Tamarack Nickel-Copper-PGE Project

Why Invest in Nickel Sulphide Exploration Projects?

McKinsey & Company is forecasting a 0.22 million metric ton class 1 nickel supply deficit by 2025. High purity class 1 nickel is required for the battery market and is produced from nickel concentrates with sufficiently low deleterious elements, such as the nickel concentrates that had been produced during metallurgical testing of material drilled at the Tamarack Project.

Historically, nickel production growth came from the world's large nickel sulphide producing complexes, such as Noril'sk, Jinchuan, Kambalda and Sudbury, with the most recent major discovery, being Voisey's Bay in the 1990's. Due to the lack of new nickel sulphide discoveries, nickel production is increasingly fueled by producers utilizing lateritic ores, with the main categories being pyrometallurgical and hydrometallurgical process producers. Annual production of nickel from these laterite producers has overtaken nickel production from the world's ever reducing nickel sulphide ore producers.

Pyrometallurgical processes are typically energy intensive, while Nickel Pig Iron ("NPI") producers, in particular, are faced with carbon emission challenges. These processes typically require high grade lateritic ores, which to date have been primarily imported from Indonesia, who has issued a ban on lateritic ore exports. Hydrometallurgical process projects, specifically High-Pressure Acid-Leach ("HPAL") projects, have resulted in significant capital budget requirements, which in turn may result in higher nickel prices to satisfy investors who are continuously leaning towards projects with lower, predictable capital budgets.

In contrast, nickel sulphide projects have been safely developed for decades and consequently, these nickel complexes have fueled large-scale, sustainable economic development. These high grade nickel sulphide deposits are typically based upon proven, simple technologies, resulting in projects that are energy efficient with low capital and operational costs.

Unfortunately, the discovery pipeline of new, high grade nickel sulphide projects have effectively run dry.

The Tamarack Project: A Discovery 30 Years in the Making

The discovery of high grade nickel sulphide mineralization at the Tamarack Project was remarkable as it is completely covered by 20-50 metres of glacial till. Only through the foresight and planning by Kennecott Exploration Company ("Kennecott"), a subsidiary of the Rio Tinto Group, could a discovery like the Tamarack Project have been made.

The Tamarack Igneous Complex (the "TIC") and associated mineralization was discovered as part of a regional program by Kennecott initiated in 1991. The focus on nickel and copper sulphide mineralization was intensified in 1999 based upon a model proposed by Dr. Tony J. Naldrett (currently, a Talon director) of the potential for smaller feeder conduits associated with continental rift volcanism and mafic intrusions to host nickel sulphide deposits similar to Norils'k and Voisey's bay. This model ("Dynamic Conduit Model") challenged previously held models that nickel sulphide deposits were only associated with large layered complexes.

Exploration by Kennecott continued at Tamarack concurrently with their testing of other regional targets and in 1995, Kennecott discovered mineralization at Eagle in Michigan, and the Eagle Deposit in 2002. Disseminated mineralization was first intersected at Tamarack in 2002, and the first significant discovery of massive and semi-massive sulphide mineralization was intersected in 2008. The discovery hole (number 42) intersected 138.37 metres of high grade mineralization with 1.61%Ni, 1.06% Cu and 0.72g/t PGM.

A Very Large Intrusive Complex; Approximately 18 km of Strike Length

The TIC is a very large intrusive complex and to date, over 131,000 metres have been drilled by Kennecott. The drilling at Tamarack has focused on defining the boundaries of the feeder dike(s) and associated structures in an effort to understand the controls that may host accumulated sulphides as well as to define the mineral resources contained within the SMSU, MSU and 138 Zones., The current focus at Tamarack is on expanding the existing resource, specifically the MSU, and testing new targets in order to determine the extent of mineralization across the TIC, which is approximately 18km in strike length and 3km at its widest point.

In plan view, the TIC looks somewhat like a tadpole, as shown in the figure below:

Map showing the locality of Tamarack west of Duluth Minnesota and the TIC defined by the aeromagnetic (1VD) signal.

Most of the exploration efforts to date had been focussed on a small part of the "Tail" where the initial discovery hole (number 42) was drilled and three zones of mineralization were identified to define the current resource. The three zones are:

Semi-Massive Sulphide Unit ("SMSU")

The SMSU comprises two lenticular, the Upper SMSU and Lower SMSU. The Upper SMSU body dimensions are 400 m long, 40 m to 80 m wide and 40 to 70 m vertically at a depth of 300 m to 325 m. The Lower SMSU body dimensions are 350 m long, 40 m to 65 m wide and 40 to 70 m vertically at a depth of 445 m to 485 m.

Massive Sulphide Unit ("MSU")

The MSU is interpreted as a lenticular shape with narrower dimensions over a potentially continuous strike length of approximately 550 metres, 0.5 to 18 metres in height and 10-30 metres wide.

The 138-Mixed Zone

The 138-Mixed Zone (mixed fine and coarse grained peridotite phases) is currently a large, disseminated mineralized zone averaging approximately 200 metres in length, by 120 metres to 160 metres in height and approximately 50 to 90 metres in width.

Map at left, showing the locality of the main Exploration Target Areas along the 18km strike of the TIC. The Tamarack and 138 Zones are shown in plan and long section (at right) with the SMSU, MSU and 138 mineralized zones.

Drilling in 2014 was successful in demonstrating expansion and continuity of the MSU that resulted in increasing the resource of the MSU.

n 2015, drilling focused on large step-outs to test new, highly prospective areas. This resulted in the discovery of an entirely new mineralized zone hosting massive sulphides in the 221 Zone that will be the focus of future drilling. Successful results were also achieved in a number of additional targets confirming the extensive potential of the TIC. These targets include: the 480 Zone, the 164 Zone, the 142 Zone which are within the Tamarack North Project and the "Neck" which is within the Tamarack South Project.

In 2016 focus has continued to expand the MSU in the Tamarack Zone with potential extensions to the north-east and to the south-east. In the 138 Zone new drilling has shown potential for expansion of the disseminated mineralization to the south-west and south-east. Drilling also continued in the new target areas of the 221 Zone and CGO Bend in the Tamarack North Project and in the Neck in the Tamarack South Project with intersections of significant mineralization, demonstrating the potential scale of the TIC to host mineralization. New geophysical surveys including gravity, Magnetotelluric ("MT")and Time Domain Electromagnetic ("TDEM") have indicated potential new targets and have also provided improved focus for existing targets.

The 2017 drill program stepped away from known mineralization and in some cases intrusions which led to the discovery of the a new sulphide anomalous intrusion.

The 2018 drill program is focused on testing the extent of Mixed Massive Sulphide ("MMS") mineralization in the 221 Zone. Results are pending.

Please refer to Talon's most recent Corporate Presentation for further information.

Talon's Involvement in the Tamarack Project

Talon became involved with the Tamarack Project in June 2014 when Talon's wholly owned indirect subsidiary, Talon Nickel (USA) LLC ("Talon Nickel") entered into an exploration and option agreement (the "Tamarack Earn-in Agreement") with Kennecott. Pursuant to the Tamarack Earn-in Agreement (as amended), Talon funded approximately US$25.5M towards exploration at the Tamarack Project, and in return, received an 18.45% interest in the project.

In January 2018, Talon Nickel and Kennecott entered into a joint venture agreement, called the Mining Venture Agreement. Pursuant to the Mining Venture Agreement:

  • Kennecott is appointed "Manager" of the Tamarack Project, with a number of explicit duties and obligations as detailed under the terms of the Mining Venture Agreement.
  • Talon Nickel and Kennecott establish a management committee to determine overall policies, objectives, procedures, methods and actions under the Mining Venture Agreement, and to provide general oversight and direction to the Manager who is vested with full power and authority to carry out the day-to-day management under the Mining Venture Agreement. The Management Committee consists of two members appointed by Talon Nickel and two members appointed by Kennecott.
  • Beginning with the first program and budget under the Mining Venture Agreement, each proposed program and budget must provide for an annual expenditure of at least US$6.15 million until the completion of a Feasibility Study (as defined under the Mining Venture Agreement). The failure of either party to fund its share of each proposed program and budget will result in dilution (and in certain circumstances accelerated dilution) in accordance with the terms of the Mining Venture Agreement.
  • In the event either party's participating interest in the Tamarack Project dilutes below 10%, such party's interest will be converted into a 1% Net Smelter Returns Royalty (as defined under the Mining Venture Agreement).
  • In the event of a proposed transfer of either party's interest in the Tamarack Project to a third party, the non-transferring party has a right of first refusal. In the event the non-transferring party elects not to exercise its right of first refusal, the non-transferring party has a tag-along right, while the transferring party has a drag-along right.

Talon is pleased to be associated with Kennecott who is known as a premium, holistically responsible partner within the communities in which it operates.

Current Independent Resource Estimate

On March 26, 2018, Talon released a second technical report prepared in accordance with National Instrument 43-101 ("NI 43-101") in respect of the Tamarack North Project. The technical report is entitled "Second Independent Technical Report on the Tamarack North Project - Tamarack, Minnesota" (the "Tamarack North Technical Report) and was prepared by independent Qualified Persons Brian Thomas (P. Geo) of Golder Associates Ltd. ("Golder"), Tim Fletcher (P.Eng) from DRA Americas Inc. ("DRA") and Oliver Peters (P. Eng) from Metpro Management Inc.

Included in the Tamarack North Technical Report is an updated independent mineral resource estimate prepared in accordance with NI 43-101. The updated independent mineral resource estimate for the Tamarack North Project was prepared by Brian Thomas (P.Geo), Senior Resource Geologist at Golder and is summarized in Table 1 below. Table 2 below compares the resource at different cut-off grades. The effective date of the resource estimate is February 15, 2018. Mr. Thomas is an independent "Qualified Person" pursuant to NI 43-101.

Table 1: Tamarack North Project Mineral Resource Estimate (Effective Date: February 15, 2018)

Domain Mineral
Resource
Classification
Tonnes
(000)
Ni (%) Cu (%) Co (%) Pt (g/t) Pd (g/t) Au (g/t) *Calc NiEq (%)
SMSU Indicated Resource 3,639 1.83 0.99 0.05 0.42 0.26 0.2 2.45
Total Indicated Resource 3,639 1.83 0.99 0.05 0.42 0.26 0.2 2.45
SMSU Inferred Resource 1,107 0.9 0.55 0.03 0.22 0.14 0.12 1.25
MSU Inferred Resource 570 5.86 2.46 0.12 0.68 0.51 0.25 7.24
138 Zone Inferred Resource 2,705 0.95 0.74 0.03 0.23 0.13 0.16 1.38
Total Inferred Resource 4,382 1.58 0.92 0.04 0.29 0.18 0.16 2.11

Notes:

  • All resources are reported at a 0.83% NiEq cut-off
  • No modifying factors have been applied to the estimates.
  • Tonnage estimates are rounded down to the nearest 1,000 tonnes
  • Metallurgical recovery factored in to the reporting cut-off.
  • *Where used in this mineral resource estimate, NiEq% = Ni%+ Cu% x $3.00/$8.00 + Co% x $12.00/$8.00 + Pt [g/t]/31.103 x $1,300/$8.00/22.04 + Pd [g/t]/31.103 x $700/$8.00/22.04 + Au [g/t]/31.103 x $1,200/$8.00/22.04

Table 2 below compares the mineral resource at different cut-off grades.

Table 2: Tamarack North Project Updated Resource Sensitivities, which also highlights the tonnage and grades at a 2.5% NiEq cut-off

Cut-Off
(NiEq %)
Classification Tonnes
(000)
Ni (%) Cu (%) Co (%) Pt (g/t) Pd (g/t) Au (g/t) NiEq (%)
0.7 Indicated 3,711 1.81 0.98 0.05 0.42 0.26 0.20 2.43
0.7 Inferred 5,263 1.42 0.82 0.04 0.26 0.17 0.15 1.88
0.83 Indicated 3,639 1.83 0.99 0.05 0.42 0.26 0.20 2.45
0.83 Inferred 4,382 1.58 0.92 0.04 0.29 0.18 0.16 2.11
0.9 Indicated 3,588 1.85 1.00 0.05 0.42 0.26 0.20 2.48
0.9 Inferred 3,914 1.70 0.98 0.04 0.30 0.19 0.17 2.26
1 Indicated 3,470 1.89 1.02 0.05 0.43 0.27 0.21 2.53
1 Inferred 3,336 1.88 1.06 0.05 0.32 0.21 0.18 2.48

Notes:

  • No modifying factors been applied to the estimates.
  • Tonnage estimates are rounded to the nearest 1,000 tonnes.
  • Metallurgical recovery factored in to the reporting cut-off.
  • Bold represents the official resource.

Please refer to the Tamarack North Technical Report for further information. The Tamarack North Technical Report is available on this website or under Talon's SEDAR profile at www.sedar.com. Please also see our Disclaimer for further important information