TLO.TO · 2021-02-04 12:00:00

Talon Metals Announces Updated PEA on the Tamarack Nickel Project: After-Tax NPV Increases 96% to US$569 Million PEA Demonstrates Robust Economics and Optionality to Produce Nickel for the Electric Vehicle or Stainless Steel

Economic Studies

Talon Metals Announces Updated PEA on the

Tamarack Nickel Project: After-Tax NPV

Increases 96% to US$569 Million

PEA Demonstrates Robust Economics and Optionality to

Produce Nickel for the Electric Vehicle or Stainless Steel

Markets

Road Town, Tortola, British Virgin Islands--(Newsfile Corp. - February 4, 2021) -

Talon Metals Corp.

(TSX: TLO)

(

"Talon"

or the

"Company"

) is pleased to announce that it has completed an updated

Preliminary Economic Assessment (the

"February 2021 PEA"

) in respect of the Tamarack Nickel-

Copper Cobalt Project (the "

Tamarack Nickel Project

").

Talon currently has the right to acquire up to a

60% ownership interest in the Tamarack Nickel Project upon the satisfaction of certain terms and

conditions

Highlights

The February 2021 PEA provides economics for three considered scenarios:

nickel sulphates used for the electric vehicle (EV) market ("

Nickel Sulphate Scenario

");

nickel concentrates used to produce refined nickel powders for the electric vehicle (EV)

market ("

Nickel Powder Scenario

"); and

nickel concentrates used for the traditional stainless steel market ("

Nickel Concentrate

Scenario

");

After-tax NPV's of:

US$569 million (after-tax IRR of 31.9%) (Nickel Sulphate Scenario);

US$567 million (after-tax IRR of 48.3%) (Nickel Powder Scenario); and

US$520 million (after-tax IRR of 45.6%) (Nickel Concentrate Scenario),

using base case metal price assumptions of $8.00/lb nickel and $3.00/lb copper and a

discount rate of 7%;

At incentive metal prices of $9.50/lb nickel and $3.50/lb copper, the after-tax NPV's increase to:

US$769 million (after-tax IRR of 38.6%) (Nickel Sulphate Scenario);

US$744 million (after-tax IRR of 57.7%) (Nickel Powder Scenario); and

US$695 million (after-tax IRR of 55.1%) (Nickel Concentrate Scenario).

The above-noted economics exclude the Company's recent positive drilling results

both within the

Tamarack Nickel Project's current resource area (see the Company's press releases dated

January 12, 2021 and January 26, 2021) and approximately 350 meters up-dip to the north-east of

the Tamarack Nickel Project's current resource area (i.e., drill results form the area known as CGO

East, as discussed in the Company's press releases dated September 16, 2020 and November 2,

2020).

Low C1 Costs

and All-in Sustaining Cost (net of by-product revenue) for all three contemplated

scenarios, including a C1 Cost of $2.05/lb nickel and an All-in Sustaining Cost of $3.01/lb nickel

under the scenario of selling nickel concentrates to the stainless-steel market (Nickel Concentrate

Scenario);

Pre-tax payback period ranging from 1.4 to 1.8 years and after-tax payback period ranging from

1.5 to 2.1 years;

EBITDA margins ranging from 64% to 68%;

Overall tonnage included in the mine plan has increased by 119% from 4.9 million tonnes

[3]

to 10.8

million tonnes; and

Processing rate has increased 80% from 2,000 tonnes per day to 3,600 tonnes per day.

"The 96% increase in the after-tax NPV from US$291 million to US$569 million excludes drilling

results announced since September 2020, as these drilling results are either outside of the Tamarack

Nickel Project's resource area and/or assays are still pending.

Our focus continues to be a systematic

approach of resource expansion. The Talon team has successfully reduced exploration costs to very

low levels, while predicting mineralization with great accuracy using both borehole and surface

electromagnetic surveys (geophysics).

Carefully designed drill holes are intercepted with precision.

The utility of data collected from each drill hole is then maximized through detailed logging

procedures, test programs and continual mine modelling,"

said Henri van Rooyen, CEO of Talon

"Our

end game is producing low cost, Green Nickel

during a predicted period of unprecedented nickel

shortages, whether it is to supply the electric vehicle (EV) or stainless steel market."

"Today's announcement of the updated Preliminary Economic Assessment, which demonstrates

strong economics across a number of scenarios, is a significant milestone for our Company",

said

Sean Werger, President of Talon

"Having said that, there is much more to come.

Indeed, this is

evidenced by the fact that today's economics exclude the tremendous drilling success we have

recently announced both within our current resource area (where we have announced extensions of

massive sulphide mineralization) and approximately 1/3 of a kilometer north-east and up-dip of our

resource area (where we have announced shallow, sheet-like mineralization).

We are pleased to report

that we now have three drill rigs running at site, so shareholders should expect plenty of drilling news

over the coming days, weeks and months.

With approximately C$15.4 million currently in the bank, we

are well equipped to progress our strategy of growing the resource further and getting ready for

feasibility studies."

"This updated Preliminary Economic Assessment (PEA) illustrates a high after-tax IRR, low All-in

Sustaining Cost, low capital intensity, a modest initial capital investment, and a quick payback. These

metrics are the hallmarks of a high quality mining project. The PEA also demonstrates that the

Tamarack Nickel Project has the optionality to produce (1) nickel sulphates for the electric vehicle

(EV) market; (2) nickel concentrates to be used for refined nickel powders also for the electric vehicle

(EV) market; or (3) nickel concentrates for the traditional stainless steel market, and that all three

contemplated scenarios have robust economics.

None of the three scenarios include a nickel price

premium for ESG-sensitive nickel production which we refer to as Green Nickel

, said Vince Conte,

CFO of Talon.

"With additional drilling and engineering in 2021, we are aiming to further increase the

NPV of the Tamarack Nickel Project."

____________________

All amounts are presented on a 100% ownership basis and all dollar amounts are expressed in United States dollars unless indicated otherwise.

C1 cost includes value of metal claimed by smelter (metal units, treatment charges and refining charges), insurance, losses and transportation costs, less

the value of by-products such as copper and cobalt. C1 cost is not an IFRS (International Financial Reporting Standards) measure and, although it is

calculated according to accepted industry practice, the C1 cost may not be directly comparable to calculations carried out by other companies.

See the technical report entitled "NI 43-101 Technical Report Updated Preliminary Economic Assessment (PEA) of the Tamarack North Project -

Tamarack, Minnesota" with an effective date of March 12, 2020 (the "

March 2020 PEA

") for comparisons in this news release. The March 2020 PEA is

available under the Company's issuer profile on SEDAR (

www.sedar.com

) or on the Company's website (

www.talonmetals.com

Product Optionality to Meet the Needs of the Electric Vehicle (EV) Battery Supply Chain or

Traditional Nickel Smelters

The February 2021 PEA has modelled three scenarios, as follows:

Scenario

Description

Nickel Powder Scenario

Nickel concentrates produced at site and thereafter used to produce

refined nickel powder by a third party for the EV market

Nickel Sulphate Scenario

Nickel sulphates produced at site for the EV market

Nickel Concentrate Scenario

Nickel concentrates produced at site and sold to a smelter, which

produces LME grade nickel primarily for the stainless steel market

The following chart illustrates the three separate potential offtake options that Talon is pursuing.

All three

options are economic, which enhances the strategic optionality of the Tamarack Nickel Project.

Figure 1: Talon's Proposed Nickel Supply Chain Options for Batteries Compared to the

Current (Inefficient) Nickel Supply Chain for Batteries

To view an enhanced version of Figure 2, please visit:

https://orders.newsfilecorp.com/files/2443/73628_46ee6218345ea856_001full.jpg

Comparison of the March 2020 PEA to Scenarios Modelled in the February 2021 PEA

The following table provides the key metrics of the three scenarios modelled in the February 2021 PEA,

with the results from the historical March 2020 PEA provided for comparative purposes.

Table 1: Key Metrics of February 2021 PEA compared to March 2020 PEA

All amounts in

United States dollars

March 2020 PEA

(1)

February 2021 PEA

NICKEL POWDER

SCENARIO

NICKEL SULPHATE

SCENARIO

NICKEL CONCENTRATE

SCENARIO

After-Tax NPV

(2), (3)

$291 million

$567 million

$569 million

$520 million

After-Tax IRR

(2)

36.0%

48.3%

31.9%

45.6%

Initial CAPEX and Working

Capital

$219 million

$316 million

$553 million

$316 million

Payback Period, pre-tax

(4)

2.3 years

1.4 years

1.8 years

1.4 years

Payback Period, after-tax

(4)

2.5 years

1.5 years

2.1 years

1.6 years

(1)

The March 2020 PEA is available under the Company's issuer profile on SEDAR (

www.sedar.com

) or on the Company's website

(

www.talonmetals.com

). The March 2020 PEA was based on a nickel concentrate scenario.

(2)

Metal prices of $8.00/lb Ni, $3.00/lb Cu, $25.00/lb Co, $1,000/oz Pt, $1,000/oz Pd and $1,300/oz Au. The same metal prices have been used in both

the March 2020 PEA and the February 2021 PEA.

(3)

Discount rate of 7%. NPV calculated from the start of construction.

(4)

From the start of production.

Figure 2: After-tax NPV, Initial CAPEX and After-tax IRR for the Nickel Powder, the Nickel

Sulphate and Nickel Concentrate Scenarios, including results from the March 2020 PEA for

comparative purposes

To view an enhanced version of Figure 2, please visit:

https://orders.newsfilecorp.com/files/2443/73628_46ee6218345ea856_002full.jpg

At current metal prices and incentive metal prices, the after-tax NPV and after-tax IRR are as follows:

Table 2: After-tax NPV and After-tax IRR of February 2021 PEA using Current Metal Prices and

Incentive Metal Prices

All amounts in

United States dollars

February 2021 PEA

NICKEL POWDER

SCENARIO

NICKEL SULPHATE

SCENARIO

NICKEL CONCENTRATE

SCENARIO

Current Metal Prices of $7.98/lb Ni and $3.55/lb Cu

After-Tax NPV

(1), (2)

$602 million

$597 million

$565 million

After-Tax IRR

(1)

50.1%

32.9%

48.0%

Incentive Metal Prices of $9.50/lb Ni and $3.50/lb Cu

After-Tax NPV

(3), (2)

$744 million

$769 million

$695 million

After-Tax IRR

(3)

57.7%

38.6%

55.1%

(1)

Metal prices of $7.98/lb Ni, $3.55/lb Cu, $19.97/lb Co, $1,107/oz Pt, $2,348/oz Pd and $1,834/oz Au as of February 3, 2021

(2)

Discount rate of 7%. NPV calculated from the start of construction.

(3)

Metal prices of $9.50/lb Ni, $3.50/lb Cu, $30.00/lb Co, $1,000/oz Pt, $1,000/oz Pd and $1,300/oz Au.

Incentive price is an estimated price believed

to be required to incentivize new mines to be constructed. Selected incentive price based on research, however may be higher or lower dependent on

numerous factors such as: inflation, future volume of demand for nickel, required return on capital and cost profile (both CAPEX and OPEX) of new

projects that potentially could be constructed to meet a supply shortfall among other factors.

Incentive price represents a possible price during periods of

nickel demand growth such as due to the projected growth in the EV market.

Additional metrics of the February 2021 PEA compared to the March 2020 PEA are included in the

following table:

Table 3: Additional Metrics of February 2021 PEA compared to March 2020 PEA

All amounts in

United States dollars

March 2020 PEA

February 2021 PEA

NICKEL POWDER

SCENARIO

NICKEL SULPHATE

SCENARIO

NICKEL

CONCENTRATE

SCENARIO

Mine Plan Tonnage

4.9 million

10.8 million

Mill Treatment Capacity

2,000 tpd

3,600 tpd

Mine Life from Start of Production

8 years

9 years

Ni Tonnes

in situ

103,000

144,000

NiEq Grade of Mill Feed

(1)

2.82%

1.85%

Ni Grade of Mill Feed

2.10%

1.34%

Cu Grade of Mill Feed

1.06%

0.76%

Ni Recovery

83.4%

(2)

82.1%

(2)

78.0%

(3)

82.1%

(2)

Total Cu Recovery

94.4%

(4)

86.9%

(4)

84.5%

(5)

86.9%

(4)

Recovered Metal

- Ni tonnes

- Cu tonnes

86,000

48,900

118,000

70,700

112,000

68,600

118,000

70,700

Ni Concentrate Grades

13.30% Ni,

1.13% Cu

10.57% Ni,

0.95% Cu

n/a

10.57% Ni,

0.95% Cu

Cu Concentrate Grade

27.60% Cu,

2.91 g/t Au

27.04% Cu,

5.02 g/t Au

26.45% Cu

4.3 g/t Au

27.04% Cu,

5.02 g/t Au

Tonnes of Product Produced over Life of Mine (DMT)

- Nickel Concentrate

- Copper Concentrate

- Nickel Sulphate

647,000

151,000

n/a

1,117,000

222,000

n/a

260,000

505,000

1,117,000

222,000

n/a

Initial CAPEX and Working Capital

$219 million

$316 million

$553 million

$316 million

Total CAPEX (including Sustaining CAPEX)

$259 million

$395 million

$646 million

$395 million

Capital Intensity (Total CAPEX per Annual Tonne of Nickel-

equivalent Production)

(6)

$21,000

$23,000

$40,000

$23,000

EBITDA Margin

60%

68%

64%

Pre-tax Cash Flow (EBIT) Margin

43%

50%

41%

46%

Revenue Split Ni/Cu/Other

(7)

77%/19%/4%

76%/20%/4%

79%/15%/6%

74%/20%/6%

Ni Sulphate Premium

(8)

n/a

$1.25/lb of Ni

n/a

(1)

NiEq grade based on base case metal prices of $8.00/lb Ni, $3.00/lb Cu, $25.00/lb Co, $1,000/oz Pt, $1,000/oz Pd and $1,300/oz Au using the

following formula: NiEq% = Ni%+ Cu% x $3.00/$8.00 + Co% x $25.00/$8.00 + Pt [g/t]/31.103 x $1,000/$8.00/22.04 + Pd [g/t]/31.103 x

$1,000/$8.00/22.04 + Au [g/t]/31.103 x $1,300/$8.00/22.04. No adjustments were made for recovery or payability.

(2)

To nickel concentrate

(3)

To nickel sulphate

(4)

To nickel and copper concentrate

(5)

To copper concentrate

(6)

Calculated as total CAPEX divided by average annual NiEq production during years 2 through 8.

(7)

Other includes cobalt, platinum, palladium and gold

(8)

Relative to LME Ni price

Figure 3: Long-Section (looking west) of the February 2021 PEA Conceptual Mine Plan

Development and Stopes in Relation to the Mineral Domains

To view an enhanced version of Figure 3, please visit:

https://orders.newsfilecorp.com/files/2443/73628_46ee6218345ea856_003full.jpg

Updated Mineral Resource Estimate

The mineral resource estimate for the Tamarack North Project has been estimated in conformity with

November 2019 CIM "Estimation of Mineral Resource and Mineral Reserves Best Practice" guidelines.

Mineral resources are not mineral reserves and do not necessarily demonstrate economic viability.

There is no certainty that all or any part of this mineral resource will be converted into a mineral reserve.

This mineral resource estimate has been prepared by Mr. Brian Thomas (P.Geo), Senior Resource

Geologist of Golder Associates Limited (Golder). The effective date of the mineral resource estimate is

January 8, 2021.

Mr. Brian Thomas is an independent "Qualified Person" as defined in National

Instrument 43-101:

Standards of Disclosure for Mineral Projects

NI 43-101

").

The mineral resource estimate has four domains:

Upper Semi-Massive Sulphide Unit ("

USMSU

Lower Semi-Massive Sulphide Unit ("

LSMSU

Massive Sulphide Unit ("

MSU

138 Zone ("

138

The updated mineral resource estimate is based on a block modeling methodology consisting of 5m x

5m x 5m blocks for the USMSU, LSMSU and 138 Domains and 2.5m x 2.5m x 2.5m blocks for the MSU.

All Domains were "unfolded" and had top cuts applied to restrict outlier values (Pt, Pd and Au).

Resources were estimated using either Ordinary Kriged or Inverse Distance methodologies to

interpolate grades (Ni, Cu, Co, Pt, Pd and Au) from 1.5m composited drill hole samples. Density values

were based on specific gravity measurements and regression formulas where absent. The mineral

resource estimate is reported at a 0.5% nickel cut-off and was determined to have reasonable

prospects for mining.

Table 4: Tamarack North Mineral Resource Estimate: Effective January 8, 2021

Domain

Classification

%Ni

Cut-Off

Tonnes

(000)

(%)

(g/t)

NiEq

(%)

USMSU

Indicated Resource

0.5

1,462

1.32

0.78

0.04

0.17

0.11

1.81

LSMSU

Indicated Resource

0.5

2,340

2.08

1.10

0.05

0.55

0.34

0.25

2.87

MSU

Indicated Resource

0.5

124

5.72

2.36

0.12

0.60

0.46

0.23

7.23

Total

Indicated Resource

0.5

3,926

1.91

1.02

0.05

0.41

0.26

0.20

2.62

USMSU

Inferred Resource

0.5

2,652

0.76

0.47

0.02

0.25

0.14

0.12

1.10

LSMSU

Inferred Resource

0.5

115

0.86

0.51

0.02

0.57

0.36

0.24

1.34

MSU

Inferred Resource

0.5

443

5.93

2.52

0.12

0.70

0.52

0.26

7.53

138

Inferred Resource

0.5

3,953

0.82

0.63

0.02

0.21

0.12

0.14

1.21

Total

Inferred Resource

0.5

7,163

1.11

0.68

0.03

0.26

0.16

0.14

1.57

All resources reported at a 0.5% Ni cut-off.

No modifying factors have been applied to the estimates.

Tonnage estimates are rounded to the nearest 1,000 tonnes.

Metallurgical recovery factored into the reporting cut-off.

NiEq grade based on base case metal prices of $8.00/lb Ni, $3.00/lb Cu, $25.00/lb Co, $1,000/oz Pt, $1,000/oz Pd and $1,300/oz Au using the following

formula: NiEq% = Ni%+ Cu% x $3.00/$8.00 + Co% x $25.00/$8.00 + Pt [g/t]/31.103 x $1,000/$8.00/22.04 + Pd [g/t]/31.103 x $1,000/$8.00/22.04 + Au

[g/t]/31.103 x $1,300/$8.00/22.04. No adjustments were made for recovery or payability.

Table 5: Tamarack North Mineral Resource Estimate In Situ Metal (Undiluted)

Classification

Tonnes of

Ni In Situ

Tonnes of NiEq

(1)

In Situ

Million lbs of

Ni In Situ

Million lbs of NiEq

(1)

In Situ

Indicated Resource

74,987

102,795

165

227

Inferred Resource

79,509

112,352

175

248

(1)

NiEq based on base case metal prices of $8.00/lb Ni, $3.00/lb Cu, $25.00/lb Co, $1,000/oz Pt, $1,000/oz Pd and $1,300/oz Au. No adjustments were

made for recovery or payability.

February 2021 PEA Results

The basis of design of the February 2021 PEA, which was completed on the USMSU, LSMSU, MSU

and the 138 Domains, is summarized in Table 6 below.

The

February 2021 PEA is preliminary in nature

and includes inferred mineral resources.

Inferred mineral resources are considered too speculative

geologically to have economic considerations applied to them that would enable them to be categorized

as mineral reserves.

There is no certainty that the February 2021 PEA will be realized.

Table 6: Basis of Design: February 2021 PEA

(1)

Parameter

Description

Approach and Mandate

Implement best available technologies to protect the environment, while creating a catalyst for establishing a

long-term, sustainable industry.

Mine Access Method

Decline ramp from surface with a road header

Mine Methods

Long-hole stoping and drift and fill. Lateral development completed primarily with a road header.

Mine Operations

Contract labour mining with owner equipment supply. Mobile equipment is purchased.

Material Flow

Vertical conveyor (primary) with some truck haulage

Mill Feed

10.8 Mt milled at 1.34% Ni, 0.76% Cu, 0.035% Co, 0.27 Pt g/t, 0.17 Pd g/t and 0.14 Au g/t equating to 1.85%

NiEq

(3)

Type of Metallurgical

Process

Bulk rougher flotation followed by cleaning of the bulk rougher concentrate and Cu/Ni separation.

In the case of

the Nickel Sulphate Scenario, additional hydrometallurgical processing.

Hydrometallurgical refinery (Nickel Sulphate Scenario only): Pressure oxidation leach, neutralization, Cu

recovery, solvent extraction, nickel sulphate and cobalt sulphide production.

Separation of Tailings

Bulk rougher tailings are treated in a desulphurization stage to produce a low-mass high sulphur stream and high-

mass low sulphur tailings.

Backfill

Cemented paste backfill utilizing all high sulphur tailings generated and low sulphur tailings.

Co-disposed Filtered

Tailings Facility (

"CFTF"

)

Filtered low sulphur tailings (at 85% solids) co-disposed with waste rock in a lined surface facility. The liner

system of the facility will consist of a composite liner overlain by a drainage layer. Contact water from the facility

will be collected in perimeter ditches and subsequently treated. Upon closure, the CFTF will be encapsulated by

a composite cover.

The Company is studying the potential for sequestrating CO

within the CFTF.

Mill Treatment Capacity

3,600 t/d for concentrator/mill

475 t/d for hydrometallurgical refinery in the Nickel Sulphate Scenario.

Mine Life

9 years (excluding construction period).

Existing Project Infrastructure

Paved highway, grid power, railway line across site, port.

Sustainable Development

The Company is studying the potential of establishing a solar garden to generate energy during and post mining.

(1)

See February 2021 PEA for further details in respect of this table to be published under the Company's issuer profile on SEDAR (

www.sedar.com

)

within 45 days of this news release.

(2)

Resources included in the Life of Mine Mined Tonnes were evaluated by calculating the NSR, using the following metal prices: $8.00/lb Ni and

$3.00/lb Cu. Revenue from Co, Au, Pt and Pd was not considered to be conservative. Relevant functions were applied such as metal recovery curves,

smelting and refining terms, transportation costs and state royalties as applicable.

The calculated NSR was then compared to the operating cost per

tonne to determine inclusion or exclusion of resource into the mine plan based on value addition or destruction.

(3)

NiEq% = Ni%+ Cu% x $3.00/$8.00 + Co% x $25.00/$8.00 + Pt [g/t]/31.103 x $1,000/$8.00/22.04 + Pd [g/t]/31.103 x $1,000/$8.00/22.04 + Au

[g/t]/31.103 x $1,300/$8.00/22.04. No adjustments were made for recovery or payability.

Capital and Operating Costs

Capital costs for the Tamarack North Project were estimated by DRA Americas Inc. for the mine,

process and surface facilities, by Paterson & Cooke Canada Inc. for the paste backfill and by SLR

Consulting (Canada) Ltd. for the CFTF.

All cost estimates have been forecast in US dollars using

constant, fourth quarter 2020 dollars, (i.e. in "real" dollars), without provision for inflation or escalation,

and are subject to change if new information is received or circumstances change.

Mine capital costs were mostly based on budgetary quotes from vendors and/or guidance from

contractors. The remaining process and surface infrastructure, as well as some minor mine infrastructure

costs, were based on consultant database information. Mine, process and surface operating costs are

based on a combination of both budgetary quotes and consultant database information. Various

operating parameters are based on historical information or are based on vendor support.

Capital Costs

The total estimated capital cost for each of the Nickel Powder Scenario or the Nickel Concentrate

Scenario is US$394.99 million of which US$315.80 million is the initial cost required during the first

three years, including the first production year.

The total estimated capital cost of the Nickel Sulphate

Scenario is US$646.44 million, of which US$552.61 million is the initial cost required during the first

three years, including the first production year. The amounts include indirect costs and contingency.

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