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Special report: Strategic metals play TNG has taken another step towards developing its next-generation project in the Northern Territory after securing a pivotal binding term sheet for the distribution of its TiO2 (titanium dioxide) product – the final product in its potential production portfolio to receive a binding agreement.

The binding term sheet means TNG (ASX: TNG) now has life-of-mine distributors for all three of the products which will be produced at its Mt Peake Project: vanadium pentoxide, titanium dioxide pigment and iron oxide.

The latest agreement follows the formal signing earlier this month of the landmark Mount Peake Native Title Mining Agreement, which clears the way it to secure Mount Peake Mining Leases.

All this means that TNG is now positioned to complete financing for the $850 million Stage 1 Mount Peake Project.

TNG emerged from a trading halt this morning to announce a strategic binding term sheet with specialty chemicals distributor giant DKSH, a publicly listed Swiss company founded more than 150 years ago.

The term sheet encompasses life-of-mine off-take for up to 100 per cent of Mount Peake’s titanium pigment production – one of three high-value products slated for production from the mine and its associated downstream processing facility.

TNG is planning to produce a high-durability titanium dioxide pigment for the outdoor coatings industry, which represents the largest pigment market at present, before expanding to other high-value niche markets.

Magnetic gabbro
Magnetic gabbro

The company has previously announced binding life-of-mine off-take agreements with Korea’s WOOJIN Metals for its vanadium output and with Gunvor Group from Singapore for its iron products.

TNG managing director Paul Burton said the parties would now work to finalise a binding off-take agreement within six months.

“Together with other key permitting milestones, including the expected grant of the Mount Peake Mining Licence this quarter, this binding term sheet will allow us to progress our commercialisation strategy for the Mount Peake Project, including completion of the overall funding package,” he said in a statement.

DKSH clearly fits TNG’s strategy of securing what it describes as “Tier-1” strategic partners and off-takers.

The group is headquartered in Zurich with a footprint that extends across the Asia-Pacific region, with 780 business locations in 36 countries and over 30,000 staff. It is one of the top-30 Swiss companies ranked by sales and employees and generated US$11 billion in net sales in 2017.

The signing of the titanium off-take agreement follows a spate of recent milestones for the emerging strategic metals company.

Earlier this month, it announced the formal signing of the landmark Mount Peake Native Title Mining Agreement between its wholly-owned project level subsidiary, Enigma Mining Limited, the Central Land Council and the Eynewantheyne Aboriginal Corporation RNTBC, the registered native title body for the Traditional Owners of the area.

This clears the way for the grant the Mount Peake Mining Leases, which is expected within the coming weeks.

This in turn means that TNG can get cracking on completing final off-take agreements and securing financing for the $850 million Stage 1 Mount Peake Project.

Located in Australia’s northern development hub, 230km north of Alice Springs, Mount Peake has a JORC compliant resource of 160 million tonnes grading 0.28% vanadium (V205), 5.3% titanium (TiO2) and 23% iron (Fe), 118 million tonnes of which is at Measured Resource status.

The November 2017 feasibility study outlined a $4.7 billion NPV and 44 per cent Internal Rate of Return for a 17-year project commencing production at 3Mtpa before expanding to 6Mtpa after four years.

The study forecast net annual operating cash-flows of $738 million and life-of-mine net cash-flow of $11.7 billion – and that was using an AUD: USD exchange rate of $0.75 and an assumed vanadium price of US$10 a pound (half of what it is today).

The vanadium price has gone from strength to strength this year, more than trebling in the past 18 months and recently hitting a new 13 years high of US$33 a pound in China as a number of long-term market forces have begun to take hold.

Among them has been China imposing stricter regulations on its construction industry to increase the use of vanadium in rebars and promote high-strength steel

The runaway price, which many analysts say is set to go even higher as demand outstrips supply, compares with the price of US$10 a pound used by TNG in its updated November 2017 Mt Peake Definitive Feasibility Study.

Against this backdrop – and with permitting now almost complete – there is growing optimism that financial close for Mount Peake might well come in 2019.

 

This special report is brought to you by TNG Limited.

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