Resource Rising Star Note

TNG can “ascend the Mount Peake” without unnecessary dilution, says Patersons Securities

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The Mount Peake vanadium-titanium-iron project is sufficiently robust financially to support a significant component of debt financing, making a large capital raising and significant shareholder dilution for developer TNG (ASX: TNG) “unnecessary”, according to a new research note by Patersons Securities.

In his initiation note on the emerging strategic metals producer, well-known Patersons resource analyst Rob Brierley recommends the stock as a SPEC BUY, saying he expects a “potential positive re-rating” on further announcements of off-take agreements and funding arrangements.

TNG unveiled a robust Feasibility Study on the Mount Peake Project in July, highlighting a “potential world-class project with promising financial outcomes”, Brierley says.

Since then it has signed a life-of-mine off-take deal with Korean ferro-vanadium group WOOJIN for a minimum of 50 per cent of Mount Peake’s vanadium output.

“TNG is now set to target project approvals, further off-take agreements and project financing with construction slated to commence in early 2016 and, potentially, first production in 2018.

Brierley says the robust economics of Mount Peake will support a “significant component of debt financing”, “especially considering the tightening of supply in the vanadium market and the falling Australian Dollar”.

The July DFS found that Mount Peake would generate an Internal Rate of Return (IRR) of 41 per cent, based on a pre-production cost of A$970 million, total estimated life-of-mine net cash-flow of A$11.6 billion and operating cash flows of A$13.6 billion over an initial 17-year project life.

The 2-stage project is designed to begin with 3Mtpa of ore being mined and beneficiated onsite with a portion being shipped to the TIVAN® plant, proposed to be located in Darwin, for refining.

Brierley says the TIVAN® process has the potential to be the “future standard” for processing of similar commercially viable ores and deposits.

“This technology thus gives TNG the competitive edge in the industry and has the potential to be a revenue generator down the line should the Company choose to monetise the TIVAN® process,” he says.

“We rate TNG as a Speculative Buy and expect a potential positive re-rating on further announcements of off-take agreements and funding arrangements,” Brierley says.

Mafew
DYOR