TNG is developing the Mount Peake vanadium-titanium-iron project in the Northern Territory. Vanadium is highly strategic metal that has long been used as an alloy in steel to harden it, but is now in huge and growing demand for use in the burgeoning business of electric car batteries.
With commodity prices on the rebound, there is definitely a spring back in the step of Australian commodity producers – and in their share prices.
That is, if they are selling product and making money at the current prices, magnified by the Australian dollar.
For those that are still in the development phase, it’s a tougher road, particularly when they’re working in the more exotic areas of the periodic table.
That is the road that TNG Limited (TNG) is on. TNG is developing the Mount Peake vanadium-titanium-iron project in the Northern Territory. Vanadium is highly strategic metal that has long been used as an alloy in steel to harden it, but is now in huge and growing demand for use in the burgeoning business of electric car batteries. Mount Peake, located 235 kilometres north of Alice Springs, is one of the largest undeveloped vanadium projects in the world.
Mount Peake is one of the largest undeveloped vanadium projects in the world. It has a total resource of 160 million tonnes grading 0.28 per cent vanadium pentoxide (V2O5), 5.3 per cent titanium dioxide TiO2 and 23 per cent iron), with 118 million tonnes qualifying as a measured resource. The project has received Major Project Facilitation status from the Northern Territory government.
Last year TNG completed a definitive feasibility study (DFS) for Mount Peake, confirming a potential world-class project capable of generating outstanding returns. The study estimated a net cash flow of $11.6 billion over an initial mine life of 15 years, a pre-tax internal rate of return of 41 per cent and a net present value of $4.9 billion. Mount Peake’s nameplate capacity is estimated at 17,560 tonnes a year of high-purity vanadium pentoxide, 236,000 tonnes a year of titanium dioxide pigment and 637,000 tonnes a year of pig iron (crude smelted iron, used in steelmaking), yielding revenue of $27.3 billion over the initial 15-year mine-life.
It’s not just a matter of having these metals in one spot: TNG has to sell them once they’re produced, and none of its three are as simple as a traded commodity like gold or copper. TNG has had to find the customers before it commits to the project. In September last year it signed a binding life-of-mine off-take agreement with Korean specialist alloys company WOOJIN, which will take at least 60 per cent of the vanadium produced from the project. This agreement was struck at minimum guaranteed price based on the cost of production estimates determined under the DFS, 20 per cent above TNG’s forecast cost of production.
WOOJIN will also supply its ferrovanadium (FeV) production technology, and a FeV conversion plant will be installed at TNG’s TIVAN refinery, which will be built at the Port of Darwin. WOOJIN’s technology currently has the world’s highest vanadium recovery rate, and is expected to significantly enhance the Mount Peake project’s profitability.
TNG has been developing its wholly owned TIVAN process since 2009. The process is designed mainly for extracting vanadium, preferably as vanadium pentoxide, from an orebody that contains significant quantities of vanadium, titanium and iron, and also for separating the titanium and iron, preferably as ferric oxide and titanium dioxide.
It’s a unique process: existing methods cannot extract all three of these elements anywhere near efficiently enough to result in industrial-commodity-grade commercial products. The TIVAN process is also applicable to a much wider range of ores, and is much less energy-intensive: and being wholly hydrometallurgical, with no smelting involved, it is also has less environmental effect.
In addition, the hydrometallurgical processing of titano-magnetite ore also allows the extraction of valuable by-products, such as scandium, high-purity silicon and magnesium oxide.
TIVAN pilot testwork at CSIRO’s Hydrometallurgical facility in Perth exceeded expectations, producing vanadium assays greater than 99 per cent purity and greater than 90 per cent titanium recovery at up to 65 per cent purity, ideal for refining to high-value pigment grade.
Working with its German partner, SMS Group, TNG reported last month that it had successfully produced high-purity vanadium electrolyte for the first time, using vanadium pentoxide from Mount Peake. This work was done at SMS’ laboratories in Vienna, where the final engineering design of the TIVAN technology is being done.
The vanadium electrolyte (VE) was produced by dissolving and mixing vanadium pentoxide. Vanadium Redox Batteries (VRBs) require a very high-purity VE: starting with a high-purity vanadium pentoxide feedstock is the best way to guarantee this. TNG’s tests and optimisation work indicate that it will be able to produce vanadium pentoxide from Mount Peake at minimum 99.5 per cent purity, which is currently among the highest globally.
This work makes it virtually certain that TNG can enter the fast-growing VRB alternative energy sector. Combined with its existing capability to produce FeV using the WOOJIN technology, TNG is now well-placed to supply every vanadium market. TNG has started discussions with a number of potential VRB producers, and will work with SMS to evaluate the feasibility of the construction of a VE production facility integrated with the TIVAN plant. This would allow TNG entry into the local growing Australian and nearby South-east-Asian VRB sector as a regional electrolyte supplier.
At the moment, the VRB industry consumes about 4,000 tonnes of vanadium a year, and this is growing at high-double-digit numbers. TNG’s high-purity vanadium pentoxide is ideally positioned to supply the VRB market.
In June, SMS invested $1.5 million in TNG, as part of a $4 million share placement, to become a cornerstone investor, emerging with a 2 per cent stake in the company. SMS has been involved with TNG and the Mount Peake project since 2011, helping in the development of the TIVAN technology. SMS works closely with the German export credit banks with its projects, which opens up the possibility of TNG getting export credit agency (ECA) funding for Mount Peake. SMS is the second biggest writer of ECA business in Germany behind Airbus.
The strategy for the titanium dioxide pigment production from Mount Peake – which will be the highest-value product – took clearer shape in July, with the signing of a long-term agreement with US-based minerals and chemicals consulting firm TiPMC Solutions, which specialises in titanium dioxide and mineral sands. TiPMC will provide ongoing support to TNG for titanium dioxide business development and marketing, helping TNG to find the most suitable pigment producers or end-users to negotiate long-term off-take agreements.
The third product, pig iron, is covered by a binding life-of-mine off-take agreement with Singapore-based global commodity trader Gunvor for the iron products from Mount Peake, signed in March. Gunvor has agreed to buy at least 60 per cent of the pig iron products, underpinning part of the project’s revenue forecast.
All up, the three agreements give TNG confidence that it can sell its products in the global commodity marketplace.
The offtake agreements follow the deal signed in February with Downer Group Limited (DOW) to develop, build and operate the mine and the processing plant at Mount Peake.
The environmental impact study has been completed, the mining licence approved by the Northern Territory government and a mining agreement struck with the traditional owners of the land.
That leaves the financing.
In September, TNG appointed independent advisory firm Gresham Advisory Partners to work on the funding package. Ideally TNG would like to reach final investment decision (FID) stage next year, and start development and construction work. If that timetable works, Mount Peake could start producing its metals in 2018, or early 2019.
So far, TNG has been a textbook example of passing through the hoops to bring off a major project. At 15 cents, which capitalises the company at $113 million, the shares are effectively where they began the year: what will move the share price is news flow on the funding front, and further advances in refining the TIVAN process, which will lower the cost of the project.
Broker Veritas Securities has a six-month price target on TNG of 30 cents; further out, broker Breakaway Research has a risked valuation of 50 cents a share, increasing to 84 cents as Mount Peake moves into production. Somewhere in there exists considerable value for someone buying TNG now, although the shares still have to be considered speculative.