Ann: Updated Feasibility Study Results, page-53

ASX,

I have taken a little more time to work through my analysis on the revised DFS today.

Agree with your emphasis on where the Capex has changed (Tivan Refinery stage 1 cost reduction) - down from A$647m in 2015 to A$541m in 2017. This is very significant IMO, very much directed to the pointy end German ExIm Bank negotiations.

It was notable that the BOOT arrangements for the Tivan plant remained off-balance sheet at an annual cost of A$63.4m or what appears to be A$562m over LOM.

This A$106m Capex reduction to the Tivan build reflects the significant work undertaken in the optimisation study by the various partners, particularly SMS. That's serious money.

Ironically, the Peake stage 1 Mining & Infrastructure Capex remained virtually unchanged from A$208m in 2015 to A$207m in 2017.

So, for me, I still see 2 distinct financial negotiations at play:

1. A$562m with the German ExIm bank with SMS playing the key proxy role;

2. A$207m for Peake completed separately, including NAIF (say A$50m) with the remainder found through Downer/Catepillar equity + some financial dilution.

I don't think the funding model has changed that much, it's just improved thru the reduced Capex.

I wasn't surprised to see the IRR improve to 44%, given that the payback period has reduced by 25% to 3 years, with a minimal OPEX increase. Both of these figures are outstanding.

Try finding another start up development that can project that it will fund A$792m of stage 2 development from free cashflow after the first 3 years of operation! Wow. So, if we can all keep a decent share holding until 2022 who knows what our share price might be?

The slight increase in total OPEX costs caught me a bit by surprise, thus we have a slightly reduced NPV down from A$4.9m to A$4.7m. Still very, very good.

I note that the pre- tax NPV still uses an 8% discount factor...but for the first time they also include NPV projections based on 10% & 12% (which theoretically reduces the NPV outcome). My guess is the Germans might have asked for these alternatives? I think I'm on the record some years ago suggesting that 8% could be optimistic, as I have been using 12% & 13% in business cases, but not in the mining industry.

Likewise, the "real" & "nominal" forecasts used for cashflow projections for the three commodities remained flat at best for TiO2 & Fe2O3 but significantly up for V2O2. A lot of realism being projected from the external consultants here.

Here's the bit that puzzles me (& Mr Plough touched on it earlier) . On the one hand, the DFS identifies & refines the Capex/Opex & BOOT costs associated with the Tivan Refinery, but on the other hand we have yet to see any potential revenues or royalties reflected in the DFS? So, you have all of the spend & none of the revenue? So much upside.

No doubt, TNG would regard these potential Tivan revenue projections as being ultra sensitive data in the current offtake negotiations for TiO2. Likewise, you would expect that the German Bank would require such revenue projections to underpin its lending risk analysis. What a sleeper this aspect is.

An earlier contributor today suggested inter alia that this revised DFS was "smoke & mirrors people".
I couldn't disagree more!

In TNG's words "the updated DFS & operating cashflow model have reaffirmed the compelling business case for development of the Mount Peake Project, confirming its potential as one of the premier undeveloped strategic metals projects in the world".

Overall, I see this as a very strong DFS revision. We are now perfectly set up for a key announcement between now & the AGM....so much so that I have just booked my flight from SYD next Monday. Will be interested to see which of the other TNG tragics make it to the AGM.

Cheers.

Jvest