Seems like I've watched this movie before with another capital raise announced and a looming AGM where more questions will be asked about our continuing subdued share price, a Board that is far too thin to take this project to execution mode and production, and why we don't have a timeline that looks to evidence expectations and accountability around next steps - given we should be close to FID in the near term. This is not where this year's AGM should be focused on but rather our road to project execution and production.
Friday's Announcement
- As an option holder who has put another round of dollars into TNG off the strength of the project, I'm clearly underwhelmed by Friday's announcement and the scant disregard for long term strategic shareholders. As all investment carries investment risk I accept that in my decision making.
- However, when you consider how far progressed this project is and the sheer thematic and metrics that surround it, there was a clear runway to accelerate the share price. Let's not use the NTEPA decision as an excuse, that was well managed ultimately by TNG, but again the communication early was not assertive nor reassuring for shareholders. Even the recent speeding ticket from the ASX we responded with the usual nonsense that the company is not aware what is driving the share price north. That was a perfect example to promote the company again by giving a factual response of where the project is at - again another missed market opportunity.
- Perhaps the options needed to be for a longer duration - 18 months - to ensure their ability to be well in the market by allowing the head stock to be sustainably into the 20s and 30s rather than by way of a recent spike.
- Again the last capital raise by an inferior broker didn't help. Subsequent actions and dumping of the stock by their investors who continued to hold the options was deplorable. I suppose as they say "you sleep with dogs you wake up with flees". The current capital raise has a different tone and context as discussed below which, aside from everything, is a significantly positive step.
- I will reserve my right to engage with the Board at the looming AGM. I will let my questioning do the talking and I will be very direct on the point of shareholder value. That is a clear requirement of any Board and they have failed to take that into account for another year when you consider all the "fodder" they have had at their disposal to sell the TNG story - which we all know is compelling on so many levels. That brings accountability and that threshold has now been reached in my view. We need a Board for the future!
Notwithstanding my sentiments from Friday's announcement, I thought to bring some balance to the landscape and pen some key observations that were notable in the last month or so for TNG.
To start with, I thought the Allan Kohler interview was good as it picked up on a few things I didn’t quite know about, or have an appreciation of until now. As we know, Allan is a well respected commentator and his comment that “TNG is Terribly Undervalued” really resonated with me.
CAWSE EXTENSION
Nickel Cobalt project
TNG is free carried with a 20% exposure to the project which has 100 million tonnes. It’s currently on ‘Care and Maintenance’ but the private entity which owns the other 80% intends to re-start production in 2022. TNG holds a 2% Net Smelter Royalty on this. TNG could sell this or have cashflow coming in to help in paying the bills. Cobalt, a good commodity to have, as it goes into all those lithium batteries.
FULLY INTEGRATED MINE
In the end, a consolidated fully integrated mining refinery operation in the one location will deliver a stronger and more robust project.
This is evidenced by savings on capex (no cyclone protection for a 100 acre refinery) together with savings on power, diesel and no double handling of ore. No trains carrying waste from Darwin back to mount Peake. No need to train 5,000 tones of ore to Darwin each day.
Also no stoppages to the refining schedule due to inclement weather. Efficiency is left, right and centre when you are dealing with a project of this scale.
Paul Burton said “ there’s a lot of support from the EPA for this new direction, which is a great sign, for completing the permitting for the Refinery".
TNG’s OFF-TAKE AGREEMENTS
Allan Kohler was shocked that Paul and TNG have managed to create "35 year, life of mine, take or pay contracts".
They have a floor price to protect TNG’s cost of production. The prices are reviewed annually and have a slight discount to the annual price, but remember the huge margins, as Mount Peake will be the lowest cost producer on the planet for these commodities.
ESG CREDENTIALS
When taking a mine to production the first hurdle is now your green ESG credentials - "What’s your plan to be carbon neutral by 2050". Paul said the green hydrogen plant maybe in production before Peake is, and the green push by TNG helps from an NTEPA perspective in terms of obtaining the permit, and from a financier point of view in terms of opening up Green Bonds, a cheap finance source. Mount Peake will be the greenest mine in the world, so the greenies won’t be able to disrupt TNG’s plans anymore.
OTHER ASPECTS
TNG has the ability to create Vanadium Electrolyte, which instead of selling the material, you can rent as it ‘never depletes’ as lithium does.
A new Financial Model / Feasibility study will be produced incorporating these new efficiencies coming through.
A 10% reduction in the exchange rate adds 20% to the NPV.
PB is “very confident on raising the capex” which means they are in a good space with the financiers. As the CFO said he will get this project financed and he will in my mind.
CANNACORD
A quality broker appointment.
They are no Sanlam. Their sophisticated institutional investors are looking for multiples not a 1/2 cent move. They are very active in the ‘Mid Tier Mining space”. TNG is finally getting instos on the register so the "the smart monies coming in".
Appointing Cannacord is a positive move brought about by change merchant Jonathan Fisher, a quality CFO, bringing TNG out of small cap land and taking it to the mid-tier miner we know it will be. Cannacord in 2021 raised $86 Billion for projects like TNG’s, across 713 transactions.
FINAL COMMENTS
Let's all acknowledge that TNG is putting the finishing touches on the consolidation at Mount Peake, finding more efficiencies and project optimisation in the immediate period ahead. We should see final permitting and project financing in the first half of next year with FID and construction to follow. I’ve spoken to a few of the top 20 holders and they will continue to accumulate TNG. They will let the dust settle first and see the capital raise take its course.
Remember we are dealing with non-traditional commodities located in a vertically integrated mine that will be all in the one location, with huge efficiencies and savings to flow through. It will be the lowest cost producer on the planet and with these new savings flowing through, the financial model, margins and NPV will continue to grow favourably for shareholders and the all important shareholder value - which we are all yearning for and deserve to see come through to better align market cap with projected NPV.
