Talon Metals Reports New Discovery at Tamarack North Project

The 2015 winter drill program for the Minnesota-based Tamarack North nickel-copper–PGM project finished up this past March, and Talon Metals (TSX:TLO) is now in the midst of releasing results. Thus far, they seem promising — on Thursday, Talon said it’s made a new discovery at the project. 

According to the company, it’s intercepted massive nickel-copper-PGM sulfide mineralization about 1.6 kilometers from the Tamarack zone, which encompasses the current independent mineral resource estimate for the project. Specifically, drill hole 15TK0221 intercepted 0.3 meters grading 2 percent nickel, 0.56 percent copper, 0.53 g/t PGM and 0.51 g/t gold; according to Talon, that works out to 2.46 percent nickel equivalent.

Drill hole 15TK0221 is part of the 480 zone, where four holes were drilled during the 2015 winter drill program. Drill holes 15TK0215 and 15TK0225 were completed about 3 kilometers north of the Tamarack zone, while drill hole 15TK0228, like drill hole 15TK0221, was completed about 1.6 kilometers to the northeast of the Tamarack zone. Prior to completing drill hole 15TK0221, Talon had not intercepted massive nickel-copper-PGM sulfide mineralization in the southern part of the 480 zone.

In terms of the other 480 zone drill holes, Talon said that drill hole 15TK0228 was begun after a downhole electromagnetic survey revealed an off-hole anomaly 80 to 100 meters northwest of the hole and between 700 and 800 meters below surface. Unfortunately, warmer-than-normal weather forced the company to stop drilling prior to its completion; it will be a priority target when exploration starts up again at Tamarack North.

More encouragingly, drill hole 15TK0225 intercepted 0.49 meters grading 1.15 percent nickel, 0.55 percent copper, 0.15 g/t PGM and 0.04 g/t gold, which clocks in at 1.42 percent nickel equivalent. Results from drill hole 15TK0215 are lower grade.

Talon CEO Henry van Rooyen said the new discovery is significant in part because it points to the effectiveness of the exploration program put together by Kennecott Exploration Company. Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) subsidiary Kennecott owns Tamarack North, and Talon currently has the right to earn a 30-percent stake in the project via an earn-in agreement signed in June 2014.

He also said, “[t]his is a modern day example of how prolific nickel producing complexes came into being in years past,” adding, “[w]e are pleased with these results and look forward to further updating our shareholders on the results from the remaining 10 holes drilled during the 2015 winter exploration program.” Results from drill hole 15TK0219 were released earlier this month.

What about financing? 

Investors who’ve been following Talon these past few months may be wondering about the state of its finances. Indeed, the last time Resource Investing News checked in with the company it had just received a US$4-million unsecured loan from Kennecott after running short on money for the Tamarack North earn in. Though Talon’s first-year exploration spending obligations were set at $10 million, plus a $2.5-million option payment, it had spent just $6.6 million on exploration and had not made the option payment.

Ultimately, Kennecott agreed to defer the $2.5-million option payment and agreed “not to make any cash calls from Talon beyond the amount of the Unsecured Loan until the fourth quarter of 2015.” Talon said it would put the loan from Kennecott toward exploration activities at the project.

Talon doesn’t mention its cash situation in Thursday’s press release, but a note from Haywood Securities provides some detail. In it, the firm states that under its model, it sees Talon needing to raise US$15 million this year to meet its near-term earn-in requirements at Tamarack North. It also points out that “current negative commodity price sentiment will likely continue to weigh on the near-term performance of base metal-focused equities,” meaning that the company could face challenges in raising that money.

That said, the firm reiterates that it sees the US$4-million loan from Kennecott as a vote of confidence in Talon, and notes that the fact that Kennecott decided to option Tamarack North “in part suggest[s] its view on the project’s potential.” Furthermore, Haywood states, it still sees the earn in with Kennecott as a “tranformational move” for Talon as it “stands to position the Company with a significant interest in a high-grade sulpide deposit poised to gain additional market recognition on the back of an anticipated deficit in global nickel supply in mid-2015.”

At close of day Thursday, Talon’s share price was down 6.25 percent, at $0.15. Haywood has a target price of $0.50 on the company and has assigned it a “buy” rating. It will be interesting to see further results from the 2015 winter drill program and to see what Talon ends up doing regarding funding.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

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Talon Receives Vote of Confidence from Rio Tinto Subsidiary