Talon up 20% on nickel supply deal with Tesla
Talon Metals Corp. [TLO-TSX] has struck a deal to supply Tesla Motors Ltd. [TSLA-NASDAQ] with nickel concentrates produced from the Tamarack Project in central Minnesota.
The announcement sparked heavy trading in Talon shares, which jumped 20% or 12 cents to 72 cents on volume of almost 9.5 million.
Talon said the execution of the agreement, which was announced just prior to the close of trading on January 10, 2022, follows an extensive and detailed due diligence period performed by Tesla and lengthy negotiations between the parties.
“This agreement is the start of an innovative partnership between Tesla and Talon for the responsible production of battery materials directly from the mine to the battery cathode,” said Talon CEO Henri van Rooyen.
“The Talon team has taken an innovative approach to the discovery, development and production of battery metals, including to permanently store carbon as part of mine operations and the investigation of the novel extraction of battery materials,” said Drew Baglino, Senior Vice-President of Powertrain and Energy Engineering at Tesla.
Under the agreement, Tesla has committed to buy 75,000 tonnes (165 million pounds) of nickel in concentrate, representing a portion of the metals that are expected to be produced from the Tamarack Nickel Project. The deal gives Tesla the preferential right to negotiate the purchase of additional nickel concentrate over and above the initial 75,000 tonnes.
The term of the agreement is for six years or until 75,000 tonnes of nickel in concentrates has been produced and delivered to Tesla.
Talon has said a preliminary economic assessment (PEA) demonstrates that the Tamarack project can produce nickel sulphates for the electric vehicle market, nickel concentrates to be used for refined nickel powders also for the electric vehicle market, or nickel concentrates for the traditional stainless-steel market.
Talon currently holds a 51% interest in the Tamarack Project and has the right to increase its stake to 60%. The property consists of the Tamarack North Project and Tamarack South Project, covering 31,000 acres of private land and state leases.
Talon kicked off its first drill program as operator of the Tamarack nickel project in 2020 after taking over operatorship from Kennecott Exploration Co. (part of the Rio Tinto Plc [RIO-NYSE] group) in 2019.
To earn a 51% interest in the project Talon was required to spend US$10 million on exploration and development and pay US$11 million in cash and US$1.5 million worth of shares to Rio Tinto.
To increase its interest to 60%, the company must complete a feasibility study and pay Rio Tinto another US$10 million. As soon as Talon owns 60%, Rio Tinto must then fund its 40% stake or dilute. The mining major has no back-in rights.