Tim Treadgold: why vanadium developer TNG could be about to power up
Investors are forgiven for overlooking TNG Ltd — a vanadium-project developer with a share price that has gone nowhere for the past two years.
But with demand for the steel-hardening metal starting to be influenced by its electricity-storage credentials, the TNG story could be about to power up.
Never an easy metal to produce or sell, vanadium has enjoyed past booms — and just as many busts. Wise investors will know — if they’re interested in exposure to vanadium — that’s when TNG gets interesting because it is a low-cost entry into a big game.
At a share-price of 12c TNG is trading at exactly the same price as mid-2016 — despite a sharp rise in the price of vanadium and titanium, the other key metal in its flagship Mt Peake project in the Northern Territory.
The main reason the stock has stagnated is that investors have been waiting for TNG to finalise the approvals process and financing for a mine and associated processing facilities with a hefty price tag of $853 million.
Progress on both fronts is being made with a native title agreement reached with traditional land owners last month and financing talks said to have reached the due diligence phase with a number of potential funders.
The next few months could see significant moves in the development of Mt Peake.
The project does have an advantage over other emerging vanadium projects — a finalised and comprehensive feasibility study which is ready of a final investment decision.
First mover advantage
The sooner TNG gets a green light for Mt Peake the better because it is a metal which still has a relatively small market that could be quickly satisfied even with the promise of demand from the battery sector.
That means there could be a first-mover advantage.
Among rival projects also getting ready to capitalise on the re-birth of interest in vanadium is the Indonesian-owned Windimurra mine in WA which was mothballed after repeated technical failures, and the even older but undeveloped Barrambie project, also in WA, which is being spun-out into a new company by lithium producer Neometals.
What everyone in the vanadium business is chasing is a combination of strong demand from its traditional use in making special (very hard) steel, and the rapidly commercialising vanadium battery which promises to displace lithium batteries in big industrial applications, but probably not transport.
In some ways, what’s happening with vanadium is similar to the way in which the nickel business is evolving with a base in steel (stainless in the case of nickel) and growing demand in lithium-ion batteries which are using more nickel and less cobalt.
TNG’s Mt Peak project is based on a 160 million orebody grading 0.28% vanadium pentoxide, 5.3% titanium dioxide and 23% iron.
The current plan is to start mining at a rate of 3 million tonnes of ore a year ad beneficiate (upgrade) that material to feedstock for processing in a proprietary technology called Tivan to produce three product streams: iron ore, synthetic rutile (a titanium product) and vanadium pentoxide.
After four years the project could be expanded to a mining rate of six million tonnes a year.
Mining and ore upgrading will take place at Mt Peake with processing at a plant near the port in Darwin after being railed from the mine site located 230km north of Alice Springs.
Sales deals in place
Significantly, and an advantage held by TNG over other new vanadium project, there are sales agreements in place for most of Mt Peake’s titanium, vanadium and iron products.
Project design and sales (offtake) agreements were put in place when prices for titanium and vanadium were markedly lower than they are today. They looked attractive then and more so today.
Vanadium in particular has developed what might be called a “double head of steam” thanks to a sharp increase in demand from Chinese steel mills which have run short of locally sourced material, and from growth in the production of vanadium redox batteries which are better at storing industrial-sized amounts of power from solar and wind farms than lithium batteries.
Vanadium an unsung hero
Over the past two years, as TNG’s share price has gone nowhere, vanadium has been the unsung hero of the battery business, enjoying a substantial price rise which has seen it easily outstrip better-known battery metals such as lithium, cobalt, nickel and copper.
Ferrovanadium, the most commonly traded form of vanadium, has risen from around $US27 a kilogram earlier this year to trade around $US65/kg, up 140% in six months.
The challenge for TNG is to connect all the dots that lead to a project development decision and that will not be easy in a market where financing for mining projects, especially those involving unique processing technology, can be hard to source.
If financing does prove to be an obstacle there is a fallback position for TNG and that’s the potential sales of an interest in Mt Peake to a bigger miner, or vanadium customer keen to secure future supplies of a metal expected to play a leading role in battery storage.
Whatever the outcome for financing and development TNG is a vanadium player with a world-class project on its books and given strong demand for the metal that should be enough to see the stock re-rated after two years on the sidelines.