Tuesday 18 April 2023

Alastair Ford: TNR Gold Now on a Solid Financial Footing, as Production from Mariana Lithium and Los Azules Copper Draws Nearer


“We are building The Green Energy Metals Royalty and Gold Company. Our business model provides the unique entry point into the creation of supply chains for critical materials like energy metals which are powering Tesla Energy rEVolution and Gold industry which is providing the ultimate hedge during this part of the economic cycle. Our shareholders are participating in the building of The Green Energy Metals Royalty and Gold Company. In our portfolio, we have a unique combination of assets providing exposure to different parts of mining cycle: starting with the power of blue sky discovery and including partnerships with industry leaders like McEwen Mining, Ganfeng Lithium and Lundin Mining as operators on the projects that will potentially generate royalty cashflows to contribute significant value for our shareholders.”

Kirill Klip, Executive Chairman TNR Gold Corp.



"TNR Gold Corp. is working to become the green energy metals royalty and gold company.

Our business model provides a unique entry point in the creation of supply chains for critical materials like energy metals that are powering the energy rEVolution, and the gold industry that is providing a hedge for this stage of the economic cycle.

Our portfolio provides a unique combination of assets with exposure to multiple aspects of the mining cycle: the power of blue-sky discovery and important partnerships with industry leaders as operators on the projects that have the potential to generate royalty cashflows that will contribute significant value for our shareholders.

Over the past twenty-seven years, TNR, through its lead generator business model, has been successful in generating high-quality global exploration projects. With the Company’s expertise, resources and industry network, the potential of the Mariana Lithium Project and the Los Azules Copper Project in Argentina among many others have been recognized.

TNR holds a 1.5% NSR Royalty on the Mariana Lithium Project in Argentina, of which 0.15% NSR Royalty is held on behalf of a shareholder. Ganfeng Lithium’s subsidiary, Litio Minera Argentina (“LMA”), has the right to repurchase 1.0% of the NSR Royalty on the Mariana Project, of which 0.9% is the Company’s NSR Royalty interest. The Company would receive CAN$900,000 and its shareholder would receive CAN$100,000 on the repurchase by LMA, resulting in TNR holding a 0.45% NSR Royalty and its shareholder holding a 0.05% NSR Royalty.

The Mariana Lithium Project is 100% owned by Ganfeng Lithium. The Mariana Lithium Project has been approved by the Argentina provincial government of Salta for an environmental impact report, and the construction of a 20,000 tons-per-annum lithium chloride plant has commenced.

Mariana Lithium Project* measured and indicated resource: 4,410,000 T of LCE and 49,700,000 T of potash with the additional inferred resource: 786,000 T of LCE and 9,260,000 T of potash.

(Updated Mariana Lithium Project measured and indicated resource: 6,854,000 T of LCE with the additional inferred resource: 1,267,000 T of LCE – Company news release, July 14, 2021)

TNR Gold also holds a 0.4% NSR Royalty on the Los Azules Copper Project, of which 0.04% of the 0.4% NSR Royalty is held on behalf of a shareholder. The Los Azules Copper Project is being developed by McEwen Mining.

Los Azules Copper Project** indicated resource: 10.2 B lbs copper, 1.7 Moz gold and 55.7 Moz silver with the additional inferred resource: 19.3 B lbs copper, 3.8 Moz gold and 135.4 Moz silver.

TNR also holds a 7% net profits royalty (“NPR”) holding on the Batidero I and II properties of the Josemaria Project that is being developed by Lundin Mining. Lundin Mining is part of the Lundin Group, a portfolio of companies producing a variety of commodities in several countries worldwide.

TNR provides significant exposure to gold through its 90% holding in the Shotgun Gold porphyry project in Alaska. The project is located in Southwestern Alaska near the Donlin Gold project, which is being developed by Barrick Gold and Novagold Resources.

Shotgun Gold Project*** inferred resource: 705,960 ounces Au at 1.06 g/t, mineralization appears to be open at depth and along the strike.

The Company’s strategy with the Shotgun Gold Project is to attract a joint venture partnership with a major gold mining company. The Company is actively introducing the project to interested parties.

At its core, TNR provides a wide scope of exposure to gold, copper, silver and lithium through its holdings in Alaska (the Shotgun Gold porphyry project) and royalty holdings in Argentina (the Mariana Lithium project, the Los Azules Copper Project and the Batidero I &II properties of the Josemaria Project), and is committed to the continued generation of in-demand projects, while diversifying its markets and building shareholder value.

*  “NI 43-101 Technical Report Update of Lithium Brine Mineral Resources; Mariana Project, Salar de Llullaillaco, Argentina” dated January 12, 2020. Prepared by Geos for Ganfeng Lithium.

** “NI 43-101 Technical Report – Preliminary Economic Assessment Update for the Los Azules Project, Argentina” dated October 16, 2017. Prepared by Hatch for McEwen Mining.

*** “NI 43-101 Technical Report on the Shotgun Gold Project, Southwest Alaska” dated May 27, 2013. Prepared by Nicholas Wyck and Allan Armitage for TNR Gold."


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. 
Do Your Own Research.


TNR Gold now on a solid financial footing, as production from Mariana Lithium and Los Azules Copper draws nearer

"Although much of the newsflow generated in recent months by TNR Gold Corp (TSX-V:TNR, OTC:TRRXF)’s royalty portfolio has been to do with the major Los Azules copper development being undertaken by McEwen Mining in Argentina, it was actually another project that has secured the future of the company.

Back in February, TNR announced that it had repaid in full its investment loan of just over C$6.9mln, including the interest related to it.

That loan can effectively be viewed as the money that got TNR going in the first place – it allowed it to build up the portfolio to the point where it now includes the Los Azules royalty, major advanced exploration project Shotgun Gold in Alaska, a royalty on Batidero properties I and II of the Josemaria Lundin Mining copper-gold project in Argentina, and a royalty on the Mariana lithium project, also in Argentina, which is owned by Ganfeng of China.

It was the sale of a partial interest in the royalty on this last project, Mariana, that has just lately allowed TNR Gold’s chief executive Kirill Klip to put the company on a secure footing.

The company sold a 0.5% net smelter royalty to Lithium Royalty Corp for US$9mln. This represents one-quarter of the NSR royalty held by the company. That’s the money that’s allowed TNR to pay off all debt, and to push on ahead into 2023 with renewed confidence.

To be sure, the lithium price is down. But it’s not out.

And construction is proceeding apace at Mariana, according to filings by Ganfeng to the Argentinian authorities.

“Representatives of Ganfeng Lithium confirmed to the Governor of Salta Gustavo Sáenz that the Mariana project, on which construction began last June, will start producing, in 2024, an estimated 20,000 tons per year of lithium chloride,” explains Kirill Klip, executive chairman of TNR Gold.

“The Government of Salta has reported on Ganfeng Lithium’s announcement that the operational phase of the Mariana lithium project began in January 2023.”

That means that for TNR, the royalty will shortly become less about benchmarking its value against the ups and downs of the lithium price, and more about enjoying the chunky cashflow that will be coming in.

To be sure, more cash will come in if the lithium price is higher.

But even if it isn’t the 0.45% royalty that TNR is likely to be left with if Ganfeng exercises its right to acquire the other 1% that TNR owns, should still prove lucrative enough. Assuming a long-term lithium price of US$40,000 per tonne, pre-tax income is likely to amount to US$3.6mln a year. Equally, if the price returns to anything like the levels it was at last year, that number rises to over US$7mln per year.

That’s looking ahead.

Were one to take a backwards-looking perspective, then the sale of half of the Mariana royalty at a time when the lithium price was sky-high looks very timely. Would TNR be able to get US$9mln for its interest today? – maybe not.

Whichever way you look at it, though, there’s upside. Because, with cash inside the company TNR is now secure in what looks to be a fairly choppy period on the capital markets. And at the same time, it still holds a very significant portion of the royalty from which it will benefit in due course.

“It’s put our company in a completely different shape and form,” says Klip.

“We repaid our investment loan, and that was a major milestone for the company because that loan allowed us to create a very strong royalty portfolio.”

But there’s likely to be more to come from Mariana, perhaps even before first production. An additional C$1mln will come into TNR if Ganfeng exercises its option to buy a further 1% of the royalty back off TNR, and the chances are, with a project this size, that it will.

What’s more, the transaction with Lithium Royalty Corp put TNR on the map, and other companies are thought to be nosing around and making enquiries about the remaining royalty. Klip has no intention of selling at this point, but more people now know that he’s here.

If TNR ever chose to, it seems likely there would be no problem at all monetizing the remainder of the Mariana royalty. The issue would be the price, and the board decision would be whether to forsake all that potential cashflow.

Not an easy decision, to be sure, and for now Klip is not selling, but on the whole it’s a nice conundrum to have.

Meanwhile, McEwen Mining continues to make progress on Los Azules copper gold and silver project, pulling in serious funding partners and releasing drilling intercepts that junior miners would give their eye teeth for.

Rio Tinto’s Nuton has already invested USD$55mln into McEwen Copper, which is developing Los Azules. Separately,  Stellantis, a major auto maker, bought a stake as well for over US$150mln.

A preliminary economic assessment for Los Azules is expected in the current quarter, with an IPO likely to follow. Mine design is likely to be complete by the end of 2024, so at this point it looks as though cashflow from Mariana will come into TNR’s coffers before any cash from Los Azules.

But with the cash that’s now in the back from the partial sale of the Mariana royalty, TNR can afford to sit tight and wait for the majors to go about their work and get production rolling.

The current market capitalisation of TNR is C$13.3mln.

But you can bet it won’t be at that level when the two major royalties it has to its name actually start to produce."

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