Tamarack Nickel-Copper-PGE Project

Why Invest in Nickel Sulphide Exploration Projects?

Global nickel production reached approximately 2.4 million tons (2.2 million tonnes) in 2014. In April 2014, Wood Mackenzie, a global leader in commercial intelligence for the energy, metals and mining industries, forecast a long-term nickel deficit of 600,000 tons per year. The predicted shortage is a function of a number of factors, including the depletion of the earth’s accessible nickel sulphide resources.

Historically, nickel production growth came from the world’s large nickel sulphide producing complexes, such as Noril’sk, Jinchuan, Kambalda and Sudbury, with the most recent major discovery, being Voisey’s Bay in the 1990’s. Due to the lack of new nickel sulphide discoveries, nickel production is increasingly fueled by producers utilizing lateritic ores, with the main categories being pyrometallurgical and hydrometallurgical process producers. Annual production of nickel from these laterite producers has overtaken nickel production from the world’s ever reducing nickel sulphide ore producers.

Pyrometallurgical processes are typically energy intensive, while Nickel Pig Iron ("NPI") producers, in particular, are faced with carbon emission challenges. These processes typically require high grade lateritic ores, which to date have been primarily imported from Indonesia, who has issued a ban on lateritic ore exports. Hydrometallurgical process projects, specifically High-Pressure Acid-Leach ("HPAL") projects, have resulted in significant capital budget requirements, which in turn may result in higher nickel prices to satisfy investors who are continuously leaning towards projects with lower, predictable capital budgets.

In contrast, nickel sulphide projects have been safely developed for decades and consequently, these nickel complexes have fueled large-scale, sustainable economic development. These high grade nickel sulphide deposits are typically based upon proven, simple technologies, resulting in projects that are energy efficient with low capital and operational costs.

Unfortunately, the discovery pipeline of new, high grade nickel sulphide projects have effectively run dry.

The Tamarack Project: A Discovery 30 Years in the Making

The discovery of high grade nickel sulphide mineralization at the Tamarack Project was remarkable as it is completely covered by 20-50 metres of glacial till. Only through the foresight and planning by Kennecott Exploration Company ("Kennecott"), a subsidiary of the Rio Tinto Group, could a discovery like the Tamarack Project have been made.

The Tamarack Igneous Complex (the "TIC") and associated mineralization was discovered as part of a regional program by Kennecott initiated in 1991. The focus on nickel and copper sulphide mineralization was intensified in 1999 based upon a model proposed by Dr. Tony J. Naldrett (currently, a Talon director) of the potential for smaller feeder conduits associated with continental rift volcanism and mafic intrusions to host nickel sulphide deposits similar to Norils’k and Voisey’s bay. This model (‘Dynamic Conduit Model’) challenged previously held models that nickel sulphide deposits were only associated with large layered complexes.

Exploration by Kennecott continued at Tamarack concurrently with their testing of other targets and in 1995, Kennecott discovered mineralization at Eagle in Michigan, and the Eagle Deposit in 2002. Disseminated mineralization was first intersected at Tamarack in 2002, and the first significant mineralization of massive and semi-massive sulphide was intersected in 2008 – the discovery hole (number 42) intersected 138.37 metres of high grade mineralization with 1.61%Ni, 1.06% Cu and 0.72g/t PGM.

A Very Large Intrusive Complex – Approximately 18 km of Strike Length

The TIC is a very large intrusive complex and to date, over 90,000 metres have been drilled by Kennecott. To date, drilling at tamarack has focussed on defining the boundaries of the feeder dike(s) and associated structures in an effort to understand the controls that may host accumulated sulphides as well as to define the mineral resources contained within the SMSU, MSU and 138 Zones. In addition, the current focus at Tamarack is on expanding the existing resource, specifically the MSU, and testing new targets in order to determine the extent of mineralization across the TIC, which is approximately 18km in strike length and 3km at its widest point.

In plan view, the TIC looks somewhat like a tadpole, as shown in the figure below:

Map showing the TIC defined by the aeromagnetic (1VD) signal, the locality of the SMSU, MSU and 138-Mixed Zones in the Tamarack Zone, and the additional target areas (described below).

Most of the exploration efforts to date had been focussed on a small part of the "Tail" where the initial discovery hole (number 42) was drilled and three zones of mineralization were identified to define the current resource. The three zones are:

Semi-Massive Sulphide Unit ("SMSU")

The SMSU comprises a lenticular, wide mineralized zone and is approximately 600 metres in strike length by approximately 60-160 metres high by 30 to 80 metres wide.

Massive Sulphide Unit ("MSU")

The MSU is interpreted as a lenticular shape with narrower dimensions over a potentially continuous strike length of approximately 600 metres, up to 10 metres in height and 20-30 metres wide.

The 138-Mixed Zone

The 138-Mixed Zone (mixed fine and coarse grained peridotite phases) is currently a large, disseminated mineralized zone averaging approximately 200 metres in length, by 120 metres to 160 metres in height and approximately 50 metres in width.

Drilling in 2014 was successful in demonstrating expansion and continuity of the MSU that resulted in increasing the resource of the MSU (see Table 1 below). In 2015, drilling focused on large step-outs to test new, highly prospective areas. This resulted in the discovery of an entirely new mineralised zone hosting massive sulphides in the 221 Zone that will be the focus of future drilling. Successful results were also achieved in a number of additional targets confirming the extensive potential of the TIC. These targets include: the 480 Zone, the 164 Zone, the 142 Zone which are within the Tamarack North Project and the "Neck" which is within the Tamarack South Project.

Please refer to Talon’s most recent Corporate Presentation for further information.

Talon’s Involvement in the Tamarack Project

Talon became involved with the Tamarack project in June 2014 when Talon’s wholly owned indirect subsidiary, Talon Nickel (USA) LLC ("Talon Nickel")entered into an exploration and option agreement (the "Tamarack Earn-in Agreement") with Kennecott. Pursuant to the Tamarack Earn-in Agreement (as amended), Talon currently owns an 18.45% interest in the Tamarack Project and Talon has no further funding obligations to earn its interest in the Tamarack Project. The remaining 81.55% interest is held by Kennecott.

Kennecott is currently the operator of the Tamarack Project, with meaningful technical and strategic input from Talon through a joint Technical Committee

Talon is pleased to be associated with Kennecott who is known as a premium, holistically responsible partner within the communities in which it operates.

Once Kennecott has spent the funds advanced by Talon on exploration activities in respect of the Tamarack Project, subject to certain self-funding rights by Kennecott during the earn-in period, Kennecott will have 180 days to elect whether to: (a) proceed with a 81.55/18.45 joint venture on the Tamarack Project, with Kennecott owning an 81.55% participating interest, and Talon owning an 18.45% participating interest; or (b) grant Talon the right to purchase Kennecott’s interest in the Tamarack Project for a total purchase price of US$114 million. In the event Kennecott grants Talon the right to purchase its interest in the Tamarack Project, and Talon elects to proceed with the purchase option, Talon will have up to 18 months to close the transaction, provided it makes an upfront non-refundable payment of US$14 million, thereby reducing the purchase price to US$100-million.

Unlike many joint ventures, Kennecott and Talon have already negotiated the full joint venture agreement, which would only come into effect if Kennecott elects to proceed on a 81.55/18.45 joint venture basis with Talon.

Current Independent Resource Estimate

On October 6, 2014, Talon released a technical report prepared in accordance with National Instrument 43-101 ("NI 43-101") in respect of the Tamarack North Project. The technical report is entitled "First Independent Technical Report on the Tamarack North Project, Tamarack, Minnesota" dated October 6, 2014 ("Tamarack North Technical Report") and was prepared by independent "Qualified Persons" Brian Thomas (P. Geo) of Golder Associates Ltd. ("Golder"), Paul Palmer (P. Eng) of Golder and Manochehr Oliazadeh Khorakchy (P. Eng) of Hatch Ltd. Please refer to the Tamarack North Technical Report for further information. The Tamarack North Technical Report is available on this website or under Talon’s SEDAR profile at www.sedar.com. Please also see our Disclaimer for further important information

On April 8, 2015, the Company issued an updated resource estimate for the Tamarack North Project. This updated independent mineral resource estimate was largely the result of the successful 2014 drilling of the step-out holes from the Massive Sulphide Unit Mineral Zone; more particularly, the positive results from drill holes 14TK0211 and 14TK0213.

The updated independent mineral resource estimate for the Tamarack North Project was prepared by Brian Thomas (P.Geo), Senior Resource Geologist at Golder and is summarized in Table 1 below. The effective date of the resource estimate is April 3, 2015. Mr. Thomas is an independent "Qualified Person" pursuant to NI 43-101.

Table 1: Tamarack North Project Updated 2015 Resource Estimate (Effective Date: April 3, 2015)

Domain Mineral
Resource
Classification
Tonnes
(000)
Ni (%) Cu (%) Co (%) Pt (g/t) Pd (g/t) Au (g/t) Ni Eq (%) Lbs NiEq(000,000)
SMSU Indicated 3,751 1.81 1.00 0.05 0.41 0.25 0.19 2.35 194.3
SMSU Inferred 949 1.12 0.62 0.03 0.25 0.16 0.14 1.47 30.8
MSU Inferred 422 6.00 2.48 0.13 0.78 0.53 0.26 7.26 67.5
138 Zone Inferred 2,012 0.95 0.78 0.03 0.23 0.14 0.17 1.33 59.0
Total Indicated 3,751 1.81 1.00 0.05 0.41 0.25 0.19 2.35 194.3
Total Inferred 3,383 1.63 0.94 0.04 0.31 0.19 0.17 2.11 157.4

Notes:

  • All resources are reported at a 0.90% NiEq cut-off
  • Tonnage estimates are rounded down to the nearest 1,000 tonnes
  • Mining recovery and dilution factors have not been applied to the estimates
  • Estimates do not include metallurgical recovery

NiEq% = Ni%+ Cu% x 2.91/9.20 + Co% x 14/9.20 + Pt [g/t]/31.103 x 1,400/9.2/22.04 + Pd [g/t]/31.103 x 600/9.2/22.04 + Au [g/t]/31.103 x 1,300/9.2/22.04

Table 2 below compares the mineral resource at different cut-off grades.

Table 2: Tamarack North Project Updated Resource Sensitivities, which also highlights the tonnage and grades at a 2.5% NiEq cut-off

Cut-Off
(NiEq %)
Mineral
Resource
Classification
Tonnes
(000)
Ni (%) Cu (%) Co (%) Pt (g/t) Pd (g/t) Au (g/t) NiEq (%)
0.8 Indicated 3,922 1.75 0.97 0.05 0.40 0.25 0.19 2.28
Inferred 4,235 1.42 0.84 0.04 0.28 0.17 0.15 1.86
0.9 Indicated 3,751 1.81 1.00 0.05 0.41 0.25 0.19 2.35
Inferred 3,383 1.63 0.94 0.04 0.31 0.19 0.17 2.11
1.0 Indicated 3,556 1.87 1.03 0.05 0.41 0.26 0.20 2.42
Inferred 2,646 1.89 1.07 0.05 0.34 0.22 0.18 2.43
1.5 Indicated 2,699 2.19 1.16 0.06 0.42 0.27 0.20 2.80
Inferred 1,289 2.98 1.49 0.07 0.48 0.31 0.22 3.73
2.0 Indicated 1,990 2.51 1.28 0.06 0.42 0.27 0.20 3.17
Inferred 752 4.21 1.89 0.09 0.60 0.40 0.24 5.17
2.5 Indicated 1,459 2.81 1.38 0.07 0.41 0.27 0.19 3.51
Inferred 556 5.12 2.16 0.11 0.69 0.47 0.25 6.22

Notes:

  • Official resources are reported at a 0.90% NiEq cut-off
  • Mining recovery and dilution factors have not been applied to the estimates
  • Tonnage estimates are rounded down to the nearest 1,000 tonnes
  • Estimates do not include metallurgical recovery