Tesla signs deal with Talon Metals for US nickel supply

US base metals company Talon Metals, through its subsidiary Talon Nickel, has signed a deal with US electric vehicle company Tesla to supply nickel concentrate from its Tamarack Nickel project in Minnesota, US, the company said.

The Toronto-listed company, a JV with Rio Tinto on the high-grade Tamarack nickel-copper-cobalt project, will look to supply Tesla, the world's largest manufacturer of electric vehicles and battery storage systems, with 75,000 mt (165 million lb) of nickel in concentrate, it said late Jan. 10.

The company said the term of the agreement is over six years or until a total of 75,000 mt of nickel in concentrate has been produced and delivered to Tesla, and linked to the London Metals Exchange official cash settlement price for nickel.

The London Metal Exchange three-months spot nickel price was trading at $21,430/mt ($9.72/lb) as of 1025 GMT Jan. 11.

Talon said both parties had also agreed to share in any additional economics derived from by-products extracted from the nickel concentrate, such as iron and cobalt.

The company said it expects to achieve commercial production on or before Jan. 1, 2026, which may be extended by the agreement of the parties for up to 12 months following which Tesla has a right to terminate the agreement and Talon may elect to sell to other parties.

Talon currently owns a 51% interest in the Tamarack Nickel project and has the right to increase its interest by 9% to 60%, it said.

In January, Tesla delivered a record 936,172 vehicles in 2021, an increase of 87.4% year on year, according to the company's quarterly report.

Australian mining giant BHP in July 2021 inked a nickel supply agreement with Tesla, sourcing the mineral from its Nickel West asset in Western Australia.