AGM 28Nov - Feedback

All, here is my feedback from the AGM.

Preamble/Caveat

I had done a reasonable amount of prep prior to the meeting. Even so, I probably only got to ask about a dozen questions, as I was very conscious of the "when is this bloke going to shut up & sit down" syndrome in the audience. Therefore, I left a number of items unexamined. Anyway, I tried to attack the key concerns.

My following comments are simply based on my observations, notes & interpretation of responses:

1. Basics
AGM: Chaired by John Davidson
Present: 2 existing Board Members + PB + Coy Sec
Key attendees: Herr Weissenbeck (SMS); COMO; Gresham; Auditors; TNG key staff including Paul Vollant
SH attendance: approx 40
HC attendees Jvest, Box, Stephen118, Bobadah, Coolamine = 20+M shares

2. Resolutions
All passed - noted the closeness of S. Crow re-election
Exception,: Part D withdrawn by the Board- approval of 10% placement facility

3. PB gave business overview & future direction

4. Question time

A. Timelines

Challenged PB as to why so many projected timelines that had been advanced to SH had either been been missed, got dropped from the narrative or just did not eventuate? Outcome has been to create significant negatives, even with the long term faithful holders.

Think PB was expecting this challenge.He didn't fall on his sword, but did reflect his disappointment that some key targets haven't been met. His demeanor was pretty subdued.

My takeaway, we might be about to see more under-promise /over-deliver than the reverse. We shall see?

It's an enormous project to bring to fruition. The lesson surely is that since there are so many moving parts in many of the key targets, it's a question of what you really have control over? You might have a good handle on 90%, but the 10% that you don't means delivery is at risk & comms message gets confused. Results in trust from SH being under frequent challenge. Need to concentrate on key wins from here.

B. Finance

a. NPV

Challenged which discount % would underpin NPV going forward 8, 10 or 12%?

My view since the 2015 DFS had always been that 8% was a higher risk, but I did not have a mining background on business case analysis to constructively challenge this. Have suspected that the German financiers wanted a more conservative approach, thus we saw 10% & 12% calcs introduced for the 1st time in the latest FS.

I drew attention to the 8% still being used in the slide presso to the AGM? Yep, it's the detail that gets missed.

PB confirmed that it's likely that 12% discount rate will be used going forward. This is a confirmed change in analysis.

So, we can expect that the NPV will drop down to A$3.1m from A$4.7m going forward. Still very strong.
The new IRR of 44% would remain unchanged, which is outstanding, as is the new 3 year payback period.

b. Tivan revenue

Challenged why we see all the expense for Tivan in the stage 1 Capex numbers (ie A$541m ex EPCM & Contingency), but see no potential revenue reflection at all for Tivan (ie. Tivan production, royalty or licensing) in the DFS (probably should call this Life of Project (LOP) revenue)?

I just couldn't process PB's answer on this as he said potential Tivan revenue is included in the Capex?

We are suspecting that the potential revenue for Tivan is BIG, as would be its impact be on the SP.

Herr Weissenbeck was sitting in front of me - would give a penny for his thoughts on potential Tivan revenue as it would be surprising if his team had not crunched the numbers on potential revenue streams/markets as part of overall due diligence? Can't really imagine LOP Tivan refinery revenue numbers would not come into play in the German KFW financing discussions as part of their key risk assessment?

c. Potential Finance Structure

Queried PB as to whether the potential financing from the German KFW bank would cover the full A$853m Capex or would it be confined to Tivan & related activities, with separate funding arrangements for Mt Peake (ie. $541m for Tivan & A$207m for Peake ex EPCM $64m & contingency A$41m)?

PB gave a clear answer. Tick.

Tivan & anything related would potentially be funded by the German Export Bank.
Peake would be separately funded.
Both would be funded simultaneously.

Have been projecting this 2 part funding for some time. Great to have it confirmed...I'm sure they want to get on with it.
-Germans/Tivan
-Peake...Downer/Catepillar equity + NAIF funding + 30% share dilution.
So, is it just red tape & licensing as the roadblock?

d. BOOT

The ongoing Build/Own/Operate/Transfer costs of A$63.4m pa or A$562m LOM are significant but don't fall under Capex raising but will be off balance sheet. Will these costs be funded from cashflow?

Synopsis, FS now derisked further & flowsheet locked down - positive

PB confirmed yes.

C. TiO2 Offtake

Sought an update on the TiO2 offtake progress & how many potential players involved?

Pretty guarded on this. Confirmed that many interested parties from Europe/US/Asia.
Suspect we may not see this announced in 2017?

D. EIS

-Update on Peake EIS.

All amendments have been lodged with NT Govt. Simply now waiting for the final approval so that next stage Fed Govt & licensing approvals can commence

-Update on Tivan EIS

Early days but not anticipating problems as INPEX EIS next door went thru without significant issues. As PB said last year "we have the same ducks flying past". Let's hope he's right.
PB made an interesting comment that TIVAN NT Crown land grant is likely to be ceded to TNG at which time it would become an asset on the books. Nice.

E. Native Title/Licensing

This was a left field problem.
PB advised that the Native Title Agreement with the Central Land Council was lodged with them in March 2016.
He had previously suggested that we only had legals to finalise!
Now he has indicated there is no Agreement in place & that the CLC has been derelict with 2 CLC members being a problem.
PB said that TNG have now put the CLC on notice that Agreement needs to be reached by April 2018.
Make no mistake, this Agreement is critical to the NT mining licence being approved. We go nowhere without this.
Hopefully, Eddy Fry can influence this position?
I'll call this a red flag.

F. Board Structure/Horsepower

Challenged PB on previously advising that a new Chairman would be appointed by Jan 2017. It's now Nov 2017. Where are we?

PB indicated that a number of candidates have been part of a global search, but they have yet to find the right candidate. Very interesting.

My view, and I suspect that of many others, is that we need some more horsepower in the top team to move us forward. This is not an issue that can rest.

Of interest, PB indicated that a new equity partner may be under consideration. This should attract our attention.
Personally, I would like to see someone like Twiggy Forrest come on board as the Chair. That would shake us up.

At the CEO level, it was good to see PB release himself from any TRT responsibility with the appointment of a new TRT CEO. He needs to focus on TNG only....he's been a champ to date. It must be frustrating to find delivery targets keep slipping.

G. Comms

Coolamine asked a critical question about the nature, quality & timing of comms.

PB listened & responded that he thought that the comms strategy has been OK he was happy to review.
I'm not sure they get that the Comms strategy has significant room for improvement.
Watch this space.

H. Sumitomo/VFRB

John Davidson was pretty bullish on the VFRB cost curve moving fairly quickly towards break even with Lithium at a grid scale level. Although he's currently a Lithium user, he's open to change & clearly is all over the VRB technology indicating that China is key to VFRB development.

He said the "levelised cost will be the key to VFRB being competitive (with Lithium)"

Latest indications suggest 2018/9 could see this cost curve come together...and Tivan electrolyte will kill the competition on this curve.

Asked him why Sumitomo hadn't secured a VFRB trial site in OZ (particularly in the South Australia battery bid)? Can't really say what he said...but let's say it was a missed opportunity.

Synopsis...think John Davidson could be an important cog in our future VFRB wheel.

Also, PB hinted that Sumitomo is the potential partner for the remaining 40% of V offtake to underpin their VFRB business. Would be interesting if Tivan became the V2O5 feed for this?

I. Other questions

a. Production Development timing

Potential times for production development timelines were raised.

Answer was 24 mths for Peake from the date of license issue & 24-36 months for Tivan, which posed a question regarding synchronisation?

b. Peake Flowsheet & Resources

-Como Engineering has completed the Peake flowsheet & it is now ready for tender (permitting & license dependent).
-The Peake mine site equipment tender is also complete ready to go.
-The Project development team has been identified & is ready for appointment pending key decisions.

K. Next Steps

P 24 of the presentation sets this out so please refer.

The precis is:

Short term

1. EIS approval
a. NT Gov
b. Fed Gov
2. TiO2 offtake agreement
3. Mining Agreement-Native Title
a. CLC decision by April 2018
4. Mining License issue
5. Board FID decision

PB Optimistic View
Commence Peake build mid 2018, ensuring Community engagement, given that this will be the biggest NT Project & the Gov wants it to happen.

My Synopsis.
We have shifted the goalposts out by 6 months.
Concerned about risk surrounding CLC agreement.
Get a new heavy hitter Chair & shake up the Board...move up gears.

Cheers.

Jvest