Tesla executes supply agreement with Talon Metals in quest for carbon neutral nickel

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By Filip Karinja - 

US-headquartered electric car and lithium-ion battery maker Tesla has signed an agreement to secure low carbon, traceable and environmentally responsible nickel concentrate from Talon Metals’ (TSX: TLO) jointly owned Tamarack project in Minnesota.

The agreement follows extensive due diligence and allows Tesla to secure 75,000 tonnes of nickel concentrate over six years.

Tamarack is a joint venture between Talon (51%) and mining major Rio Tinto (ASX: RIO) (49%), and is the only high grade nickel operation in the US at development stage.

Talon plans to implement carbon capture technology designed to extract carbon dioxide out of the atmosphere and chemically bind the gas to rocks under the site, allowing Tesla chief executive officer Elon Musk to achieve the company’s strategy for carbon neutral nickel.

Carbon capture technology

Carbon capture technology is described as a Direct Air Capture (DAC) system that enables the use of zeolites, a class of molecular sieves, for capturing the carbon dioxide and operating on solar and geothermal energy. Feasibility studies and testing are currently incomplete.

Tesla Powertrain and Energy Engineering senior vice president Drew Baglino said the Talon team had taken an innovative approach to the discovery, development and production of battery materials including to permanently store carbon as part of mine operations and the investigation of the novel extraction of battery materials.

Talon chief executive officer Henri van Rooyen said Talon was committed to “meeting the highest standards of responsible production that is fully traceable and that has the lowest embedded carbon dioxide footprint in the industry”.

“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,” Mr van Rooyen added.

The quest for clean nickel

Since 2020, Musk has been requesting less environmentally damaging nickel production, calling US nickel extraction techniques “very lame”.

Last year, Tesla inked deals for nickel supply with BHP (ASX: BHP) in Australia and Prony Resources in New Caledonia, however this new agreement with Talon offers shorter supply chains and the opportunity for environmentally cleaner mineral extraction.

Commercial production by 2026

The agreement between Talon and Tesla requires commercial production from Tamarack to commence by 1 January 2026, with the opportunity for a 12-month extension and the right for Tesla to terminate the agreement following that extension.

Talon has the right to increase its interest in Tamarack by 9% to 60%, and the deal with Tesla is also conditional on Talon upping its stake this amount.

Nickel concentrate sold to Tesla will be linked to the London Metals Exchange’s (LME) official cash settlement price.

As part of the deal, Talon and Tesla will work together to optimise nickel concentrate grades and metal recoveries.

The companies have also agreed to share additional economics from any by-products extracted and sold from the concentrate including cobalt and iron.

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