Talon Management Discussion and Analysis

For the three and six months ended June 30, 2023

On August 14, 2023 Talon Metals posted a document titled "Management's Discussion and Analysis". A copy of this document (which can be found on sedar.com searching for "Talon Metals") can also be viewed here.

The following is a brief analysis of that document:

PAGE 14:
"As of June 30, 2023 and August 14, 2023, the Company had working capital of $18.6 million and approximately $15 million, respectively. In order to continue work towards achieving these business objectives, the Company will need to raise additional capital and there can be no assurance that the Company will be successful in doing so."

Now this is a Canadian company so all these "dollars" are Canadian dollars. To convert to US dollars, divide by 1.37. So as of August 14th … they have about $11M in working capital (US) to their name. They typically spend about $25M to $30M a year … they have spent $14.22M (US) so far (as of August 14th). In effect, they may run out of money in 2023.

Their ability to raise more cash has, this year, been limited. Their stock price has dropped steadily throughout the year to its present value of around $0.20 per share. With this kind of performance, they are not able to just "sell more shares" as they did in the past since when the stock is dropping, nobody would buy these extra shares.

Thus, the imperative then for Talon is to get "big investors" to buy into their venture and do to this, they are focusing on creating a feasibility study (by 2024) to shop around to big investors.

PAGES 14-17:
Here Talon provides a long, multipage list of things they need to do. And although they say they can afford to do "some" of this, they also say:

"There is no assurance the various business objectives, plans or milestone as detailed above will be completed on the timelines outlined (or at all). The exploration, development and construction of mineral projects are subject to a number of risks and uncertainties. See section below entitled 'Risks and Uncertainties'."

Which leads to the following statement.

PAGE 17 - 18:
"The next "milestone" for the Tamarack North Project is the completion of a feasibility study. This milestone is expected to be completed in 2024 at an estimated total cost of $16 million, including direct and indirect costs such as maintaining the land package, local costs, community and external engagement, overhead and public company costs. This amount compares to working capital of $18.6 million as of June 30, 2023."

Remember the above costs are in Canadian dollars. They are claiming they can complete the feasibility study in 2024 but as we noted, they likely run out of money in 2023. They need the feasibility study to go out and recruit new big time investors. They have been claiming they would have a feasibility study for well more than a year (possibly 2 years). It is easier said than done but they clearly have a poor record in delivering. But since financing IS THE PRIORITY and they need more mineral resources, they still maintain a big drilling program looking for more resources. The current "final" PEA set of resources was clearly well short as they were going after investors this last winter and spring. Indeed, this is likely why the stock has been dropping as insiders (potential investors) become more familiar with the project, they are voting to get out. To get a successful feasibility study, they need to connect a number of different areas which means the mine plan and scope must change dramatically. Thus they will need to completely "redo" their EAW. Although they publicly deny that they will need to expand their current scope, legal precedence in Minnesota will likely require this expansion.


The price of nickel has dropped significantly over the year, likely due to both an increase in supply (triggered by the previous high prices) and the decreased demand caused by the introduction of LFP and other battery technologies lowering the need for nickel.

Related to this, a couple of companies are coming out this year and early next year with a new lithium manganese ferrous phosphate (LMFP) battery that has the volumetric energy density of the old LI-Ion but with no nickel or cobalt, with much better safety, faster charging, better low temperature performance and 20-30% lower cost. If this remains true, this means the old LI-Ion battery is gone from the scene within the next year or two. See www.whichcar.com.au/news/new-longer-range-battery-coming-for-tesla-model-3 and https://electrek.co/2023/06/06/gotion-unveils-lmfp-ev-battery-it-says-can-deliver-1000-km-per-single-charge-for-a-lower-price/.

The new innovation is a new LMFP battery. This is a lithium manganese ferrous phosphate battery that outperforms the old nickel cobalt battery plus 20%+ lower cost. And if that is indeed the case, it makes no sense to use nickel in batteries … ever.

This would likely affect demand to the point that nickel drops to its "pre EV craze" days of around $15,000 a tonne. Since an underground mine is VERY expensive, this level of pricing may not support an underground mine.

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