TNG Limited (ASX:TNG) progress towards production continues with two out of three product offtakes now in place, a binding agreement for the refinery design, potential for international processing plant sales or licensing, an MoU for mine/refinery building and mine operation, and recognition by S&P through its inclusion in the ASX All Ordinaries Index.
► Strategy: Primary asset is the Mount Peake Vanadium-Titanium-Iron Mine project around 230km north of Alice Springs with an associated refinery located in Darwin’s new East Port. The current feasibility study covers an initial 17-year mine life. Mine and refinery construction are expected to take two years, with production starting in 2018.
► Strategy Part 2: In addition to mine development TNG has other base-metals assets at earlier stages of development. The intention is for the majority of non-ferrous assets to be spun out as a new company, Todd River Resources, when market conditions permit. Holders of TNG stock will receive an in specie distribution of equity in Todd River Resources.
► Valuation: Using mining parameters from the company’s feasibility study and Hardman & Co commodities price estimates, once financed and permitted, the project supports a Fair Market Value for 100% of the project, not including tax or interest, of A$4.63/sh on a fully diluted issue of 723m shares (see note published in Dec 2015 for full description of the model).
► Risks: There are low political and technical risks but moderately high project development and global commodity price risks. The company has secured life-of-mine off-takes for a minimum of 60% of both its vanadium and its pig iron products. Negotiations for project finance are on-going, but construction and operational agreements have been signed. A long-term agreement to cover sales of the pigment grade titanium dioxide product remains to be signed. Inclusion in the S&P ASX All Ordinaries Index should raise the company’s institutional profile.
► Investment summary: The main potential for rapid growth is the start of production of three high-value mineral products from a long-lived mine. On the current schedule this is due in 2018 with a production step up four years later. Project delivery has been significantly de-risked, with additional binding agreements continuing that improving trend, but project finance has not been finalised and dilution of current holdings is expected.
