Tim Treadgold: TNG goes for heavy lift, might just make it
Link copied to
Small mining companies, as a general rule, struggle to finance and build big projects, but that might not be the case with TNG’s proposed Mount Peake vanadium development in the Northern Territory.
With an estimated pre-production capital cost of $853m, Mount Peake looks to be a stretch for TNG with its stock market value of $101m. *
What adds to the confidence of TNG’s management team is that steel-hardening vanadium is just one of three potential product streams, with titanium dioxide and iron ore rounding out the mix, which could see Mount Peake succeed where pure-vanadium mines have consistently failed in Australia.
But the real key to TNG’s plans to shift Mount Peake from planning and design to production over the next three years lies in the processing technology which maximises the value in the polymetallic ore, and the partnerships formed with technology providers and offtake partners — the customers who want to buy TNG’s finished products.
A team comprising the Australian government’s science and technology arm, the CSIRO, a Perth-based mineral process specialist, METS Engineering, and Germany’s SMS Group, has worked with TNG staff to develop (and patent) a technology to separate the vanadium and titanium from the iron in Mount Peake ore.
On the other side of the business there are sales agreements covering the three products. Woojin of Korea, Asia’s second biggest ferro-vanadium will take a minimum of 60 per cent of Mount Peake’s vanadium. Swiss-based DKSH will take the lion’s share of the titanium dioxide, and European commodity trader Gunvor will buy much of the iron ore – which may be upgraded to pig iron.
TNG chief executive Paul Burton told an investment conference in Queensland last week that Mount Peake was a world-class, long-life project in a stable location, poised to proceed.
The orebody, discovered 10 years ago, is close to existing road, rail and power supplies which would support the concentrating stage of the business, while a site for the metal refinery had been allocated by the NT government close to Darwin’s port.
A key factor in Burton’s talk, and the key to what happens next, were details of a financing arrangement struck with Germany’s KfW Ipex-Bank, a specialty financier with deep European roots.
KfW has a mandate to raise up to $US600m ($A850m) for Mount Peake with a list of possible finance providers including strategic investors, offtake partners and international institutions such as government trade financiers.
Financing at a time of stress in the world banking system, and uncertainties created by the China v U.S. trade war, will make KfW’s job a lot harder than it might have been last year, but Burton says he is confident that an acceptable finance package can be structured.
Other big projects by small miners taken through to the point of pressing the development button have often seen the introduction of a big brother to help finalise the planning and help with construction and marketing, and that is a step that TNG might take.
Much of the heavy lifting required to get Mount Peake to where it is today has already been done, though investors remain to be convinced, mainly because the equity component in the financing package could require the issuing of a large number of new shares.
On the market, TNG has not been a star performer for some time, trading today at around 10c, which is up 2c on early April, but roughly where the stock was at the start of the year.
The mineral resource of 159 million tonnes assays an average of 0.28 per cent vanadium, 5.4 per cent titanium dioxide, 23 per cent iron, and 8.4 per cent aluminium.
That raw material will be passed through a concentrator, which will boost the grade to 1.04 per cent vanadium, 16.35 per cent titanium and 51.4 per cent iron, and then railed to Darwin.
In the refining stage material will be fed into the patented Tivan process, which uses heat and hydrometallurgy to extract the vanadium and titanium with the annual output expected to be 11,000 tonnes of vanadium, 150,000 tonnes of titanium and 500,000 tonnes of high-grade iron ore.
Burton told the Gold Coast conference that demand for vanadium was strong with the steel industry retaining its role as the major consumer, but with increasing interest in the metal for use in battery storage systems.
Because Mount Peake is expected to represent about 6.8 per cent of the global market for vanadium it should be easily absorbed, as could the titanium dioxide which is expected to be of the highest quality and able to command a peak price, while the 500,000 tonnes of iron ore is a drop in the global steel bucket.
As currently planned, Mount Peake will start as a 3-million-tonne-a-year mine, doubling to 6 million tonnes after four years. Payback on the $853m capital cost is expected in three years with the internal rate of return estimated to be 44 per cent.
The current operational focus is on final design and financing, with construction starting next year and first production in 2022.
* Three hours after Stockhead published this story on TNG the company announced a $15m capital raising program with $10m coming from a German fund, Delphi, and another $5m expected to come from a one-for-20 share issue priced at 9.3c to existing shareholder. The funds will be used to accelerate work at the Mount Peake project.