Ethical, sustainable locally sourced battery metals in Europe is our top long term investment theme. Zero-Carbon Copper, Nickel and Cobalt exposure all within the same company.
$0.145
Opened: 21-Jan-2022
Shares Held at Open: 2,639,750
What does KNI do?
KNI holds a portfolio of battery metals exploration assets (copper, nickel, and cobalt) in Norway.
What is the macro theme?
Copper, nickel and cobalt are all metals that are required for electrification and decarbonisation.
Copper is used in EVs and EV chargers, while nickel and cobalt are used in EV batteries, notably the NCM (Nickel, Cobalt Manganese) EV batteries that should form the foundation of the European EV push.
Commodities that can be sourced in a low or zero carbon manner, should also be favoured by end users in the EV supply chain as Europe aims to meet its net-zero emission goals.
Our Big Bet for KNI
To develop a sustainable battery metals mine within European borders that is of strategic importance - and hence highly valuable as an acquisition target.
Why did we invest in KNI?
Ethical, sustainable locally sourced battery metals
Ethical, sustainable locally sourced battery metals in Europe is our top long term investment theme. Zero-Carbon Copper, Nickel and Cobalt exposure all within the same company.
Historically producing projects
Projects are not greenfield assets, targets put together together based off historically producing mines. We know the mineralisation is there with an extensive mining history that are still to be analysed with modern technology.
Impressive management team and board
KNI has the same team as behind Vulcan, with VUL remaining 25.85% shareholders in KNI. The team has the established relationships and access to potential off-takers, major investors, bankers, technology, and advisors.
Cap structure leveraged to growth
Low number of shares on issue (39 million), with VUL retaining one-quarter, meaning that the capital structure is leveraged to success. There are no options on issue to dilute shareholders positions.
What do we expect KNI to deliver?
Objective #1: Results from geophysical and geochemical surveys and analysis
Detailed evaluation of the geophysics & geochemical data-sets as well as soil/rock chip sampling assays as part of target generation works for expected drilling in 2022.
Historic drill-core logging & re-analysis of drilling data to also be incorporated in target generation works.
Objective #2: Drilling of highest priority drill targets in 2022
Target generation works expected to be completed in early-2022, with the highest priority targets to be drilled in the Norwegian summer months (mid-2022).
Objective #3: Assess and acquire new European battery metals projects
Investment thesis will be reviewed after the highest priority targets are drilled after the assays from drilling are received.
Objective #4: Identify Canadian lithium drill targets, be permitted to drill
We expect KNI to conduct preliminary exploration campaigns at its Canadian lithium projects over the coming months, and pending the results of this work, select the best targets and be fully permitted to drill by the end of 2023. [Added 9-Mar-2023]
What could go wrong?
Exploration risk
Although KNI is working with a historic mine there is potential for KNI’s drilling to show up results that disappoint - if this is the case or the drilling needs to go deeper the economics of the project could be affected
Market risk
While the commodities that KNI are targeting are at elevated prices, there is the possibility that the prices of these commodities falls, impacting the economics of the project and the ability to access financing
Funding risk
As of their September 2021 quarterly, KNI had ~$7M in cash which is sufficient funding for initial drilling. Subsequent drilling and development works will however depend on both good drilling results and commodity prices - should the drilling not go well or the commodity prices fall this would likely impact KNI’s ability to access funding for the project
What is our investment plan?
Our strategy with early stage explorers is to achieve free carry prior to the initial drilling results, which we expect in mid to late 2022. Because of KNI's European battery metals thematic, management team and connection to Vulcan we plan to hold ~60% of the initial position to see the entire story play out over at least 2 to 3 years.
Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 2,639,750 KNI shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by KNI to share our commentary on the progress of our investment in KNI over time.