Tamarack Nickel-Copper-Platinum Project
Why Invest in an Advanced Nickel Sulphide Exploration Project?
Global nickel production reached approximately 2.5 million tons (2.2 million tonnes) in 2013, while 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 only one 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
Discovery of high grade nickel sulphide mineralization at the Tamarack Project was highly improbable, 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 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 72,000 metres have been drilled by Kennecott, which focussed on defining the boundaries of the feeder dike or dikes and associated structures, such as very large magma chambers where the multiple pulses of mineral carrying magmas would have found their final resting place. Going forward, the focus over the next three years will be on additional exploration 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 Tamarack North Project (to the right) where the SMSU, MSU and 138-Mixed Zones, which are described below, are located.
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 have been identified as follows:
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.
Introducing Talon Metals
The Talon management team has a track record and reputation for diligently progressing exploration projects to being mine ready. On June 25, 2014, Kennecott decided to enter into an exploration and option agreement (the “Tamarack Earn-in Agreement”) with Talon’s wholly owned indirect subsidiary, Talon Nickel (USA) LLC.
Talon is pleased to be associated with Kennecott who is known as a premium, holistically responsible partner within the communities in which it operates.
Initial Exploration Resource Estimate
Kennecott’s historical exploration programs have yielded adequate data in the small portion of the Tail (referred to as the ‘Tamarack Zone’), which enabled Golder Associates to compile an independent mineral resource estimate on the Tamarack North Project prepared in accordance with National Instrument 43-101, which is reflected in table 1 below and is explained in Talon’s press release dated September 2, 2014.
Table 1: Tamarack North 2014 Resource Estimate (Effective Date: August 29, 2014)
Table 2 below shows the tonnage and grades at different cut-offs and demonstrates the robustness of the mineralization in the Tamarack Zone.
Table 2: Tamarack North 2014 Resource Sensitivities
The 2014 Program: Important Preparation for Future Exploration
Kennecott is currently conducting a 2014 exploration program on the Tamarack North Project of up to 8,500 metres in order to gather additional data for preparation of a much larger exploration program commencing in 2015. Current exploration activities include:
The Commercial Deal between Talon and Kennecott
Pursuant to the Tamarack Earn-in Agreement, Talon has the right to acquire a 30% interest in the Tamarack Project over a three year period (the “Earn-in Period”) by making US$7.5-million in instalment payments to Kennecott, and incurring US$30-million in exploration expenditures (the “Tamarack Earn-in Conditions”), in accordance with the following schedules:
Talon Payments to Kennecott
Exploration Expenditures to be funded by Talon
In addition to the above, Talon has agreed to make certain land option payments on behalf of Kennecott, which may also be payable over the Earn-in Period (and, if payable, are included as part of the Tamarack Earn-in Conditions).
If at any point prior to expending the total earn-in funds pursuant to the Tamarack Earn-in Conditions, Talon elects not to continue with the Tamarack Project, it will earn no interest in the Tamarack Project and all funds expended will not be refunded.
During the Earn-in Period, Kennecott will continue to be the operator of the Tamarack Project. Further, Talon and Kennecott have agreed to form a Technical Committee with both parties appointing representatives who will provide strategic input in regards to ongoing and upcoming exploration programs.
Upon Talon completing the Tamarack Earn-in Conditions and Kennecott having spent the funds advanced by Talon within the time period provided for under the Tamarack Earn-in Agreement, Kennecott will elect whether to: (a) proceed with a 70/30 joint venture on the Tamarack Project, with Kennecott holding a 70% participating interest, and Talon owning a 30% participating interest; or (b) grant Talon the right to purchase Kennecott’s interest in the Tamarack Project for a fixed purchase price of US$107.5-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 to Kennecott of US$7.5-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 following the exploration phase if Kennecott elects to proceed on a 70/30 joint venture basis with Talon.