Copper market’s biggest whale fuels speculation of a major shift
The world’s single biggest buyer of copper, State Grid Corp. of China, has slowed its purchases of copper wire this year.
US miner Talon Metals (TSX: TLO) (OTC:TLOFF) said on Wednesday it had brought in three more drill rigs to expand exploration at its Tamarack nickel-copper-cobalt project in Minnesota. Talon already has among its clients electric vehicles (EV) giant Tesla (NASDAQ: TSLA).
The company currently holds a 51% interest in the Tamarack project, the only high-grade development-stage nickel project in the US. The remaining 49% is held by Rio Tinto (ASX, LON: RIO).
The asset is comprised of the Tamarack North and Tamarack South projects, occupying a large land position (18km of strike length) with numerous high-grade intercepts outside the current resource area.
Talon said the new rigs will be used on exploration outside of the main resource zone.
The investment “will hopefully confirm our geologists’ view that Tamarack is a ‘district scale’ resource similar to other large-scale nickel sulphide districts in Canada and Russia,” chief executive Henri van Rooyen said in the statement.
“The need to secure domestic sources of battery minerals like nickel has grown more urgent,” van Rooyen noted. “President Biden, with bipartisan support in Congress, has recently elevated domestic sourcing of battery materials like nickel to a national priority.”
Talon has an earn-in option increase its stake in the project to up to 60%. To achieve it, the company is expected to make staged payments totalling $22.5 million in cash and shares to partner Rio Tinto, spend $10 million on exploration and development, and complete a feasibility study.
Shares in the company jumped on the news, trading 3% higher in Toronto early morning and 5% in New York.
The announcement comes as automakers scramble to secure steady supply of battery metals, including cobalt, nickel, lithium and copper, to meet rising demand for EVs.
Some manufacturers, such as Tesla (NASDAQ: TSLA) and Volkswagen have even announced intentions of becoming “actively involved in raw materials business”. Tesla’s Elon Musk seems particularly inclined to do so with lithium, as prices have reached what he calls “insane levels”.
He has also promised “giant contracts” to companies able to produce nickel in an “environmentally sensitive way” amid concerns of an imminent deficit.
Tesla has since inked nickel supply deals with the world’s largest miner, BHP, (ASX: BHP) in Australia and with Prony Resources in New Caledonia.
Nickel helps cram more energy into cheaper and smaller battery packs, allowing EVs to charge faster and travel farther between plug-ins.
Prices for the commodity have – not surprisingly – shot to historic records over the last year. It surged by an unprecedented 250% in a day in March, forcing the London Metal Exchange (LME) to halt trading of the metal.
Musk has repeatedly flagged nickel supply as the company’s biggest concern, as the metal is a key component in batteries for longer-range vehicles. Tesla uses iron-phosphate for shorter-range vehicles.
Sanctions against Russia over the invasion of Ukraine have added urgency to secure supplies of the metal, since the country holds about 17% of global capacity for refined Class 1 nickel, the type required for EVs.
(Wth files from Bloomberg)
