Samsung SDI Invests in Canada Nickel, Ignoring Short-Term Market Oversupply

South Korean battery manufacturer Samsung SDI (KRX: 006400) announced a $18.5 million investment in Canada Nickel Company CNC, marking the latest investment in the emerging Canadian mining company.

The funds will be used to support Canada Nickel’s Crawford nickel sulphide project in the Timmins-Cochrane mining camp of Ontario.

"As we advance the Crawford nickel sulphide project, it is critical to form long-term partnerships with companies that truly understand how crucial this production is for electric vehicle supply chains across North America and Europe," Canada Nickel CEO Mark Selby said in a news release.

According to the agreement, Samsung will purchase Canada Nickel’s common shares at C$1.57 per share. This gives the battery maker an approximately 8.7% stake in the company upon closing.

Samsung secured the right to purchase a 10% equity interest in the Crawford project for $100.5 million, exercisable upon a final construction decision. This agreement allows Samsung to participate in 10% of the nickel-cobalt production from the Crawford project over its life and an additional 20% of production for 15 years.

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The Crawford project currently hosts the world’s second-largest nickel resource, estimated at 2.46 billion tons at 0.24% nickel. An October feasibility study highlighted an after-tax net present value of $2.6 billion and an internal rate of return at 18.3%. The proposed operation includes two open pits with an on-site mill, with a total capital cost estimated at $3.5 billion.

Samsung’s investment follows other major contributions to Canada Nickel, emphasizing the growing interest in the company’s potential. Last week, Canada’s largest gold producer, Agnico Eagle Mines AEM invested C$23.1 million for a 12% stake in Canada Nickel. Before that, British mining giant Anglo American AAL also made a substantial investment in Canada Nickel, reflecting the industry’s confidence in the Crawford project.

These investments come at a turbulent period for nickel, which ended 2023 as the worst performer among the metals — dropping 45% in value on the London Metal Exchange.

Looking forward, commodity analysts aren't expecting an improvement. South East Asia Iron and Steel Institute reported that BMI research revised its 2024 forecast from $20,600/t to $20,000/t, citing a persistent supply glut, weak demand in mainland China and limited growth prospects.

BMI's research aligns with an earlier ING report about growing supply from Indonesia; however, the firm anticipates a shift to a deficit by 2028 due to rising demand from the electric vehicle battery industry.

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