TLG (ASX) Talga's Current NPV

Originally posted by Gero: ↑
Talga's Current NPV

If you add the NPV's in the Vittangi DSF and the Niska SS they have a combined NPV with an 8% discount rate of between US$3.5B and US$5.7B.

https://www.talgagroup.com/irm/PDF/47146b39-9c1e-42ef-830e-15ef895e5b63/RobustDFSPavesWayForTalgaBatteryAnodeProject

https://www.talgagroup.com/irm/PDF/00041131-e82a-48d2-83bf-27b0a1003b4d/NiskaStudySupportsGloballySignificantAnodeProjectThe range is due to the Talnode-C sale price range of $7,500 to $11,250/t used in the Niska SS.

In the Vittangi DFS, a 24 years LOM is US$12,312/t anode and is forecast as a flat price of US$11,875/t anode from 2030. As this is a more detail document and has been completed since the Niska SS I think we can use the upper range of Talnode-C sales price of US$11,250/t in calculating the Niska NPV.

NPV 8% Discount Calculation

Vittangi DFS $1,054,000,000

Niska SS $4,650,000,000

Total $5,704,000,000

Share On Issue 303,000,000

US$/SP $18.83

A$/SP $25.44 Ex Rate 0.74

So even at an annual 100kt Talnode-C production rate we get a current NPV SP of $25.00.

With a current SP of $2.05 the market is valuing Talga a less than 10% of the combined NVP's.

So what will move the SP closer to the $25 SP NPV?

1. JV and Project Funding which we should know by the 30/11/21.

https://www.talgagroup.com/irm/PDF/0371d89b-d2b1-4be8-b58b-9dbfa40e5a6e/LKABAndMitsuiSignLOIExtensionWithTalga

2. Permits. If you read Zoulou's detail post on this, he believes that "The decision is due in November 2021 with the formal permits enacted by the first quarter of 2022." which aligns with the LKAB And Mitsui LOI Extension to the 30/11/21.

https://hotcopper.com.au/posts/54503080/single

3. Off Take Agreements. It is my opinion the Auto OEM's and Battery Manufactures are trying to play hardball with Talga with regards to pricing. As we have seen with VUL you don't need a DFS, Permit or even a proven process to get a conditional off take, if you are willing to bend over on the pricing. The longer Talga can hold out the more desperate the Auto OEM's and Battery Manufactures are going to become and more willing to pay the price that Talga wants.

In the June Quarterly is said "Talga is now working directly with 11 automotive companies and the majority of announced battery manufacturers in Europe (Figure 3) under advancing qualification and procurement processes.

https://www.talgagroup.com/irm/PDF/1d51919f-9d5e-4fe1-a3fe-0ecd0a2b8c68/QuarterlyActivitiesandCashflowReport30June2021

So it is now a game of Musical Chairs with the Auto OEM's and Battery Manufactures dancing around Talga waiting for one of them to make the first move. That is when the music stops and everyone else will scramble to get a seat on the very limited chairs. They all know that there is going to be a shortage of anode material and none of them can afford to be left standing without a seat at the Talnode-C & Si banquet table.

4. Diamond core assay results from the initial stages of the Vittangi drilling program (TLG:ASX 30 August 2021) are expected in November 2021 and results from the Nunasvaara East target are expected in December.

https://www.talgagroup.com/irm/PDF/3d7c5120-1151-46fb-a685-50be1fefbee1/SkyTEMresultsanddrillingupdate

It is possible that we may have all four of the above before the end of the year or by the middle of next year at the latest. If that was the case, I could see the SP well north of $10. Which would give Talga an MC of ~A$3B. If VUL can be valued at ~A$1.4B and NVX at ~A$4.25B at their stages of development then I think A$3B for Talga with all four boxes ticked is not unreasonable, as it would still be less than 50% of the combined NVP's.

Also remember that all the calculations are only on 100kt of Talnode per annum. I'm sure that once resource upgrade drilling is completed we well see production increase 5-10 times this amount over the next 10 yrs. Giving Talga a further 5-10 times increase in MC.

There is no such thing as a sure thing, but I'm confident that there is minimal downside risk at the current SP.

As always do you own research.

Gero
Expand

Depends on many items coming together for the expanded production cases not least the full validation and product sign off for initial production.

Wet blanket and not the same but a clear warning for TLG how they plan to enter production vs current (not future) NPV is FYI.

For the JV path to production the new TLG project % ownership must hold and continue to present an undervalued case for TLG shareholders and the market or the haircut comes out.

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Talga's Current NPV, page-6

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