Emerging strategic metals company TNG Limited has signed the company’s first binding off-take agreement for its flagship 100%-owned Mount Peake Vanadium-Titanium-Iron Project in the Northern Territory, along with a technology transfer agreement for the TIVAN refinery.
These landmark agreements, with the major Korean-based ferro-vanadium group WOOJIN IND., CO., LTD., (WJN), were signed last week by TNG’s Managing Director, Mr Paul Burton, and WOOJIN’s CEO, Mr Ki, at a formal ceremony held at WOOJIN’s headquarters in Seoul, Korea .
The life-of-mine off-take agreement encompasses binding commitments for WJN to take or pay a minimum of 60 per cent of the vanadium pentoxide (V2O5) and other vanadium products from Mount Peake with a minimum guaranteed price which is, based on the cost of production estimates determined under the DFS, 20% above TNG’s forecast cost of production. This off-take agreement will allow more accurate forecasts of project’s revenue and profitability and creates a strong foundation for the projects financing and development.
TNG also entered into a binding agreement for the transfer of ferro-vanadium (FeV)production technology from WJN. The FeV conversion plant will be installed at TNG’s TIVAN® refinery site. This technology will allow TNG to further diversify the product portfolio assumed in the DFS, move up the vanadium value chain with a product that is directly saleable to major steel mills on a global basis and take advantage from any price advantage of one product over the other (V2O5 vs FeV).
WJN’s proprietary technology has the world’s highest vanadium recovery rate and TNG expects this to significantly benefit the company with additional profitability over the project’s life.
The signing of these binding agreements cements TNG’s strategic plan to become a major player in the global supply chain of vanadium, securing a long-term partnership with one of the world’s leading high quality ferro-vanadium producers.
Both agreements are governed by Singapore law and require the parties to obtain any relevant approvals regulatory and governmental approvals in Australia and Korea for implementation when production commences which is assumed to be in 2018 subject to finance and all regulatory approvals.
The signing of these two binding agreements marks a significant milestone for the Mount Peake Project following the completion of the DFS and will assist in the Company’s financing and commercial plans to deliver on its project development schedule. Subject to receipt of all approvals, permitting and financing, construction of Mount Peake could commence in 2016 with potential first production in early 2018, when independent commodity forecasts indicate that the price of V2O5 is expected to be substantially higher than current prices.
In parallel, the company confirms that it is moving forward with discussions on off-take agreements for the remainder of its vanadium production, which includes, but is not limited to, vanadium redox battery grade products, and for its Titanium Pigment and Pig-Iron products, and on a number of key aspects of the Mount Peake project, including the process for mine and development permitting and approvals.
TNG is also currently in initial discussions with parties interested in providing financing for the Mount Peake Project. WOOJIN and other Korean and international groups are currently reviewing both pre-production finance to and investment in, TNG or the Mount Peake Project.
TNG recently completed a Definitive Feasibility Study (DFS) for Mount Peake, confirming a potential world-class project capable of generating outstanding returns. Key findings of the DFS included life-of-mine net cash flow of $11.6 billion, a pre-tax IRR of 41% and an NPV8 of $4. 9 billion (see ASX Announcement – 31 July 2015). The DFS forecasts Mount Peake’s nameplate capacity at 17,560tpa of high-purity vanadium pentoxide (V2O5), 236,000tpa of titanium dioxide (TiO2) and 637,000tpa of pig iron.
TNG’s ASX Announcement regarding the DFS (dated 31 July 2015) contains a competent person’s statement. TNG confirms that it is not aware of any new information or data that materially affects the information included in the 31 July 2015 announcement and that all the material assumptions and technical parameters underpinning the estimates in the 31 July 2015 announcement continue to apply and have not materially changed.
Management Comment
TNG’s Managing Director, Mr Paul Burton, said the signing of TNG’s first-ever off-take agreement represented a huge milestone for the Company and for the Mount Peake Project.
"The significance of this historic agreement should not be underestimated, with WJN’s commitment to purchase at least 60 per cent of our vanadium production, on a take-or pay basis with a guaranteed minimum price and opening the way to securing investment from Korean and other international companies towards financing and development".
"In addition the technology that TNG will access via the technology transfer agreement from WJN provides TNG with an additional competitive advantage to produce a high value product with proven highest vanadium recoveries in the world, which is in line with our corporate aim to be the lowest cost producer of the highest purity products".
"These agreements crystallise a very close and strong relationship developed over the past year from a non-binding Memorandum of Understanding to a commercial agreement for the life of the project. WJN are one of the world’s leaders in ferro-vanadium production, with a strong Research and Development capability and a considerable depth of marketing expertise in the global vanadium industry and as a result a tier one partner for TNG. This will spearhead TNG to become a potentially world leader in the vanadium sector" he said.
"This is a great achievement by our marketing team and sets TNG up with significant momentum as we now move ahead with our project financing discussions," .
"We continue to achieve our goals in very challenging international market and I am committed for this to continue and build TNG into a substantial resources company" he added.