Tesla has signed a deal with a subsidiary of little-known Talon Metals to acquire nickel concentrate produced in the United States for the first time, Kallanish reports.

Tesla has committed to purchase 75,000 tonnes of nickel in concentrate over six years from the Tamarack nickel-copper-cobalt project in Minnesota’s Aitkin County in what could be a $1.5 billion deal with Talon Metals’ subsidiary, Talon Nickel. The purchase price to be paid by Tesla will be determined by London Metals Exchange pricing.

The agreement also gives Tesla the preferential right to negotiate the purchase of additional nickel concentrate. The execution of the agreement follows an extensive and detailed due diligence performed by Tesla and lengthy negotiations between the parties, the two companies report in a joint statement.

Talon needs to begin commercial operations at Tamarck on or before 1 January, 2026. That may be extended by up to one year by the parties, after which Tesla can terminate the contract if the mine is not in operation and Talon can sell to others. The two companies have also agreed to share any additional economics derived from project by-products including iron and cobalt.

“This agreement is the start of an innovative partnership between Tesla and Talon for responsible production of battery materials directly from the mine to the battery cathode,” says Talon ceo Henri van Rooyaan in a statement.

“The Talon team has taken an innovative approach to the discovery, development and production of battery materials including to permanently store carbon as part of mine operations and the investigation of the novel extraction of battery materials,” says Drew Baglino, Tesla senior vice president of powertrain and energy engineering.

Media reports say it is unclear where Tesla might refine the nickel. There are no operating refineries in the US.

Last July, Tesla had signed deals to purchase nickel from BHP in Australia and from New Caledonia’s Prony Resources. In 2020, Tesla chief executive Elon Musk had strongly urged American miners to produce more nickel in an environmentally friendly way as the electric vehicle battery industry grows.

Tamarack is a joint venture between Talon Metals with headquarters in the British Virgin Islands and Rio Tinto. Talon owns a 51% stake in the project and can increase that to 60%. That is one of the conditions in the agreement with Tesla.

Talon Metals is preparing a new Tamarack resource estimate and moving toward a pre-feasibility study. Continuing exploratory drilling around the project margins should be completed by mid-2022. The project is located in east-central Minnesota about 90 kilometres west of Duluth, Minnesota. The project covers 124 square kilometres. A 2018 estimate says the project has indicated resources of 3.6 million tonnes at 1.83% nickel equivalent with inferred resources of 4.4m t grading at 1.58% nickel equivalent. The mine is projected to operate for eight years.