Sunday 7 January 2024

TNR Gold: Building the Green Energy Metals Royalty Story in Argentina - the New Powerhouse of rEVolution

Guest post:

TNR Gold: Building the Green Energy Metals Royalty Story in Argentina - the New Powerhouse of rEVolution

Energy transition to renewables has High Materials Intensity, of which copper (at 5x more intensity) is a major constituent and a common denominator across *all* technologies. Bet on precedent; global copper production has only managed to double every 25 years…

Kirill has spent many hours writing how "Argentina has everything to become the Power House of the Tesla Energy rEVolution." And we have seen that money, sense and Mandarin are flooding into Argentina as step after step it positions itself on the politically strategic tightrope to supply the copper and lithium commodity deficit devoured by green electric transportation.

As I wrote before, if TNR Gold can do one thing well, it's to identify underappreciated assets and squat on them until pop hype and fanfare wake up the hatchling within. But there’s a certain poetry to this business model; TNR must be warmed in turn by those looking for underappreciated assets, so participating in this type of venture requires a certain kind of paternal patience, no matter the blizzard coming.

"A recently published research report on TNR, written by Fundamental Research Corp, reckons fair value for the company at C$0.22 per share. The current price is significantly lower than half of that." Alastair Ford

Chart by Nicholas Winton

Core management at TNR Gold has displayed an unassailable tact in its decision-making; from closing a deal just prior to a lithium price crash to choosing the projects in the correct nation and with the correct partners amidst a torrent of noise present in the lithium market.

"We have closed our Mariana Lithium NSR deal with Lithium Royalty Corp. Now TNR Gold is in a strong financial position. By monetising only part of our Royalty we have confirmed an important benchmark for the valuations of our Royalty Holdings for the market. During our negotiations, we have generated a significant industry interest in our Company and TNR Gold's assets."

This transaction has provided more evidence for TNR Gold's undervaluation in the marketplace. In the last year, we have generated significant capital and extinguished our debt. We hold the cash from a sale of a portion of our Mariana Lithium royalty while holding royalties on two industry-leading projects under two leading industry majors.

Stability has always been a mantra for our Company - Solid Values in Uncertain Times. Be it fluctuating or stabilised lithium prices, these are royalty projects for keypoint critical metals under industry majors with no input needed; a simple fundamental win maker for shareholders: 1.35% NSR royalty on a major Mariana Lithium project that’s currently being developed by Chinese champion Ganfeng, 0.36% NSR royalty on the giant Los Azules copper project being worked up by McEwen Mining and 7% net profits royalty on Batidero I and II Properties of Josemaria copper project in Argentina under Lundin Mining.

There is the Danger of Death Grips on Dead Horse Deposits among junior mining companies. Where a majority of value stems from a single prospect, there always exists a risk of ‘We Have to Make It Work’ that sees cash flow money bleed out. If management deings to stay past the Pump And Dump phase.

TNR Gold's hands-off cash-generating royalties, in multiples and with industry majors, provide both incentive to stay at the helm and the cash to reasonably evaluate options regarding cash-flow intensive prospects in gold, lithium and copper.

“We do fundamentally believe in a shortage for the lithium industry. We forecast supply growth of course, but demand is set to grow at a much faster pace. By the end of 2025 a “modest deficit” of around 40,000 to 60,000 tonnes of lithium carbonate equivalent” CNBC

The gap between Science and ‘fast’ Wall Street money is how investor money evaporates in mining, particularly in lithium. Only a few companies in the world are able to *rear* Lithium operations into producing projects, less so reaching forecasted capacity.

Investors must remember that a lot of "Lithium companies" have only the word lithium in their name but lack the capacity, know-how or legislative backing to produce in 10 years. The whole industry produced only 369,000 T LCE in 2020, how will we jump to over 1 mln T LCE by 2025?

In my opinion, Argentina’s new president Javier Milei represents a low risk to domestic mining projects; the state’s provincial jurisdictional buffer will buffet any radical policies regarding Sino-affiliated projects, plus a goal of boosting national mineral exports keeps lithium and copper projects guarded.

On another hand, Argentina’s new president is great news for copper projects in the region, more so for Western-backed miners. 

Canadian McEwen Mining’s Los Azules stands in a great spot to benefit from a national pivot away from environmental constraints on mining.

The risk to mining represented by Argentina’s new president in the form of state-specific BRICS regulation will be more than balanced by the project-positive reduction in environmental regulation - propelling projects forward and enriching communities with local jobs and investment.

Described as an ‘anarcho-capitalist’ and a ‘rabid’ free marketeer, Argentina’s new president Javier Milei would have to display a degree of self-contradiction to uproot prospective lithium, copper and gold projects, as it would go against a self-proclaimed goal of boosting mineral exports.

With recent events, it's easy to choose when comparing Argentina to neighbouring Chile, where our sector’s worst nighttime bogeyman of resource nationalisation is heralded by a far-left socialist & communist coalition prevailing in political elections.

"And towards the end of last year, Lithium Royalty paid it US$9mln for a 0.5% royalty in the Mariana project. TNR retains a 1.35% royalty, and also holds 0.15% on behalf of a shareholder. What’s that worth, now that Mariana is less than a year away from production?

Probably not much less than C$9mln, even allowing for the subsequent decline in the lithium price. After all, lithium could come back, the royalty remains in place, and a year is not long to wait in mining terms, assuming there are no delays.

Even if it’s just 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, that 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.
And there’s likely to be more to come from Mariana, perhaps even before first production. An additional C$0.9mln 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. 

But is the Mariana royalty even the best asset inside TNR?" Alastair Ford

"Arguably not, since the Los Azules royalty, according to some calculations, may be worth as much as US$30mln. Rob McEwen himself holds a 1.25% NSR royalty over Los Azules, and he’s been putting some pretty punchy numbers around his own interest in his recent video presentations.


On the assumption of production of 182,000 tonnes of copper per year from Los Azules, and a ballpark copper price of US$10,000 per tonne, TNR could end up receiving income of upwards of US$6.6mln per year from its royalty." Alastair Ford

TNR Gold business model provides an exceptionally valued entry point into the creation of a critical material supply chain like copper and lithium energy metals which are powering the EV revolution and the gold and silver industry which is providing the ultimate hedge during this part of the economic cycle.

I believe that TNR Gold is close to enjoying a pincer move after many years of planning, the company picks up not one but two potentially cashflow-generating royalties in the future on the essential critical metals electrifying the gears of change within the electric and renewable global market.

TNR Gold’s purpose is quite simple in intent; a solid value launchpad of green royalties for the gold in the USA rocketship in fueling. With Ganfeng's plan to put Mariana Lithium in production, 2024 is set to be an interesting year, one that is due to go by in pop celebration, national flag-waving fanfare and certain marching bands.



"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-six 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.

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