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Elon Musk’s plea for more nickel production sends shares in US-based juniors soaring

The Tesla CEO promised nickel companies a “giant contract” if they can quickly and efficiently mine the metal

Vale SA (ADR) -
The nickel price increased by around 3.5% over a 24-hour period to hit nearly US$6.16 per pound

Tesla Inc (NASDAQ:TSLA) CEO Elon Musk is on the hunt for sustainably-mined nickel.

The Tesla CEO promised nickel companies, during the electric car maker’s 2Q earnings call on Wednesday afternoon, a “giant contract” if they can quickly and efficiently mine the metal.

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” Musk told investors.

READ: Tesla posts second-quarter profit as cost cuts and strong deliveries help offset coronavirus shutdowns

On Thursday, the nickel price increased by around 3.5% over a 24-hour period to hit nearly US$6.16 per pound.

Nickel is a critical component of electric car batteries, allowing vehicles to run further on a single charge. Production of the metal is currently dominated by three key players: Vale SA (NYSE:VALE), which had to shut down operations in Brazil amid the coronavirus pandemic, Russia’s Norilsk Nickel and BHP Group (NYSE:BHP) in Australia.

But with its Gigafactory in Nevada and another one just proposed for Texas, Tesla could certainly benefit from having a stable supply of the metal in the US. For junior companies with US-based projects, Musk’s comments are sending pulses racing – and share prices soaring.

“It is meaningful to receive validation from Tesla that there is a requirement for new nickel mines to come on stream to provide much needed additional supply for the expected electric vehicle boom,” said Sean Werger, president of Talon Metals Corp (TSE:TLO), which is advancing the Tamarack project in Minnesota.

READ: Talon Metals increases throughput at Tamarack thanks to "exciting" metallurgical test results

Talon shares jumped 28.6% on Thursday on no new news to trade in Toronto at C$0.18.

“We have consistently said that (Tamarack) is extremely well-positioned given it is one of the only undeveloped nickel projects in the USA – and on top of that, it's on infrastructure and high-grade,” Werger added.

Fellow nickel junior PolyMet Mining Corp (TSE:POM) (NYSEAMERICAN:PLM) was also up 43% in Toronto and New York at C$0.83 while its shares traded south of the border at US$0.64. PolyMet’s NorthMet copper-nickel project is also in Minnesota.

Electric vehicles are expected to be the quickest growth market for nickel miners. Research firm Wood Mackenzie is forecasting nickel consumption in electric vehicle battery materials to soar 64% between 2019 and 2025.

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

Quick facts: Talon Metals Corp.

Price: 0.335 CAD

Market: TSX
Market Cap: $186.1 m

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