Sherritt International's Q1 2024 earnings call, while seemingly a routine affair dominated by operational updates and market commentary, conceals a potential game-changer for the company and, perhaps, the entire North American nickel market. Tucked away in Leon Binedell's closing remarks (see below) lies a tantalizing glimpse of Sherritt's ambition to disrupt the Chinese dominance of battery material refining, a move that could ripple through the EV supply chain and propel Sherritt into the spotlight.

The initiative, dubbed the "Mixed Hydroxide Precipitate (MHP) midstream processing flowsheet," focuses on developing a new refining process for nickel and cobalt sulfate, specifically tailored for the EV battery market. While the initial announcement might seem modest, the underlying implications are profound. Currently, China reigns supreme in the refining of battery materials, leaving North American EV manufacturers heavily reliant on overseas suppliers. Sherritt's MHP flowsheet aims to break this dependence, offering a domestically sourced and processed alternative.

What makes Sherritt's project even more intriguing is its focus on environmental sustainability. The new flowsheet is designed to minimize the production of sodium sulfate effluent, a major environmental concern and permitting hurdle plaguing the industry. By tackling this challenge head-on, Sherritt is not only pursuing a sound business strategy but also aligning itself with the growing demand for responsible sourcing in the EV sector.

But the real question is: Can this MHP flowsheet be the catalyst for a nickel renaissance, shifting the balance of power in the nickel market? To answer that, we need to delve deeper into the data and explore some compelling hypotheses.

Sherritt's Track Record of Innovation

First, consider Sherritt's long-term commitment to technological innovation. Their recent success in developing and patenting the MHP flowsheet is just the latest example of a company that constantly seeks new ways to optimize processes and create value. Their expertise in hydrometallurgical processing, honed over decades, forms a strong foundation for this new venture.

The Shift Towards Regionalization

Second, examine the growing appetite for domestically sourced battery materials. The US Inflation Reduction Act (IRA) and similar regulations in the EU and UK demonstrate a clear shift towards regionalization, prioritizing materials and manufacturing within their borders. Sherritt's project fits perfectly into this narrative, offering a strategic alternative to Chinese-controlled supply chains.

The Potential Economic Impact

Third, analyze the potential economic impact. Currently, the majority of Class 1 nickel, the high-grade nickel used in EV batteries, is refined in China. Sherritt's flowsheet, if successfully commercialized, could open up a significant new revenue stream, allowing them to capitalize on the rapidly expanding EV market.

The Numbers Tell a Compelling Story

The numbers tell a compelling story as well. The global demand for nickel in EV batteries is projected to soar in the coming years. Benchmark Mineral Intelligence forecasts this demand to reach 1.5 million tonnes by 2035, a staggering increase from the current levels. Capturing even a fraction of this market could be transformative for Sherritt.

Sustainability as a Differentiator

Moreover, Sherritt's commitment to reducing sodium sulfate effluent aligns with the increasing emphasis on responsible sourcing in the EV sector. A 2023 report by McKinsey & Company highlights that EV buyers are increasingly concerned about the environmental and social impact of battery production. Sherritt's focus on sustainability could be a key differentiator, attracting customers who prioritize responsible sourcing.

Challenges and Opportunities

Of course, challenges remain. Site identification, securing partnerships, and navigating the complex regulatory landscape are all hurdles that Sherritt will need to overcome. The company's plan to collaborate with provincial and federal governments, secure customer and partner arrangements, and continue to refine the flowsheet and project definition are all positive steps in the right direction.

Conclusion

Sherritt International, often viewed as a legacy nickel producer, may be on the verge of a significant transformation. Their MHP midstream processing flowsheet holds the potential to disrupt the global nickel market, creating a more regionalized and sustainable EV supply chain. While the road ahead is not without its challenges, the potential rewards are immense. Investors and analysts alike should pay close attention to this development, as it could signal the start of a nickel renaissance, one where Sherritt plays a pivotal role.

"“Sherritt's technical expertise has always been a key differentiator for the Company. During the quarter, our team at Fort Saskatchewan developed and patented an MHP (mixed hydroxide precipitate) midstream processing flowsheet for the production of nickel and cobalt sulfate with a focus on the EV battery supply chain. The flowsheet also reduces sodium sulfate effluent, providing a solution for a key environmental challenge for the industry and also a permitting challenge.” - Leon Binedell, President and CEO, Sherritt International"

"Fun Fact: Nickel is a key component in stainless steel, which is used in everything from kitchen sinks to skyscrapers!"