Talon Metals lands $15 million to help Kennecott pinpoint copper deposit near Aitkin/Carlton County line

AITKIN COUNTY - A joint effort between mining giant Kennecott and newcomer Talon Metals will punch up to 20 more exploratory drill holes in the swampy country near the Aitkin-Carlton county line this winter as the effort to pinpoint a major copper-nickel deposit expands.

The exploration project, about 50 miles west of Duluth and just north of the tiny hamlet of Tamarack, has been underway for nearly 15 years, with millions of dollars spent, 230 holes already drilled and miles of core samples studied.

So far, geologists are impressed with what they've found -- especially considering nobody knew the minerals were down there before.

Unlike the well-studied Duluth Complex north of the Iron Range, the so-called Tamarack Intrusion was never verified before Kennecott's efforts.

Kennecott already has identified a strip of deep-underground copper-nickel-platinum group metal deposits more than 12 miles long and nearly two miles wide in some spots. At least some of it is high grade ore that would be valuable to mine -- if and when copper prices recover from their current slump.

"Every hole now has the potential to sway a decision," said Matt Jeschke, spokesman for Utah-based Kennecott, the U.S. subsidiary of London-based global mining giant Rio Tinto. But the companies involved and their financiers are a long way off from declaring plans to dig a mine.

"In some places we have found some fantastic grade" copper and nickel, Jeschke said. "But how extensive is it? How far does it go? We don't know yet. We need to better define what's out there."

New money, new drilling

Kennecott and the Minnesota Department of Natural Resources announced the increased exploration activity Wednesday. On Friday, Talon announced that it has secured $15 million from Resource Capital Funds to pay for more drilling in the Tamarack area.

The Kennecott-Talon partnership now has 85 different DNR leases across 37,135 acres -- on state forest, tax forfeited and school trust lands -- where the state holds the mineral rights. In addition to paying a small fee for exclusive exploration rights, the companies also would pay the state a fee per ton of ore processed if mining ever begins.

Kennecott, which has an office in Tamarack with six employees, also has purchased a private farm in its most promising hotspot: Section 3 of Clark Township in Aitkin County.

Drilling earlier this year also found good deposits another mile or so north of the previous focus area. Kennecott says it's still unclear if the second deposit is connected to the main body and that more drilling is needed. But Talon appears very excited.

The recent efforts "found exceptionally high grade massive (sulfide) mineralization in two out of three holes" and are "once again testament to the effective deployment of intellectual property designed and integrated by the Kennecott team at Tamarack," said Henri van Rooyen, Talon Metals CEO, in a statement. The finding "reaffirms the potential for widespread massive (sulfide) mineralization" at Tamarack.

Kennecott recently secured a new state mineral lease to explore south of Tamarack and state Highway 210, two miles south of Section 3.

"It's interesting to watch what they find as they move out. It's all new for us, too, in that area," said Dennis Martin, manager of the DNR's Mineral Potential Section.

Martin said the specific findings are confidential, under terms of the DNR lease. But he said Kennecott has made their core samples public, and the DNR has been poring over them.

"It's an entirely different kind of deposit than what other companies (such as PolyMet and Twin Metals) are looking for in the Duluth Complex," Martin said. "In the Duluth complex, it's large amounts of lower-grade ore. ... At Tamarack, it's smaller pockets of very high-grade ore. So how you go about that is much different."

So far, Martin said, the Kennecott-Talon partnership is the only entity exploring in that part of Minnesota.

Progress in "fits and spurts"

The effort at Tamarack may still be years away from a financial feasibility study and any environmental review, let alone any mining. But among Rio Tinto's roughly 50 mineral exploration projects worldwide, the fact that Kennecott is pumping more money into the Tamarack project right now -- even as copper prices are at their lowest level in years -- "is very encouraging," Jeschke said. Copper sat just above $2 per pound last week, less than half the $4.50 per pound it got in 2011 and the lowest since 2009.

Kennecott began a broad search for minerals in geologically uncharted areas of Minnesota in 1991. They began to hone in on north-central Minnesota in 1999, and made the first big copper finding at Tamarack in 2002. But as Jeschke described it, the exploration has often been in "fits and spurts."

The company made a major finding of high-grade copper in 2008, but the global recession killed copper prices and virtually halted new exploration. Meanwhile Rio Tinto moved resources, staff and attention to the Eagle Mine project in Michigan that is now producing copper.

In 2014, fledgling investment firm Talon Metals agreed to buy into the slow-moving Tamarack project, a sort of junior partner to infuse cash to help keep exploration moving, Jeschke noted.

At first it seemed an odd marriage. Rio Tinto is one of the top-three largest mining companies in the world. Talon is a startup investment company based in the British Virgin Islands (traded on the Toronto Stock Exchange) that was looking for a mining project to start on.

Kennecott allowed Talon in on a rent-to-own sort of deal. Talon's recent cash infusion will give it an 18 percent stake in the project.

"Even with a big company like Rio Tinto, capital is limited. So the idea of an agreement with Talon is to spread risk a little bit," Jeschke said.

Until Friday's announcement, Talon had slowed its investment this year, as mining capital tightens in a weak commodities market. But Kennecott kept Talon in the mix and a rewritten agreement now means Talon has fulfilled all of its obligations. Eventually, if Kennecott and Rio Tinto decide to walk away from Tamarack, Talon could buy it all.

"But we don't see that happening right now. We are very much engaged and involved and, yes, infusing capital into Tamarack at this time," Jeschke said.

Mostly quiet enthusiasm

In recent months Talon has been the partner doing the most talking, touting the Tamarack project as a resource nearly ready to be exploited. The company notes that Kennecott has already collected 124,700 feet, or 23.7 miles, of drill core samples from the area. Talon says those samples tell geologists that there are more than 10 million tons of mineable ore in Section 3.

Talon officials have said the copper and other valuable minerals are about 1,000 to 1,500 feet below the surface, which experts say would indicate an underground mine. But Kennecott isn't willing to commit to that just yet.

"We could say that's what it looks like as of now; that's where we've seen the best deposits," Jeschke said. "But if we start finding it 50 feet underground and the best idea is (an open pit mine) then we don't want to look like liars."

The DNR's Martin said his agency will closely watch all drilling activities over the winter to make sure they are done properly. The state Department of Health also monitors drill hole capping.

But the DNR also is watching, like residents along the Aitkin-Carlton county line, as the Tamarack project moves slowly toward mining.

"They are still in the exploration stage so we don't expect to hear much if anything at all (about mining plans) until they move to the development stage and hand it off to a different (Kennecott) team," Martin said. "When that happens, if that happens, things will start to kick in. But it's still not clear that's going to happen."

"We're certainly happily surprised by what they've found out there," Martin added. "But that doesn't mean someone is going to invest in building a copper-nickel mine."

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By John Myers, Forum News Service