Analysts at Stifel GMP applauded Talon Metals Corp's move to put its proven exploration team to work in a “highly prospective land package” in the Upper Peninsula of the US state of Michigan.
Tamarack, Minnesota-based Talon has struck an option and earn-in agreement with UPX Minerals Inc, a wholly owned subsidiary of Sweetwater Royalties, to acquire up to an 80% ownership interest in the mineral rights over a 400,000-acre land package in Michigan.
The historic parcel of land was originally assembled by Henry Ford and owned for 70 years by the Ford Motor Company (NYSE:F).
The analysts, who have a “Buy” rating on Talon, described the push into Michigan as “incrementally positive.”
“The property is 2.8 kilometres (km) from the high grade, currently operational Eagle nickel mine, but also comes with a wealth of exploration data and is on private land, highlighting the exploration potential,” wrote the analysts at Stifel.
Stifel noted that the deal comes with historical geophysical data and access to drill core containing multiple high-grade nickel intercepts up to 7.4%, which with Talon's experienced geological team, could “lead to growth in resources.”
“While the feasibility study, due 2023, remains the most significant near-term catalyst, we continue to look for encouraging results from both infill and expansion drilling consistent to our thesis that exploration could define a much larger resource than envisioned in the 2021 preliminary economic assessment (PEA),” added the analysts.
Terms can be met
In exchange for the option agreement with UPX to acquire up to an 80% ownership stake in the Michigan nickel properties, Talon has agreed to a minimum spend of up to US$5 million or drilling at least 7,500 meters (m). Talon also has five years until August 2027 to complete the minimum requirements and to earn a 51% undivided interest in the properties on the completion of 25,000m of drilling.
In addition, Talon can earn an additional 29% interest on delivering a feasibility study within eight years of determining a mineral resource for the property.
“In our view, the earn-in commitments are not onerous and can easily be met within the allotted timeframe with Talon's sizable, inhouse and experienced exploration team,” wrote the analysts.
Stifel said the push into Michigan underpins Talon's vision of developing a US domestic supply chain for electric vehicle (EV) batteries.
“With the acquisition of the Michigan property, we view Talon as a preeminent, high-grade nickel exploration and development company in North America, well positioned to benefit from nickel's status as a critical mineral,” concluded the analysts.
Separately, Talon owns 51% interest in the Tamarack nickel-copper-cobalt project in Minnesota. On completion of the feasibility study and a $10 million payment to Rio Tinto, Talon's stake in the project will jump to 60%.
Stifel has a C$0.90 price target on Talon's shares, which are currently trading around C$0.58 in Toronto.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive