Tesla signs $1.5 billion deal for nickel from Talon Metals’ Minnesota project

Nickel sulphate. (Image by Benjah-bmm27, Wikimedia Commons).

Tesla on Monday said it has signed its first US supply deal for nickel, tapping Talon Metals Corp’s Tamarack mine project in Minnesota.

Under the terms of the deal, which Talon (TSX:TLO) said came after “extensive and detailed” due diligence and “lengthy negotiations,” Tesla will buy 75,000 tonnes (165 million pounds) of nickel over six years, with an option to increase the delivered tonnage.

Based on the ruling nickel price the deal is nominally worth more than $1.5 billion. Any iron and cobalt by-products at the proposed mine are also part of the deal. Tamarack is currently the only high-grade development-stage nickel project in the US and is a joint venture between Talon and Rio Tinto.

“The Talon team has taken an innovative approach to the discovery, development and production of battery materials, including to permanently store carbon as part of mine operations and the investigation of the novel extraction of battery materials,” said Drew Baglino, SVP of Powertrain and Energy Engineering at Tesla.

In July last year Tesla signed nickel supply deals with BHP in Australia for an estimated 18,000 tonnes of nickel annually and New Caledonia’s Prony Resources for about 42,000 tonnes of the metal.

“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. Talon is committed to meeting the highest standards of responsible production that is fully traceable and that has the lowest embedded CO2 footprint in the industry,” said Henri van Rooyen, CEO of Talon.

“Rio Tinto is working to support Talon to bring the Tamarack mine into production, as we strengthen our battery materials portfolio. We look forward to seeing it supply Tesla with nickel that is essential for the production of their electric vehicles,” said Rio Tinto Minerals Chief Executive Sinead Kaufman.

Talon needs to start commercial production at Tamarack by the end of 2025, which may be extended by the agreement of the parties for up to 12 months “following which Tesla has a right to terminate the agreement and Talon may elect to sell to other parties.”

Talon, for its part, undertakes to earn a 60% interest in Tamarack, a joint venture with Rio Tinto. Talon already owns 51% with an option to add another 9%. To earn the maximum interest, it must make staged payments totalling $22.5 million in cash and shares to Rio Tinto, spend $10 million on exploration and development, and complete a feasibility study on the project.

The Tamarack project, located 210 km north of Minneapolis and 89 km west of Duluth, is comprised of the Tamarack North and Tamarack South projects, with approximately 31,000 acres of private land and state leases.

The announcement came the same day world’s largest miner BHP announced a preliminary $50 million investment in Tanzania’s Kabanga Nickel.

Shares in Talon trended lower on the Toronto Stock Exchange on Monday ahead of the announcement and subsequent halt in trading. The company has a market capitalization of C$418 million ($329m).