Special report: Sydney-based resource analyst Mark Gordon from Independent Investment Research has upgraded his valuation of strategic metals developer TNG (ASX:TNG) to 60c a share following a landmark debt mandate announced last week.

Gordon’s bullish outlook for the stock stems from what he says is the “progress made and further de-risking” of TNG’s flagship Mt Peake vanadium-titanium-iron project in the Northern Territory.

The Perth-based company last week mandated the leading German-based resource financier KfW IPEX-bank to structure the total debt package of up to US$600 million (A$830 million) to underpin the financing of the Mt Peake Project.

The mandate commences on 15 January, with KfW expected to structure, coordinate, lead and manage the debt finance syndicated, including advising on the best strategy to maximise cover instruments from the Export Credit Agencies (ECAs).

“One of the strengths of going down this finance route is the potential to access ECA cover, which can result in relatively low interest rates, thus reducing the cost of financing when compared with other debt finance options,” Gordon wrote in a new research note released yesterday.

“The final capital requirements will be ascertained following lenders’ due diligence and the ongoing Mt Peake Front-End Engineering and Design (FEED) study,” he said.

“KfW IPEX-Bank, as part of the Frankfurt headquartered, German Government-owned KfW Group, is one of the leading global providers of export credit and project financing.”

Gordon says the signing of the mandate with KfW is critical, and one of the final steps leading to the development of the $850 million Mt Peake Stage 1 Project, with recent milestones including:

  • Territory and Federal Government environmental approvals for the Mt Peake mine site;
  • Signing of the Mount Peake Native Title Agreement with the Central Lands Council and Eynewantheyne Aboriginal Corporation;
  • Signing of a binding titanium products term sheet; and
  • Grant of the Mining and Ancillary Leases for Mt Peake.

“The grant of the Mount Peake site leases is one of the last major permitting processing prior to construction and development of the project,” Gordon says.

“Remaining major permitting activities include environmental approvals for the Darwin TIVAN® plant site, with work on the ongoing Environmental Impact Statement ongoing and due for completion in early 2019.”

Gordon says another significant factor in obtaining finance is having off-take agreements in place, with the recent titanium products agreement being the final one for the three products to be produced from Mt Peake.

He says the recent progress on the project has also come at a time of continuing strong prices for the project’s three products, with these being positive for the already strong project economics.

“With ~A$18 million funding in the bank, the Company is now largely funded through to the main project development funding, with this excepted to be finalised, all going well, in early to mid-2020.”

Gordon’s valuation of TNG is based on a conceptual 70:30 debt to equity mix, an updated Australian to US Dollar exchange rate of 0.72, an increase in the risk multiplier to reflect advances in the project, and an increase in the cash and current shares on issue to reflect the current position.


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