impressions from the european roadshow

Hello Down Under,

I had the chance to meet CEO Paul Burton during his roadshow through Germany.
As i have been quite busy lately it took some time for me to conclude my research on TNG.
As a previous poster put it, this is about boxes being ticked.

So here is a summary of my research:

1.Overview

TNG Limited
285 Mio shares outstanding with a further 21,4 Mio options
Marketcap of ~ 35 Mio AUD (@ shareprice of 0.12 AUD)
Cashposition of ~ 6 Mio AUD after a placement of 2.8 Mio for 0.11 AUD this year

2.Management

Well i talked to CEO Paul Burton in Germany and Paul made a very determined impression on me. As i talk to directors of different companies frequently i think i am able to make some comparrisons and Paul clearly was in the upper league of deciders i have spoken to.Of course this is a subjective statement, but IMO he seemed very positive about future developments without being exaggeratedly euphoric, as is often the case when directors start talking about their own company.
And i think that the directors hold about 7% of the outstanding shares speaks for itsself.


3.Projects

3.1.Main Project Mt Peak

Located in the Northern territory, with a well connected infrastructure. (Rail/Highway and gas pipeline close by)
A Jorc Resource in the inferred category of 140 MT with 0.3 % V2O5-9% TiO2-35 % Fe. The companies exploration target is in the range of 500-700 MT. Drilling is expected to start soon to upgrade part of the resource into the measured and indicated category.
Due to TNGs new hydrometallurgial process which enables TNG to extract all three minerals with high recoveries ( 90%), the company was able to come up with an improved scoping study in the February of this year showing very encouraging numbers. Initial production is planned to be 2Mtpa starting from 2014 and will be ramped up to 5Mtpa after 3 years. Capex requirements are expected to be 370 Mio for the first stage and an additional 307 Mio AUD for the upgrade, which should be partially financed from Cashflow. OPEX is estimated to be in the 46 AUD range.
The study came up with an annual net Cash Flow of 148 Mio ! although as the AUD tends to be very strong against the USD recently (and IMO will continue to do so in the future) this number is probably too high. At a parity exchange rate the net Anual Cash Flow is still expected to be an impressive 73.5 Mio.
And i do think that a weak USD will most likely mean higher commodity prices, so there is something to make up for the unfavorable exchange rate.

Furthermore the outlook for vanadium (a very volatile commodity) is looking bright for the next couple of years. (keyword: use in batteries)
I have read some publications on TNGs and other companies websites concerning that matter and the way it looks chances clearly surpass the risks.
It should be noted that just recently another Australian vanadium play called Atlantic Ltd. (ATI) had no problems at all to finance its Windimurra Mine. So money is obviously streaming into the sector.
Currently the major supply of vanadium comes from countries like China,Russia and South Africa, not the most reliable suppliers for Western Nations. I guess most investors will have heard about the export restrictions for Rare Earths from China where currently 95 % of this particular commodity is mined. I think it can not be ruled out, that the Peoples Republic takes a similar approach for vanadium should they see their own industry in short supply. So a producer in a politically stable country might just be exactly what European,Northamerican or Japanese customers are looking for in a couple of years. And never forget the insatiable hunger from the Chinese for commodities. The recently signed MOU is a good first sign in that direction and as unsinkable has already mentioned we should be very close to a decision one way or the other. If the Chinese do decide to finance the project TNG could get a real boost sharepricewise-but lets just wait and see what happens, i guess we will find out very soon...

3.2.The Copper Projects around Mc Arthur River

From what i have read here at HC, i think these tenements are running under the radar of most investors.Paul told me, that the company intends to spend some time and effort on these lands in the next couple of months. In this regard i think it is important to stress that TNGs marketcap is just some 35 Mio AUD. There is the possibility of huge leverage if they can find some significant copper there. The Yah Yah EL for example had some waste dump of over 30 % copper. This reminds me very strongly of Horseshoe Metals (HOR) a comnpany with similar copper tenements with a history in copper mining with very high grade, but very low tonnage. Some months ago HOR published some drilling results with 5-7% copper which resulted in a 200% run up in one single trading day !!! Admittedly Horseshoes marketcap was only about 11 Mio before these results (thus the lever was higher) and is a pure copper play, but nevertheless there is huge possible additional upside IMO from that angle.
If TNG starts drilling there in the Fall i will be closely watching !


3.3.There are several smaller side projects, which are mostly outsourced (meaning TNG is free carried for an initial phase of exploration) In some cases TNG will get royalties for others they will get Cash, as just happened for the Manbarrum Zinc project, where TNG received the initial payment of 500.000 AUD this year, with another 2 Mio to follow in 2013.

My conclusion:

We have to wait and see what happens here in the shortterm (with the Chinese) but regardless this company has some very interesting potential and is not a one trick pony. The low marketcap of TNG falls exactly in my style of investing (searching for high leverage possibilities with limited risk) and i want to quit with a quote from another fellow HC poster:

?If you dont see a possible Tenbagger, dont invest in the company?
Its still early days, and there are still some boxes, which need to be ticked, but the potential is obviously there.

As always DYOR

Wantedman