TNG Limited (ASX:TNG)

NEARING DEVELOPMENT
TNG Limited (“TNG” or “the Company”) has made significant progress towards a planned Final
Investment Decision (“FID”), expected by mid-2020, for its 100% owned Mount Peake Vanadium-
Titanium-Iron Project (“Mount Peake” or “the Project”), located in the Northern Territory (“NT”) of
Australia. The Project includes two components - the Mount Peake mine site located near Alice
Springs, and the TIVAN® processing plant in Darwin
A key advance, as presented in our December 2018 Flash Note, has been the mandating of the
German Government owned KfW IPEX-Bank as the lead debt arranger; the mandate commenced in
January 2019, and as part of the mandate KfW IPEX-Bank has been providing input, largely relating
to costs, into the ongoing Front-End Engineering and Design (“FEED”) Study being overseen by
the Company’s German strategic engineering and construction partner, SMS group GmbH (“SMS
group”). The mandating of KfW IPEX-Bank should allow access to export credit agency (“ECA”) debt
finance, with this generally having superior terms to traditional sources.
The FEED Study has resulted in an optimised delivery strategy as recently released; this presents
a single stage, 2 Mtpa project with a life of 37 years, in contrast to the two stage 3 Mtpa/6 Mtpa
project as presented in the original and updated Definitive Feasibility Study (“DFS”).
It is expected that the study will be completed by mid-2020, at which stage a FID will be made. This
has led to a slight decrease in expected up-front capex (and no requirement for expansion capex)
and an as expected incremental increase in operating costs - costs however are interim, and will be
firmed up in the ongoing FEED Study.
The Company now has ~80% by value of planned production under binding life of mine (“LOM”)
offtake agreements - this includes 100% of the planned 100,000 tpa of titanium dioxide pigment
(trademarked as TNG360â„¢) with Swiss based global group, DKSH, and 60% of the planned vanadium
products with WOOJIN Metals of South Korea. The Company is currently advancing offtake for the
planned 500,000 tpa of high grade iron fines products.
Significant progress has also been made on the permitting front, with the Mining and Ancillary
Licences/Leases being granted, following formal execution of the Native Title Mining Agreement and
environmental approvals - the final key approval is that of the Mining Management Plan (“MMP”),
with this document recently being lodged. TNG has also recently lodged the Environmental Impact
Statement (“EIS”) for the proposed TIVAN® facility in Darwin. Approval of both is expected in Q1/
Q2, CY2020.
KEY POINTS
Robust project: Although the Company’s modelling results in a lower NPV of A$2.8 billion (pretax),
the optimised delivery strategy for Mount Peake still results in a robust project with the inputs
used - our modelling indicates that it can readily absorb 15% adverse movements in both costs and
revenues.
Permitting and offtake largely in place: The Project is close to being fully permitted, and thus has
been significantly de-risked - this is also reinforced by having the majority of the potential product
value being under binding offtake agreements, including 100% of the titanium dioxide pigment
which is expected to provide ~60% of the revenue.
KfW IPEX-Bank: In addition to providing access to quality debt financiers (including ECA debt), the
bank undertakes very comprehensive due diligence with a hands-on role in the FEED Study, which
will result in robust outcomes and a potentially readily financeable project.
Cashed up: With ~A$20 million in the bank, the Company should be funded through to the FID.
VALUATION SUMMARY
Our risked, after tax and funded (using a conceptual funding model with a diluted share structure of
2.9 B shares) technical valuation of TNG has reduced to A$0.369/share from our previous valuation
of A$0.601/share as presented in our December 2018 Flash Note. This is largely due to the change of
project scope, and is in line with the change in the Mount Peake NPV as presented by the Company.
TNG indicative base case technical valuation - funded and after tax
Asset Value (A$m) Risk Factor Risked Risked/Share Notes
Mount Peake $1,512 70% $1,058 $0.362 Post-tax NPV8
Cash $20.77 100% $20.77 $0.007 September 30, 2017
Listed Investments $0.22 100% $0.22 $0.000 Current
Total $1,533 N/A $1,079 $0.369
Please note that our valuation is based on interim cost figures as presented in the Company’s
release of September 11, 2019. As noted by TNG, estimated costs may change with progress
of the FEED Study, and thus costs used, and hence the valuation should be treated as being