Strategic Canadian nickel explorer FPX Nickel has closed a private placement financing with a new cornerstone strategic investor, the major global stainless steel producer Outokumpu Oyj.
Outokumpu is a major producer of stainless steel and its participation reflects the importance attached to the FPX Baptiste Nickel Project. Shares in FPX Nickel were up by +20% on the news.
FPX has issued 26,800,000 common shares to Outokumpu for gross proceeds of C$16,080,000. Upon completion of the private placement, Outokumpu now owns approximately 9.9% of FPX’s issued and outstanding common shares on a non-diluted basis.
“This strategic investment…underscores Canada’s critical role as a supplier of choice to allied industrial partners in Europe and the United States,” commented Martin Turenne, FPX’s President and CEO. “Outokumpu is a large and highly-regarded global operator, with a robust track record of producing the world’s most sustainable stainless steel, and is a significant nickel consumer.”
The deal testifies to Baptiste’s potential to produce a premium nickel product that can bypass the intermediate smelting stage, thus becoming a highly sought-after feedstock for the responsible production of low-carbon finished products in multiple consumer and industrial markets, including stainless steel.
Based on the 2020 preliminary economic assessment, the Baptiste project has the potential to produce up to 44,900 tonnes of nickel per annum over a projected mine life of 35 years.
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Low carbon footprint
“The carbon footprint of Outokumpu’s stainless steel is already the smallest in the world, but we want to further decarbonise our production,” commented Marc-Simon Schaar, Head of Raw Material Sourcing at Outokumpu. “This would also mean the reduction of the emissions of our supply chain, and to achieve this, we work together with our suppliers to strengthen the sustainability of the entire supply chain – including environmental, social and governance aspects.”
Schaar said that the nickel to be produced from FPX’s Baptiste deposit in Canada has the potential to have a very low carbon footprint. He added that once realised, the project could provide “an excellent low-emission source of nickel, and in a composition which suits our own production.”
FPX Nickel said it intends to use the net proceeds of the private placement primarily for development activities at the project, including the completion of a preliminary feasibility study for Baptiste, continuance of ongoing environmental baseline activities, and feasibility study readiness activities, as well as general corporate and administrative purposes.
Negotiation of offtake agreements and investor rights
FPX Nickel granted a right of first offer which will provide Outokumpu the right, so long as it continues to hold the private placement common shares, to negotiate, at market terms, one or more offtake agreements with FPX for up to an aggregate of 60,000 tonnes of nickel (7,500 tonnes of nickel per year over a period of eight years) from FPX’s Baptiste Nickel Project.
FPX and Outokumpu have also entered into an investor rights agreement that provides, among other things, Outokumpu with certain rights in the event it maintains minimum ownership thresholds in the company, including the right to participate in equity financings. In addition, Outokumpu has agreed to a two-year standstill with respect to the acquisition of additional securities in FPX, other than acquisitions pursuant to Outokumpu’s rights under the agreement.
