Tesla in US nickel supply deal at Tamarack with Talon Metals

Talon Metals Corp has entered into an agreement to supply Tesla with nickel from the Tamarack project in central Minnesota, marking the auto manufacturer’s first supply deal in the United States for the metal used in the batteries for its electric vehicles (EVs), the company said.

According to Talon, which is in a joint venture with miner Rio Tinto to develop nickel-cobalt–copper deposit Tamarack, Tesla has committed to purchase 75,000 tonnes of nickel in concentrate over a six-year period.

This represents a portion of the metals projected to be produced at Tamarack, with Tesla also having a preferential right under the agreement to negotiate the purchase of additional nickel concentrate over and above the initial 75,000-tonne commitment, Talon noted.

The execution of the agreement follows an extensive and detailed due diligence period performed by Tesla and lengthy negotiations between the parties, Talon added.

“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 chief executive officer Henri van Rooyen said.

“Talon is committed to meeting the highest standards of responsible production that is fully traceable and that has the lowest embedded carbon footprint in the industry,” he added.

The deal with Tesla is conditional on Talon earning a 60% interest in Tamarack from its current 51% stake, which Talon has the preferential right to do. The project is currently scheduled to begin commercial production by the start of 2026, with initial production of 18,600 tonnes per year.

Drew Baglino, senior vice president of powertrain and energy engineering at Tesla, noted that Talon was working to responsibly produce its nickel, including to permanently store carbon as part of mining operations and the investigation of novel methods of extracting battery materials.

“Responsible sourcing of battery materials has long been a focus for Tesla, and this project has the promise to accelerate the production of sustainable energy products in North America,” Baglino added.

Tesla CEO Elon Musk has publicly called for nickel producers to ramp up output to meet demand for battery raw materials.

In April 2021, Fastmarkets launched a nickel sulfate premium amid strong global demand for EV battery materials. It assessed the nickel sulfate premium, cif China, Japan and Korea at $1,900 per tonne on January 4, down from $2,300 per tonne at the start of the prior month.

The purchase price to be paid by Tesla will be linked to the London Metal Exchange official cash settlement price for nickel. The parties have also agreed to share in any additional economics derived from by-products extracted from the nickel concentrate, such as iron and cobalt.