Tesla said on Monday that it had signed the first US nickel supply agreement to take advantage of Talon Metals Corp's Tamarack mine in Minnesota.
Under the terms of the deal, Tesla will buy 75000 tonnes (165m pounds) of nickel within six years after "extensive and detailed" due diligence and "lengthy negotiations", with the option of increasing delivery tonnage, according to the terms of the deal indicated by Talon (TSX:TLO).
Based on current nickel prices, the deal is nominally worth more than $1.5 billion. Any iron and cobalt by-products from the proposed mine are also part of the transaction. Tamarack is currently the only high-grade development stage nickel project in the United States and is a joint venture between Talon and Rio Tinto.
Drew Baglino, Senior Vice President of Power Systems and Energy Engineering, Tesla, said, "the Talon team has taken an innovative approach to the discovery, development and production of battery materials, including permanent storage of carbon as part of mine operations and investigation of new extraction of battery materials.
In July last year, Tesla signed a nickel supply agreement with Australia's BHP, which is estimated to supply 18000 tons of nickel a year, while New Caledonia's Prony Resources signed a supply agreement of about 42000 tons.
This agreement is the beginning of an innovative partnership between Tesla and Talon to responsibly produce battery materials directly from the mine to the battery cathode. Talon is committed to meeting the highest standards of responsible production, which are fully traceable and embed the lowest carbon dioxide emissions in the industry. " Said Henri van Rooyen, CEO of Talon.
As we strengthen the battery material mix, Rio Tinto is working to support Talon in putting the Tamarack mine into production. We look forward to seeing it provide Tesla with the necessary nickel for the production of electric cars. " Said Sinead Kaufman, chief executive of Rio Tinto.
Talon needs to start commercial production in Tamarack by the end of 2025, and the production period may be extended by up to 12 months under the agreement between the two parties, after which Tesla has the right to terminate the agreement and Talon can choose to sell to other parties.
Talon promises to take a 60 per cent stake in Tamarack, a joint venture with Rio Tinto. Talon already has a 51 per cent stake and can choose to increase its stake by another 9 per cent. To maximize interest, it must pay Rio a total of $22.5 million in cash and stock in installments, spend $10 million on exploration and development, and complete feasibility studies for the project.
The Tamarack project, located 210km north of Minneapolis and 89km west of Duluth, consists of Tamarack North and Tamarack South projects and owns about 31000 acres of private land and state leases.
Talon shares fell on the Toronto Stock Exchange on Monday before the announcement and subsequent suspension. The company has a market capitalization of C $418 million (US $329 million).
