Magna Mining's 92.4% Levack IRR rests on a C$8.6 million net outlay and a preliminary study

On October 7, Magna Mining (TSX: NICU) said its board had approved a restart of the Levack nickel-copper mine on the Sudbury Basin’s North Range and released a preliminary economic assessment prepared by AGP Mining Consultants. The headline after-tax internal rate of return was 92.4%. That figure only makes sense beside the net outlay behind it. Magna’s price deck and the inferred share of the mine plan sit in the same frame.

has not based its restart decision on a feasibility study of mineral reserves

The C$8.6 million that makes the IRR look tall

Magna puts initial capital, covering the stretch from January 1, 2027 until commercial production starts, at C$70.1 million, including C$12.6 million of contingency. Equipment-financing timing matters here: deferred equipment purchase payments fall in later years. Against that capital, Magna expects about C$55.9 million in operating cash flow before commercial production at base-case prices, plus about C$5.6 million in refundable tax credits under the Clean Technology Manufacturing Investment Tax Credit, still subject to eligibility and the company’s tax review. The full C$70.1 million still has to be funded. After those offsets, the net outlay at the end of ramp-up is C$8.6 million.

The Northern Miner reported that Magna held C$40 million in cash at the end of June, before Alpayana’s C$140 million investment for a 20% strategic stake in September. In that same Northern Miner piece, Desjardins analyst Bryce Adams said the company has the balance sheet to cover the initial capital outlay. Adams’s rating and target in that article are his, reported by The Northern Miner; they are not Magna’s PEA numbers.

Jason Jessup, Magna’s chief executive, said the mine plan prioritizes higher-grade copper-precious-metal footwall zones early, which generates pre-production revenue that supports the IRR, and that low capital intensity reflects capital already spent on the mine and its existing infrastructure. The PEA treats capital committed through year-end 2026 as sunk.

An IRR is the discount rate at which after-tax cash flows reach zero net present value. When early high-grade production throws off C$55.9 million before commercial production begins, the discount rate that zeroes the NPV rises sharply. The C$8.6 million net outlay is the effective base that IRR runs against. Payback is 0.6 years from January 1, 2028. After-tax NPV at a 7% discount rate is C$227.0 million. Sustaining capital of C$168.0 million runs from July 1, 2028 through the 7.3 years of commercial production in the plan.

Price deck: company case versus September 2026 averages

The base case uses US$5.10 a pound for copper, US$8.00 for nickel, US$3,600 an ounce for gold, and a Canadian dollar at C$1.385 per US dollar. Those are Magna’s chosen prices. An illustrative case built on September 2026 average commodity prices uses copper at US$6.55, nickel at US$7.50, gold at US$4,320, and the exchange rate at 1.370. That case shows after-tax NPV of C$313.6 million and an IRR of 115.8%.

The release does not break out how much each metal or the exchange rate moves the NPV between those two cases. At base-case prices, Levack revenue is 46.0% nickel and 34.8% copper, with precious metals covering most of the rest, so a move anywhere in that basket reaches the model.

In The Northern Miner’s report, Adams put the base-case after-tax NPV of C$227 million at less than half his prior estimate of C$497 million at comparable metal prices. He wrote that the Contact Zone plan looked stronger than he had modelled, and that excluding R2 left optionality outside the study. He retained a speculative buy rating and a C$5 price target, again as reported by The Northern Miner.

Magna also modelled the Productivity Mega Deduction, the federal proposal Finance Canada announced September 15 under which eligible capital costs could be fully expensed in the year an asset is put to use. Applied to the base case, Magna says it lifts after-tax NPV by C$5.1 million to C$232.1 million and the IRR to 99.2%. Finance Canada’s backgrounder describes the measure as a proposal with draft legislation attached. Magna keeps it out of the base case.

Inferred tonnes, stream opacity, and what the PEA does not claim

The mine plan covers 5.75 million short tons of diluted indicated and inferred material. Jonathan Cirelli, P.Geo., Senior Geologist of Orix Geoscience Inc., is the qualified person under NI 43-101 for geology, exploration, drilling and data verification at Levack for the mineral resource estimate behind that tonnage. Of the 5.75 million short tons in the mine plan, 2.1 million short tons are inferred. Magna states that inferred resources are too speculative geologically to carry the economic confidence required for a mineral reserve classification.

Average annual payable production over the commercial period is 36.8 million copper-equivalent pounds. All-in sustaining cost is US$3.71 per payable copper-equivalent pound. Payable metal revenue is reduced by stream costs before operating costs are calculated, and the cash-cost line then excludes those stream costs as well, so the AISC runs against net proceeds after the stream rather than gross payable metal. The study does not name the streaming counterparty or disclose the stream’s terms. AISC here adds estimated sustaining capital to cash costs and is Magna’s calculation; other producers may report the figure differently.

The PEA leaves out the R2 Footwall Zone, a copper-precious-metals discovery not yet in a resource estimate. Three underground drill rigs are testing R2. Magna’s release states that the board approved the restart without a feasibility study of mineral reserves, that the PEA is preliminary, and that there is no certainty it will be realized. The technical report supporting the assessment is due within 45 days of the October 7 release.

I read the 92.4% IRR as a statement about a small net cheque on a restart that still rests on preliminary economics and Magna’s price deck, with a material inferred share still inside the plan.