could essentially run the entire length of the project, the 30 kilometers, but we're focusing on areas that we can build into a mineable footprint and that have consistently larger grain sizes that are going to give us better recoveries. So yeah, it's definitely not a small area. It's large areas, and potentially all these targets are joined, but we do have to segregate them and try to outline individual areas that are going to be most economic for potential mining, and that's our initial focus.
Goldfinger
Okay, so with RPM and Chrome Pond, are those two zones the focus for phase two?
Adrian Smith (CEO)
Currently, we're building a new road access into the south area. Previously, the road access came in from the north, and it didn't give us access all the way down. 30 kilometers is a long way, and we saw an opportunity based on the results from phase one, including the visuals and XRF confirmation that we got from the cores and the microscope. Assays are pending, and we do plan to have those out fairly soon, but we believe this is the area that is going to put this project on the map.
Goldfinger
You made a property acquisition last month. What was the purpose of that? Is that just tying up more ground because you like what you see in this area?
Adrian Smith (CEO)
One of my mentors in the industry told me that you need room to turn your truck around, and what we're talking about in this large scale kind of operation where the potential to have 100,000 plus tonnes a day, similar to copper porphyry mining, but with nickel style, where it's large scale and there's going to be large trucks and infrastructure. Because of this you're going to need the ground to build that and to basically turn your truck around. So that was really the intent.
We think that the potential for the mineralization does continue to the south from the RPM, but we don't necessarily need it for that. Really, it's for infrastructure, securing the ground, filling in out land position and making sure that we have the entire area tied up so that we didn't have to deal with this in the future once a major company or whoever, whether it's us or another entity is trying to develop this into a producing mine or operation, we wouldn't have to deal with it at that point. We also wanted to give ourselves the ability to step across that southern line that previously existed. Now we just don't have to worry about it. We have fully purchased it, so it's outright ours. There's no retained payments or anything on it. So we're just going to carry forward and be able to operate how we see fit in that area.
Goldfinger
Okay, I want to get in a little more granular here. No pun intended. Grain sizes. Give us some education about the grain sizes of the awaruite in holes 2 and 3 at RPM. There seems to be a trend to the east of the grain sizes getting bigger. Seems that you guys like that. Can you explain that to us? What does it indicate to you and how important is that for the economics of the deposit?
Adrian Smith (CEO)
I'm learning a lot from Dr. Ron Britten, an expert in awaruite mineralization who understands the exact factors of why grain sizes grow and develop and the chemistries that are involved. The more that you dive into it, the more complicated it becomes.
It's not something as simple as just having it or not having it, but generally you want that grain size to be larger than 10 microns, ideally 20 microns and bigger. I think the average on the comparable project is around 50 microns. The target is to get 20 microns or better. What we've seen is we're getting into areas where there are hundreds of microns to thousands of microns. Obviously, we're not showing every single grain size that we're analyzing. We're trying to show what's representative and what we're seeing in the core. What we're seeing is that it's a sufficient grain size to be able to use that magnetic separation.
Essentially, when you're crushing and grinding the material down and passing it through a magnetic separator, you need that grain to be large enough to hold a magnetic attraction to pull it out of the material. When you get too small, that grain isn't susceptible to the magnetic field that you're pulling or passing the material through. The grain sizes are important, but what we're seeing is that the material, especially down in the RPM and the Chrome Pond areas, is looking good. That's really why we want to focus there because the grain sizes are so good, and they are large there.
Goldfinger
Based upon the drilling in phase one, it seems that the trend of the mineralization is trending to the east. Is that correct?
Adrian Smith (CEO)
This is a large-scale geological formation called an ophiolite. It's basically a chunk of the Earth's crust, the ocean crust, and the bottom of the ocean crust is closest to the mantle. The mantle is enriched in nickel and iron. When this thing got uplifted and rotated, it is now a slice through that crust. When we're furthest to the east, we're in material that was basically part of the mantle and is most highly enriched in nickel and iron because of that.
As we progress to the west, we go through a whole section of the Earth's crust all the way up even into sediments where there's another company called Benton that is drilling within those sediments looking for VMS-style mineralization. You can actually walk when you go east-west through a whole section of the Earth's crust over several kilometers. Within that lower portion of the crust, this is at least a kilometer or more wide where we have this highly elevated nickel rock that has been altered through serpentinization and essentially in a unique setting with serpentinization where there's a lack of sulfur. It takes the nickel out of the primary minerals and it basically goes into an alloy because there's nowhere else for it to go. So there's a lot going on and there's a lot of reasons why we're exploring and working where we are.
To answer your question, the east is good, but it's not just a small area. It's quite a wide area. We're going to be going east, we're going to be going west, we're going to be going north, we're going to be going south. The scale of this deposit style is quite significant. It leaves us with a lot of work to do, but it also leaves us with a lot of potential for where we can go and where we can build on the tonnages that we want.
Goldfinger
What has really stood out to me about FAN ever since I first learned about the company was just the scale. The potential scale here is enormous. The scale doesn't really get much bigger in the mining industry. Location is tier one with relatively easy access to the East Coast of the US and all the battery manufacturing infrastructure. Now you need to prove the metal is in the ground. Then of course metallurgy is key. And I know that's all coming. I do want to talk about some details of the phase two drill program. What's going to be different in phase two as opposed to phase one? I see you're going to use a new rig, probably going to be a bigger program, new core shack. Tell us all about it.
Adrian Smith (CEO)
This is such a large-scale project and where we based out of in the northern portion of the project is insufficient to base out of for Phase II. So we're already constructing a new camp in the south end of the project.
Again, it's located on the project, it's going to be totally ground accessible from where we're building the road into the RPM area that we didn't previously have, because we didn't previously know it was there. This is truly a new discovery and we're taking full advantage of that. We’re also taking advantage of the permitting process in Newfoundland which allows us to turn these things around quickly based on the recent discovery.
We just made the RPM discovery in Q4 of 2024, and we're already permitted and working on getting ready for a Phase II drilling program in Q1 2025. This is unheard of in most areas, so yeah, that's fully underway, we're planning on drilling deeper, taking lessons learned from phase one. That includes the difficulties caused by difficult ground conditions, one of the realizations that we had is that the ground is very heavily broken, it's very fractured and it makes for very difficult drilling. The constant pressure on the drill rods as you go down was leading to a lot of operational time and reaming and cleaning out the holes, so essentially we're learning from that and we're going to take a different approach.
We’re going to use a bigger rig and we’re going up-size to HQ drill core, which is a larger diameter drill core and, drill it deeper and then size down and go even deeper with the NQ size drill rods in the inside of HQ. That will solve a lot of issues for us, it'll allow the hole to be a lot more stable when we're drilling deeper. Based on what we're modeling, we want to be able to, take advantage of the large scale style of mineralization and put a conceptual pit around it, even before we built the resource, so we can understand the geometry that will fit into a pit and how we can maximize every exploration dollar spent drilling to give us the largest number at the end of the day when we want to go into the resource stage.
Goldfinger
So you start with a large diameter drill core and then you get a little smaller as the hole gets deeper, is that correct?
Adrian Smith (CEO)
It’s standard in the exploration industry is to drill NQ size core, the diameter of the core is a couple inches, HQ core is just slightly bigger than that and that is used for deeper drilling, it's common to for the holes that are going a thousand meters down to be HQ and maybe size down once they hit three or four hundred meters and then go to NQ.
This is a standard operational tactic in the exploration industry, but it wasn't being used here because we didn't know what we had. Now we're seeing that this mineralization is not changing at depth, if anything it’s more consistent and even better at depth, so we want to be able to capture that. We want to drill five or six hundred meters tops, we don't want to drill a kilometer down for the reason that we 're not going to build a pit that's a kilometer deep.
If you take a large porphyry system that's a kilometer deep, you flip it on its side and you double it or triple it, that's what we're looking at. We’re looking at the same kind of dimensions but even larger scale and spread out closer to surface. So the deepest holes are going to be modeled and designed based on a realistic total depth. We're still looking 500+ meters down where you get to the limits of open pit kind of economics allow you to go.
Goldfinger
Right, that makes perfect sense, so you probably drill most of the holes 300 to 400 meters but you might have a couple that go deeper, if it's looking like the mineralization is getting stronger at depth.
Final question Adrian, you have over C$3 million in the treasury after this cash infusion, what kind of news flow can investors expect from the company over the next several weeks and when does the phase two drill program start?
Adrian Smith (CEO)
News has been a little slow but we've been busy dealing with the strategic partner and the legal ramifications and issues of getting it through, including the restrictions with the exchange. This is something that's relatively unheard of for most people in this industry, getting a strategic investment that has no payback for 5 years, no bonuses, no extra anything [no bonus shares or warrants] being issued, there's no commissions. It's just money in and if things go well then in five years we can address how to pay it back. We have a significant runway that they've given us with very favorable terms for the company to be able to go and have the flexibility to start and execute on phase two and beyond.
Now that this is out of the way, we're going to get back to the usual kind of news flow that we've shown that we're capable of providing. We have several things that will be coming in the coming weeks, several updates including everything to wrap up phase one and the initiation of phase two. Phase II work has already started, we've been busy, we haven't been sitting around. It’s been full on and we're excited to see where this is going to go. We’re excited and grateful to have very friendly capital coming in that's non-dilutive and it's hopefully going to show investors that we're working to make the company better and increase the shareholder value of the company. First Atlantic Nickel is looking forward to being recognized as a serious player in the nickel space.
Goldfinger
That's great, it sounds like things are starting to really pick up in terms of the news flow and the activity at the project. Thank you so much for your time, Adrian, I appreciate it.
Disclosure: Author owns FAN.V shares at the time of publishing this interview. Goldfinger Capital has been compensated for production, editing, and dissemination of this interview.
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