- Tamarack project boasts over 18 kilometres of strike length
- Rio Tinto is active joint venture partner
- Talon bullish on nickel price
What Talon Metals Corp does:
Talon Metals Corp is advancing the giant Tamarack nickel project in Minnesota, USA, to potentially supply the rapidly growing electric vehicle (EV) battery materials market.
Tamarack is one of the only undeveloped nickel projects in the US and could be one of the only options for nickel if EV raw materials are going to be sourced domestically.
The 124 square kilometre asset comprises the Tamarack North project and the Tamarack South project. Talon is in a joint venture there with mining giant Rio Tinto PLC (LSE:RIO), where the smaller firm can earn up to a 60% stake.
The Tamarack project boasts over 18 kilometres of strike length, with numerous high-grade intercepts outside the current resource area.
Talon is focused on expanding its current high-grade nickel mineralization resource prepared in accordance with NI 43-101; identifying additional high-grade nickel mineralization; and developing a process to potentially produce nickel sulphates responsibly for batteries for the electric vehicles industry.
How is it doing:
Talon Metals has been continuing its success with the drill bit at Tamarack from the start in 2021.
Following a succession of positive drill results in the first five months of the year, the company announced on June 1 that it intersected nickel-copper mineralization in over 60 holes outside the current resource area at Tamarack.
In a statement, the company told shareholders that drilling is progressing “extremely well” at the nickel project, with consistent intersections at shallow depths in the CGO East and CGO Bend areas further afield from Tamarack’s resource.
The new drill holes show that the CGO East area has continuous nickel-copper mineralization over a strike length of more than 500 metres (m), with mineralization of 50m to 85m in width.
A week later, on June 9, Talon revealed the results from seven new drill holes that all intersected nickel-copper mineralization at shallow depths. Highlights of the results include 7.31m of mixed massive nickel-copper mineralization in one hole and 5.44m in another, as well as a third hole that intercepted 9.81m.
Talon told investors that the results “significantly expand the area of high-volume ‘pooled’ massive sulphides" first indicated in the 13.88m intercept.
Two of the new drill holes are 26m and 32m step-outs to the west and southwest of the 13.88m intersection, Talon’s vice president of geology Etienne Dinel said.
The company followed up with the release of a new round of drill assays on June 15 that confirmed the thick nickel-copper mineralization at Tamarack extended beyond the current resource area.
Two new holes that were drilled as 49m and 25m step-outs northeast from the northern portion of the resource area intersected 108.81m and 87.35m of nickel-copper mineralization, it reported.
Talon told shareholders that one of its “key catalysts for value creation” in 2021 is growing Tamarack’s resource to the north in an attempt to shorten the timeline to production.
In a further update on July 6, Talon said the latest assay results are likely to positively impact the overall economics of the project even further.
The company said it is continuing to drill out the new pool of massive sulphides aggressively, with the goal of growing it in a meaningful way. It reiterated that it does not think the pooling will be limited to the one area as it believes there is potential for more high-grade nickel-copper mineralization to come along the 18 kilometre Tamarack Intrusive Complex.
As well as making good progress with drilling, on July 29 Talon announced a ground-breaking new workforce development partnership to advance the project.
As part of the agreement, the USW steelworkers union will work collaboratively with Talon management to plan for the potential production and maintenance workforce required at the Tamarack Nickel Project and develop a strategic plan for future recruitment. It is envisaged that the proposed mine at the Tamarack Nickel Project will require a mix of experienced underground miners and "new age" miners with skills in automation, AI, and computer modeling.
That followed news a week earlier that the company has added three experienced former Rio Tinto members to the Talon team. The three additions, who are well-versed on the Minnesota project, will take on senior roles at Talon as the company continues to execute its goals.
On the financing front, on March 18, Talon announced the closing of its previously announced "bought deal" public offering of units for aggregate gross proceeds of $34.5 million.
The company said the offering was for 57.5 million units at a price of $0.60 each, which includes the issuance of 7.5 million units under the full exercise of the over-allotment option by the underwriters.
Talon said it intends to use the net proceeds from the offering for advancing work related to its planned exploration and development program at the Tamarack North Project, and for general working capital purposes, as set out in the Prospectus.
Inflection points:
- Further drilling results from Tamarack
- More details on processing optimization work
- Nickel price moves
What the broker says:
In a note published on August 2, analysts at Roth Capital Partners maintained their Buy rating on Talon with a $1 per share price target.
The analysts said they remain confident in the thesis for Talon amid recent newsflow, noting that announcements by electric car market Tesla and global resources group BHP supported the case for nickel demand in North America.
In a July conference call, Tesla CEO Elon Musk commented informally on the outlook for various battery chemistries and emphasized that lithium iron phosphate (LiFePO) holds the potential to take two-thirds of the market and nickel-based chemistries could take one-third. While this commentary might suggest a less bullish outlook for nickel, the analysts said it's important to point out that one-third of the battery market implies significant demand for nickel. Furthermore, they said Talon’s main nickel powder scenario involves capturing iron by-products which can then be sold as battery precursor material for LiFePO applications.
Also in July, BHP made an all-cash offer for Noront Resources Ltd (TSX-V:NOT), which is developing the Eagle’s Nest nickel project in Northwest Ontario. The Roth analysts believe that leaves Tamarack as the last remaining high-grade nickel project in North America, putting pressure on Rio Tinto to determine its nickel strategy, into which Tamarack seems to fit well.
They expect Talon to eventually reach 60% ownership of the Tamarack project in partnership with Rio Tinto. Important catalysts include a pre-feasibility study incorporating a material increase in resources of about 40% and joint-venture/off-take partnership announcements.
"We expect the potential for an offtake agreement for Tamarack to improve if Rio decides to increase its ownership stake in Talon above 40%," the Roth analysts said. "We value the company based on a cash flow NPV (net present value) analysis and while we evaluate a range of commodity price scenarios, the valuation is supported by an NPV in excess of the current share price using a base case price forecast of $8 per pound (lb) nickel and $3/lb copper."
The analysts said the $1 per share valuation is based on the expectation that Talon will successfully add to the Tamarack resource in the coming year in a way that is accretive to published NPVs. Impediments to their price target include, but are not limited to: significant competition from well-financed commodity producers in competing regions, operational risks associated with mining operations, unexpected capital raises, environmental regulation of mining in various jurisdictions, commodity price risk, competing battery chemistries and substitutes for nickel in various end-markets.
What the boss says:
In the company's July 6 update, Brian Goldner, head of exploration for Talon said: "It is now clear that the new 'pool' of massive sulphides identified within the CGO West area is high-grade,”
"The fact that the mineralization sits shallow suggests that we will be able to bring this into the mine plan early on, which will likely positively impact the overall economics of the Tamarack Nickel Project even further," he added.
Contact the author at stephen.gunnion@proactiveinvestors.com
