Link to Research Report

Highlights:

➢ A Preliminary Economic Assessment (PEA) on the Kenbridge nickel project in the
Kenora mining district, northwestern Ontario, returned attractive economics, with
an After Tax-NPV5% of $109M, and a high AT-IRR of 20%, using US$10/lb nickel.
TN is trading at just 20% of AT-NPV5%. For comparison, shares of Talon Metals
(TSX: TLO/MCAP: $311M), a comparable advanced-stage nickel junior, are trading
at 61% of AT-NPV7%.

➢ Unlike the historic PEA, which was based on an open-pit/underground operation,
the latest PEA was based on a smaller-scale underground operation, targeting the
project’s deeper/higher-grade resource. This scenario is more attractive as
higher-grade ore can be accessed in the initial years of operation, through an
existing shaft infrastructure on site. We believe very few nickel juniors in North
America have high-grades and low CAPEX/OPEX as TN does.

➢ 2021 drill campaign resulted in a 25% increase in contained nickel (146 Mlbs), and
an 18% increase in contained copper (78 Mlbs). Approximately 70% of the resource
estimate is classified as underground resources.

➢ We believe the PEA was conservative as it did not account for the remaining 30%
of open-pittable resources.

➢ Nickel grades of the underground resource increased 16% to 1.08%, and
copper grades increased 10% to 0.55%. We note that nickel grades of over 1% are
considered high.

➢ Management is planning to conduct a resource expansion drill program to test
the deposit at depth.

➢ Nickel prices are down 23% in the past two months. We are expecting prices to
be under pressure amid rising rates, and slower global GDP growth. In
addition, the nickel market is expected to move to a supply surplus this year. That
said, we are expecting long-term prices of US$8/lb or higher (current price:
US$9/lb) as most of the large undeveloped nickel projects cannot generate
attractive economics if prices fall below US$8/lb.

➢ Upcoming catalysts include a resource expansion drill program, and positive
sentiment towards juniors focused on EV metals. The discrepancy between TN and
Talon’s EV/AT-NPV indicates that the market has yet to realize TN’s potential.

SOURCE: Funadamental Research Corp.