The future of US-made electric-vehicle batteries might be found in a modest white shed in Tamarack, Minnesota, population 104.
Beneath bright fluorescent lights, foot-long cylindrical pieces of rock are laid out in cardboard boxes, where they sparkle with grains found in the millions of pounds of nickel that Tesla Inc. committed to buy on Jan. 11. That commitment has the potential to turn into a savvy buy for the electric carmaker.
Brian Goldner, chief exploration officer for Talon Metals Corp., an exploration and mining company, lifts one of the rock cylinders recently drilled from hundreds of feet below the Earth's surface and tilts it so that the nickel catches the light. “Over nine percent,” he says of the unusually high metal content. “It's crazy.”
In 2020, Tesla's Elon Musk begged miners to “please mine more nickel” and offered a “giant contract” to anyone who could do it sustainably. The problem is acute. Nickel is a key component of electric-vehicle batteries. Thanks to surging EV demand, geopolitics and a lack of new supplies, the high-grade nickel necessary for making electric-vehicle batteries is becoming scarce.
According to Goldman Sachs, the world faced a high-grade nickel deficit in 2021 that will widen in 2022, and quadruple to over 800,000 tons by 2030. That shortage is having an impact: In March, Tesla raised prices on vehicles with nickel-based batteries by $1,000 to account for surging raw material costs.
Recycling and waste reclamation are important means of obtaining some of it. But if the world is truly committed to achieving a net zero carbon future, new mining must play the key role over the next decade. Tesla's commitment to Talon is, in part, a bet that Talon can do it.
If it's successful, the payoff will be more than just financial. It'll be a road map for mining the critical materials necessary to compete in a net zero future.
Desperate Demand for US-Sourced Nickel
Late on a bright weekday afternoon, I step out of a Talon Metals' company car, a Tesla Model 3, and into a large, pine-lined clearing in Tamarack, located 50 miles west of Duluth. I'm accompanied by representatives of Talon, which — with its partner, Rio Tinto PLC subsidiary Kennecott Exploration Co. — continues to explore an ore body that stretches over 11 miles and 31,000 acres of state and private land.
Here, four rigs are drilling cores, what company representatives characterize as the “only high-grade development stage nickel project in the USA.” The company hopes to begin mining in 2026, one year after the country's only operating nickel mine, in Michigan, is scheduled to cease operations.
The timing is excellent, especially for policy makers and battery makers desperate for US-sourced, sustainable nickel. According to the White House, global demand for nickel sulfate, the high-grade ore containing metal pure enough for batteries, will grow from 200,000 to 3 million tons per year by 2040.
For now, production of high-grade nickel isn't nearly sufficient to keep up with a global electric-car population that will grow from roughly 13 million today to 677 million by 2040.
And what production exists, isn't necessarily going to be accessible to US car and battery makers. For example, Russia accounts for around 20% of the world's Class 1 nickel supply. So far it hasn't cut off supplies to customers, but that could change.
The Joe Biden administration was worried about supply-chain constraints well before the war in Ukraine. Recent events have only sharpened the White House's thinking, highlighting — among other deficits — that the US accounts for only 0.64% of all global nickel production.
As a result, at the end of March, it invoked the Defense Production Act to boost domestic production of critical materials used in electric vehicles. Among the means to be used include “environmentally responsible domestic mining and processing.”
That phrase alarms environmentalists, and with good reason. When nickel is mined from sulfide-bearing ores like those in Tamarack, the tailings are typically exposed to air and often water. The resulting chemical reaction produces sulfuric acid and toxic metals that can seep into water and harm plants, animals and humans.
A 2012 review of 14 copper sulfide mines that represented 89% of US copper production found that 13 failed to control contaminated seepage. The damage can be catastrophic: Acidic mining wastes accumulated over decades transformed parts of Butte, Montana, into one of the US's largest Superfund sites.
In Butte and many other former mining sites, cleanup costs that can total in the billions are often borne by taxpayers. Paula Maccabee, advocacy director and counsel for Water Legacy, a nonprofit founded to oppose sulfide mining in northern Minnesota, argues that, on a regulatory level, few lessons have been learned from these failures. “Minnesota and federal regulators have shown themselves to be ill-equipped to control the environmental effects of sulfide mining,” she says.
The White House's interest in mining has also attracted the concern of native American tribes. Mining companies have a long history of damaging the environment in or near tribal lands, typically with little or no consent of the tribes. The transition to electrical vehicles could, potentially, further that ruinous legacy.
A 2021 analysis by MSCI Inc. found that the majority of US reserves of energy transition metals are located within 35 miles of native American reservations. In the case of nickel, it's 97%. That includes Tamarack, which is within a watershed that affects two federally recognized tribes, which, among other activities, cultivate wild rice in federally protected waters.
Can a Sulfide Mine Be Sustainable?
At Tamarack, the question of how to mine sustainably looms particularly large. As we walk toward one of the drill rigs, Todd Malan, Talon's chief external affairs officer and head of climate strategy, points out several water monitoring wells.
“These give us a baseline understanding of underground water flows over many years,” he says. That data won't just be incorporated into the eventual mining proposal, currently set to be released in early 2023. “We are sharing this data with regulators and the wider community.”
In central and northern Minnesota, the wider community includes tribes and environmentalists, and they will need to be satisfied. Over the last decade, Minnesota has hosted two bitter battles over proposed sulfide mines near the federally recognized Boundary Waters Canoe Area Wilderness.
So far, the mining industry has lost, in part due to a perceived lack of transparency on environmental matters. In January, the Biden administration canceled the leases for one of the projects, and the other is tied up in environmental reviews and court cases, some of which include tribes.
With that in mind, Talon is explicitly positioning Tamarack as a sustainable project. For starters, the mine is nowhere near the Boundary Waters. Though most details of its plan aren't yet public, Talon is pledging that it will have a much smaller surface footprint than other proposed Minnesota sulfide mines. It will also be designed to recover more of what it mines, including iron powder that can be used for Tesla's growing fleet of cars using cheaper lithium iron phosphate batteries.
Perhaps most notably, Talon has received $2.2 million from the Department of Energy, and $4 million from Rio Tinto, to research a large-scale carbon sequestration system on the mine lands using technology already deployed in Iceland. If that comes to pass, Talon — and Tesla — would be in a position to market the mine's nickel as a net zero product.
Neither of the two tribal bands that will be directly affected by Tamarack responded to emailed questions about the project. But Talan isn't alone in hoping that they will eventually approve of it. The Biden White House has repeatedly signaled that it expects the mining of critical minerals to account for, respect and benefit tribal communities.
At a convention late last month on opportunities for indigenous communities to benefit from a net zero economy (in part, sponsored by Rio Tinto and Talon Metals), Energy Secretary Jennifer Granholm went even further. She told the nearly 1,300 delegates that “we want to see tribal communities at the forefront of the clean energy transition.” Those communities appear to be listening: Among the delegates was Kelly Applegate, the commissioner of natural resources for the Mille Lacs band of Ojibwe, one of the tribes with lands that the Tamarack mine could affect.
Environmental groups are taking a similarly cautious approach. Over the last year, several national organizations have voiced cautious support for the Biden administration's push for mining reform and sustainable mining of critical materials.
In Minnesota, Water Legacy's Maccabee remains skeptical that a mining plan can protect the water-rich environment around Tamarack. That said, she doesn't rule out the idea of acceptable sulfide mining, somewhere. But like many environmentalists, she insists that mining should be a last approach, after trying other means of obtaining critical materials: “Can we look at what we can get from nickel recycling?”
The White House wants recycling to play a role, as well. It’s offered support and funding for research and financing of advanced recycling infrastructure for critical materials, including those related to batteries. But there simply isn't enough high-grade nickel to fill the supply gap.
Goldman Sachs recently estimated that batteries available globally for recycling will quintuple by 2030 (to 356 gigawatt hours). Even if that estimate is accurate, it will still only amount to around 7% of the global nickel supply. Expecting it to replace high-grade nickel mining is a bit like asking for recycled railroad tracks to replace the need for iron-ore mining — in 1820.
‘A Unique Opportunity’
Tesla didn't respond to a request to comment on the Tamarack project. But that doesn't mean the company doesn't care. In recent years, for example, members of Minnesota tribal nations have been active in protests against oil pipelines, causing delays and reputational damage to their owners. It's not difficult to imagine similar disruptions over a mining plan, and a hit to Tesla's reputation as a “sustainable” company.
Talon, for its part, has no interest in seeing any of that happen. As we walk back to Talon's Tesla, Malan tells me that the company is “listening to the community's concerns about mining in a water-rich region.”
If Talon has any hope of meeting its target to begin mining in 2026, it will need to allay those concerns. “We have a unique opportunity build a mine that both Joe Biden and Elon Musk can support,” he tells me as we walk into one of the drilling rigs. If Talon succeeds in that quest, the US will be one step closer to achieving its net zero ambitions.
Bloomberg
