Friday 2 July 2021

Alastair Ford: "TNR Gold Set To Be Major Beneficiary Of Ganfeng’s Proposed US$600mln Investment In The Mariana Lithium Project."


Giant Ganfeng Lithium To Invest US$600M In Mariana Lithium, Plans To Double PEA Estimated Annual Lithium Production To 20,000 LCE Tonnes.

"Another great news for the proud people of Argentina and TNR Gold shareholders is that Reuters reports that now Ganfeng Lithium is planning 20,000 T of annual LCE production capacity. It will be a 100% increase from the 10,000 T of annual production capacity estimated in the Mariana Lithium PEA which was prepared and released in 2018 before more than 250% increase in measured and indicated Lithium resources from the 2017 resource estimate was reported by Ganfeng Lithium and TNR Gold in 2020."


TNR Gold set to be major beneficiary of Ganfeng’s proposed US$600mln investment in the Mariana lithium project

Alastair Ford

TNR has exposure to three sizeable projects, two in Argentina and one in Alaska

It’s a back-of-the-envelope number, but TNR Gold Corp (CVE:TNR) could now just be a stone’s throw away from a recurring US$5mln per year revenue stream from its 1.8% royalty on the Mariana lithium project in Argentina.

It’s been more than 12 years since the TNR team originally discovered Mariana, and development since then has sometimes seemed painfully slow. In the intervening period between then and now TNR managed to further develop a highly attractive gold project in Alaska that often hogs the limelight as far as newsflow and investor sentiment are concerned.

But Mariana retains significant value for the company too, particularly so since the project is so large.

Since China’s largest lithium company, Ganfeng Lithium, got involved some years ago the size of the lithium resource has increased by more than 250%, the amount of lithium the project is slated to produce annually has doubled, and the lithium price has bounced from multi-year lows.

In this context, it wasn’t too surprising that Ganfeng announced in the latter part of June that it was willing to put up nearly US$600mln to develop Mariana, and that ideally construction should start before the end of this year.

The news was welcomed by the governor of Argentina’s Salta province, particularly so as the proposal involves sourcing all power for the project from solar energy.

The implications for the region are significant in terms of employment and wider economic uplift, and they’re significant for TNR too.

Hard financial numbers are difficult to come by as yet, as an official feasibility study is still in the pipeline, and the parameters of the project have changed so much to the upside since the original preliminary economic assessment was done in 2018.

But on the basis of a smaller resource, a lower lithium price, and a lower output rate, one analyst reckoned a year or two ago that the annual revenue due to TNR would be upwards of US$1mln. No question that that number is much higher now, and pegging it at US$5mln, though aggressive, doesn’t seem outlandish.

Kirill Klip, the chief executive of TNR, is certainly under no illusion about the significance of the Ganfeng commitment to Mariana.

“This is basically the best news for us since we got involved,” he says.

“The project has been 12 years in development and now suddenly the switch is going to switch on.”

The transformation to TNR will be significant. The company is currently capitalised at under C$8mln on the Venture Exchange, despite the huge potential upside at the Shotgun Gold project in Alaska and at the Los Azules copper project, also in Argentina, where McEwen Mining (TSE:MUX) is taking the lead. All told, Argentina is definitely heating up for TNR Gold this year, as Bloomberg reported significant developments at Los Azules only this week.

At Shotgun, meanwhile, Klip has been hanging fire on initiating a major drill programme because to his mind the upside is so significant that only a major campaign would do it justice - and that, of course would be expensive.

But with US$5mln in potential future annual revenues coming in from Mariana, the picture is transformed. For one thing, TNR will be able to front up for significant drilling costs off its own bat, without having to go to the market or seek a partner. But if it does end up seeking a partner, the pressure to sign on the dotted line will be greatly reduced.

The Mariana royalty, in short, represents TNR’s route to independence, especially since no contribution at all is required to get Mariana going.

“The essence of our business model is to have industry leaders like Ganfeng Lithium as operators on the projects that will potentially generate royalty cashflows to contribute significant value for our shareholders,” emphasises Klip.

"I believe, that our NSR Royalty on Mariana Lithium is a company building asset. We are building the green energy metals and gold company. TNR Gold holds NSR royalties on projects containing copper, gold, silver and lithium metals. TNR Gold does not have to contribute any capital for the development of the Los Azules copper project and Mariana lithium project. The essence of our business model is to have industry leaders like McEwen Mining and Ganfeng Lithium as operators on the projects that will potentially generate royalty cashflows to contribute significant value for our shareholders."

Please read my legal disclaimer. There is NO investment advice on any Kirill Klip feeds and blogs. Always consult a qualified financial adviser before any investment decisions. 
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