Metals

Talon Metals Corp’s Tamarack asset continues to be strategic, undervalued nickel project in the US, says Stifel GMP

Broker Stifel GMP continues to view Talon Metals Corp’s Tamarack project as a “strategic and undervalued” nickel project in the US, it said, repeating a ‘Buy’ rating on the shares.

In November this year, the resource group revealed it had raised C$37 million via equity financing to advance Tamarack’s exploration and development program. A feasibility study for the asset is expected later in 2023.

“Talon is in a solid position to both continue exploring and growing the high-grade Tamarack resource in Minnesota, as well as update the project design and economics through a feasibility study, incorporating the new plan to process ore in North Dakota following receipt of a $114M cost share grant from the US Department of Energy (DOE), which was announced on October 19, 2022,” noted Stifel’s analysts.

READ: Talon Metals closes $37M bought deal offering to advance work on Tamarack nickel project

The analysts, however, have adjusted some of their estimates, including total capex for the project, due to the relocation of the process plant to North Dakota from the project site in Minnesota, as per the requirements of the US$114M grant, as well as inflationary pressures.

“Considering that the US grant is anticipated to cover a minimum of $100M ($114M based on a preliminary estimate of 27% of project processing costs) and reduce Talon’s direct funding requirements, we have adjusted our estimate of the total project cost to $375M, up from $341M previously,” they said.

They have also added US$30 per tonne onto the transportation costs to the broker’s forecasted unit operating costs to account for rail or trucking of run-of-mine (ROM) ore from the project to North Dakota.

“With the endorsement from the Federal government leading to an improvement in project perception and potentially lower risk to project delays, Rio Tinto as a 40% project owner (currently, Rio owns 49%, but will decrease to 40% upon completion of a feasibility study (FS)), Tesla Inc (NASDAQ:TSLA) having signed a purchase agreement in January of this year, and the domestic push to increase supply of critical metals, we believe the ability of the project to be funded primarily through debt has improved,” they also noted.

“While the transportation costs can be substantial and have resulted in a lower project net asset value, we believe the new plan substantially de-risks the project’s timeline, increasing confidence in its ability to achieve the targeted 2026/2027 production start-up plan,” analysts continued.

The broker has trimmed the price target on the shares to C$0.80 each, from C$0.90 previously, which is still a long chalk from the current price of C$0.44.

Talon is advancing Tamarack to potentially supply the rapidly growing EV battery materials market. It owns a 51% interest in the project and upon completion of the feasibility study and a $10 million payment to Rio Tinto, its stake is anticipated to increase to 60%.

The property comprises a large land position (18km of strike length) with high-grade intercepts outside the current resource area. 

The firm has an agreement with Tesla to supply it with 75,000 metric tonnes of nickel in concentrate from Tamarack over an estimated six-year period once commercial production is achieved.

Contact the author at giles@proactiveinvestors.com

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