Talon Metals (TSX: TLO; US-OTC: TLOFF ) has raised $4 million in a non-brokered private placement of more than 40 million common shares at a price of 10 ? a share.
The funds will be used to advance its Tamarack nickel-copper-cobalt project in north-central Minnesota, about 89 km west of Duluth ad 210 km north of Minneapolis.
Resource Capital Funds participated in the offering, purchasing 21.13 million shares or just over half of the financing and bringing its stake in the company to 48.7%.
"Amidst the current macro-economic environment, and the fact that we're base metals and not precious metals, to get financing in and of itself says a lot about the quality of the project," Sean Werger, Talon Metals' president, said in an interview.
Talon currently owns a 17.56% stake in the project and is the operator. Kennecott Exploration, a subsidiary of Rio Tinto (NYSE: RIO; LSE: RIO), owns the remaining 82.44%.
Talon has an earn-in right to acquire 51% of the project by spending US$10 million on exploration and development and paying US$5 million to Kennecott, by March 2022. As part of the agreement signed last year, Talon has already paid US$6 million in cash and issued US$1.5 million in shares to Kennecott.
In addition, Talon can earn another 9% interest in the project for a total of 60% by completing a feasibility study and paying an additional US$10 million to Kennecott by March 2026.
Currently the project contains 3.64 million indicated tonnes grading 1.83% nickel, 0.99% copper, 0.05% cobalt, 0.42 gram platinum per tonne, 0.26 gram palladium per tonne and 0.20 gram gold per tonne (2.45% nickel equivalent). Inferred resources add 4.38 million tonnes grading 1.58% nickel, 0.92% copper, 0.04% cobalt, and 0.29 gram platinum, 0.18 gram palladium and 0.16 gram gold (2.11% nickel equivalent).
Talon completed an eight-hole drill program earlier this year, with six of the holes intersecting high-grade mixed and massive sulphide mineralisation.
"The drill program focussed on our existing resource area and was primarily conducted to define the resource," Werger said. "The program successfully showed the continuity of high-grade nickel-copper mineralisation throughout the area, and the grades were outstanding."
Highlights from the program included hole 12TK0153A, which intersected 11.36 metres grading 7.1% nickel, 2.98% copper, 0.14% cobalt, and 0.49 gram palladium per tonne, 0.62 gram platinum and 0.16 gram gold (8.67% nickel-equivalent) starting from 555 metres downhole.
"So far, our exploration indicates the presence of high-grade nickel, copper and cobalt along a 1 km part of an 18 km intrusive complex," Werger said. "The next phase of the project is to explore to the south and north of the identified intercepts with a step-out drill program slated for the summer."
In March, the company updated a preliminary economic assessment for the project. The PEA estimated a mine life of eight years for a total production of 4.91 million tonnes of processed ore for capital costs of US$83.33 million. All-in sustaining costs are estimated to be $3.57 per lb. of nickel concentrate, an after-tax net present value of US$291 million for a 7% discount rate, an IRR of 36% and a payback period of 2.5 years.
The forecast represents a base-case scenario for a nickel price of $8 per lb., copper at $3 per lb., and cobalt at $25 per pound.
"In the real estate world, the rule is location, location, location, but for the mining industry, it should be grade, grade, grade," Weger said. "If you look at the results of the PEA, they are pretty outstanding."
In addition to the drill program, the company also hopes to convert current resources from the inferred to the indicated category and undertake more geophysical studies.
The company is also looking at other mining scenarios, such as the production of nickel concentrate for smelters and nickel sulphates for electric vehicle batteries.
"Whereas most other nickel companies have low-grade disseminated projects, which are focussed on the EV [electric vehicle] market and are relying on the nickel price to rise," he said, "but because Tamarack has the potential to be a low-cost producer, we believe we can be competitive in both the stainless steel or electric vehicle market."
At press time in Toronto, Talon was trading at 11 ? per share within a 52-week trading range of 8 ? and 24 ?.
The company has around 535 million common shares outstanding for a $54.38-million market capitalization.