TAMARACK, Minn. - In a glorified shed that serves as a library for rock samples, Talon Metals' Brian Goldner picked up a length of "drill core" and pointed at a rich nickel concentration.
"This is ridiculous; it's world class," said Goldner, Talon's exploration vice president. "In my career, I have never seen anything else like it."
Indeed, analysts who have reviewed the company's drilling results and securities filings say Talon and its mining behemoth partner Rio Tinto are sitting on a potential nickel bonanza, a rarity in the United States.
"This a barn burner — it's very impressive," said David Hammond, a Colorado-based minerals economist.
Talon has a grand vision. Though it would start with a single underground mine estimated to last only nine years, it hopes the ore body may support multiple mines. The company also is positioning the project — about 50 miles west of Duluth — as a source of scarce U.S. nickel for electric vehicles.
And Talon's pitch for the mine includes a "direct air" carbon capture system, which would suck CO2 from the air and permanently store it in rock waste from the mine. It sounds like alchemy, but a project based on a similar idea opened earlier this year in Iceland.
Still, even with its high-grade nickel discoveries, Talon must prove the economics of the mine to investors. And it has not yet undergone the state's environmental and mine permitting process, which is expected to begin in earnest next year.
Other proposed sulfide mines in northern Minnesota — the PolyMet and Antofagasta Twin Metals projects — are facing strong opposition from environmental groups and Ojibwe bands concerned with acid waste polluting lakes, rivers and wetlands.
The Tamarack mine isn't likely to escape a fight of its own.
"Fundamentally, sulfide mining has a long track record of failing to protect water quality in water-rich environments," said Paula Maccabee, advocacy director for WaterLegacy, an environmental group.
Nickel would be king at Tamarack
The Tamarack Mine, which Talon said would cost about $400 million and employ around 450, is situated in the same Great Lakes geological belt as PolyMet's and Antofagasta's mines – the Midcontinent Rift.
But those two northeastern Minnesota projects are copper mines first, with low-grade nickel and other metals as secondary products. High-grade nickel is king at Tamarack, with copper the secondary metal along with low grades of other metals like cobalt.
There is only one high-grade nickel mine in the United States, the Eagle Mine in Michigan's Upper Peninsula — and it is expected to exhaust the mineral deposits in 2025 after nine years of operation.
"The U.S. has relied on imported nickel almost forever," said Adrian Gardner, nickel markets analyst at the consulting firm Wood Mackenzie.
Only 7% of global refined nickel production is used in electric vehicle (EV) battery production; 65% to 75% goes to making stainless steel, he said. But by 2030, EV batteries are expected to account for around 22% of the market.
"It is the rate of growth that has everybody excited," Gardner said. "It's a good time for a mine like Tamarack. The demand for nickel is strong from both stainless steel and EVs."
But for all the EV market talk, nickel processing for batteries is generally done in China. The United States does not even have a nickel refinery, used to produce an almost pure nickel product.
"The structure to make nickel-based batteries does not exist in North America," Gardner said.
Talon is betting that a U.S. nickel supply chain will emerge in the coming years, pointing at efforts by President Joe Biden's administration.
Earlier this month, the U.S. Geological Service designated nickel as a "critical mineral," and more important the Biden administration has recommended that the federal government help finance a new nickel refinery.
The federal infrastructure measure signed into law this month contains $6 billion for loans and grants aimed at battery material processing. A bevy of projects will be competing for that money.
Talon will work to partner with other companies — nickel refiners, battery tech firms and automakers — to pitch the federal government on a nickel processing project, particularly a refinery in Minnesota, said Todd Malan, Talon's chief external affairs officer.
"We have to put a team together to do it," Malan said. Rio Tinto is considering participating.
Rio Tinto muscle behind project
Rio Tinto, under its Kennecott subsidiary, began poking around for copper and nickel in Aitkin County as early as 1991, though a drilling program didn't begin until 11 years later. After 42 drill holes, Rio finally found encouraging results in 2008.
Anglo-Australian Rio Tinto is the world's second largest mining company, operating mines, smelters and metal refineries in 35 countries, and handling minerals from iron ore to copper to diamonds.
In 2018, Rio signed up Talon as joint venture partner for the Tamarack project. Rio "is not in the business of developing small mines," said Hammond, the minerals economist. "So they will farm out [the development] to Talon."
Talon, whose shares trade on the Toronto Stock Exchange for about 70 cents, is based in the British Virgin Islands and run from Canada.
It's a "junior" miner, a company devoted to mining exploration, often for a single project. PolyMet, whose mine is closest to reality in Minnesota, is a junior miner, too, and it's backed by global mining giant Glencore.
But there's a key difference between the two.
Glencore owns over 70% of PolyMet, building its stake over time. Talon has been buying into what started as Rio's project, currently owning 51% of the Tamarack venture with a maximum possible stake of 60%. (Rio in turn owns 6% of Talon's shares.)
This year, Talon's drilling program — which will continue for six to nine months — came up with core samples that had even higher nickel and copper grades than its current mine plan filed with securities regulators.
"The grade is good, absolutely. But the second question is quantity: How big is it?" said Nitin Laddha, a stock analyst at Couloir Capital. In other words, is the nickel-copper deposit near Tamarack rich enough to eventually host more than one relatively small mine?
Talon's mineral leases, which cover about 31,000 acres, are primarily with the state of Minnesota. The project involves no federal land. Because of its high grade minerals, even a small mine would likely still be plenty profitable for Talon's owners.
Environmental details still not public
Talon said the mine would have a relatively small environmental footprint. Waste rock — known as tailings — would not be stored in a dam, lessening the risk of sulfuric acid leaks into the surrounding water system.
Instead, a good portion of the tailings would be mixed with cement and pumped back underground. The rest would be dried, stacked and covered with earth. Still, environmental details of the Tamarack mine are not yet publicly available.
When they are, the Mille Lacs Band of Ojibwe will be closely scrutinizing them. Parts of the band's reservation are within 10 miles of Tamarack. So are prime waters for wild rice, which are sacred to the Ojibwe.
The band doesn't yet have a position on the mine, said Kelly Applegate, Mille Lac's natural resources commissioner. But it has plenty of concerns, particularly about possible toxic leaching of buried tailings.
"Our concern is that groundwater flows could come into contact with that disturbed rock," Applegate said.
Talon and Rio Tinto last month announced a carbon-dioxide reduction project that would be connected to the mine. They are working with California-based Carbon Capture Inc., developing a technology that would directly remove CO2 from air.
Rio Tinto has invested $4 million into the company, which has so far raised over $40 million. CO2 removed from the air by Carbon Capture's machines would be mixed with the tailings-and-cement concoction before it's stored underground.
The magnesium-rich rock that often accompanies high-grade nickel deposits naturally reacts with carbon dioxide, turning it into rock. This happens over thousands of years. The trick with direct carbon capture is to greatly accelerate that mineralization process.
Direct carbon capture technology is in its infancy, and it may never prove to be cost effective on any significant scale.
Still, the world's first commercial direct carbon capture project opened to much fanfare in Iceland two months ago. It injects carbon deep into basaltic formations – which also is amenable to turning CO2 into rock.
The Iceland enterprise sells carbon credits, including to such big companies as Microsoft and Audi. The Tamarack project would also depend on companies buying carbon credits – along with federal tax credits for capturing carbon.
"There is a very clear opportunity here," Talon's Malan said. "The question we are going to try to answer is, can we do it economically?"
