Ann: Half Year Accounts, page-10

Above are two excerpts from the recently announced financials. The focus for me is what is the total financial requirements for the "Mt Peake Project" "MPP" which includes mine, concentration plant, refinery and associated plant.

The extended mandate for SMS (FEED) and EPCM contract. It seems to me to be clear firstly, that the Titanium Pigment plant is now included as a component of TIVAN refinery and the core financial package and secondly, that the other previously identifed plants to be funded under the BOOT model may also be brought into the MPP funded and constructed under the financial package.

In the revised DFS (11/17) the Acid Rejeneration Plant , the Oxygen Plant , the Titanium Pigment plant and Clor- Alkali plant, were identified as not inherent to TIVAN and "sensibly" to be built owned and operated under the BOOT model. Since the revised DFS we have heard nothing about tendering for the ARP, OP or the C-AP. The TPP is the subject of a turn key tender with Ti-Cons. It now seems all are included in the SMS EPCM, covered by SMS's extensive guarantees and included in the DD financial audit currently in process by SMS and KfW.

If correct the with necessary adjustment the ball park financial package for stage one MPP is now A $853 mill ((which includes A$105 mill for EPCM and Contingencies) plus A $562 mill therefore A $1,415 mill. There may also be a further A$ 73 mill being EPCM and contingencies at the same %s as per the CAPEX figures identified in the revised DFS. So circa A$1.5 bill.

Obviously the above figures are an extrapolation of the revised DFS and dont include known reductions for the Titanium Pigment process refinements and the likely contribution from NAIF which in combination could exceed A$ 100 mill. There is likely to be more reductions that are not publicly known.


If so then the total financial package could be as high as A$ 1.4 bill of with the KfW mandate covers A$ 850 mill. The difference A$ 550 mill is significant if correct and if funded substantially from equity contribution. This is especially so when the SP is sub 10 cents. That would require the issue of 5.5 bill shares at current SP if totally equity funded. On the plus side the OPEX funding of the BOOT components totalled A$63.4 mill and if the above is correct then this expence would be removed from OPEX costings.

In reviewing the above i went back to the 2015 DFS. The CAPEX stated was A$ 970 mill (including A$ 114.6 mill for EPCM and contingencies). This figure was calculated on the assumptions that the Refinery would produce high purity vanadium pentoxide, titanium dioxide concentrate and iron oxide, although it later refered to pig iron. The 2015 DFS stated " Associated downstream plants will produce high grade titanium pigment and pig iron" . Neither "downstream plant" appears to feature CAPEX calculations and the only associated plant refered to under a BOOT funding model was the ARP.

Clearly the MPP has expanded to include production of the final products which attracts further expences and brings about greater revenues. I do worry about the "equity component" of finance and just how this is going to be structured. For those staying the distance might pay to start puting away the 10 cent pieces and hope we get a look in so as to keep abreast of the dilution and reap the gains.

Im way out of my comfort zone to do all the caculations and understand the processes involved but i got a very clear impression that there were really no substantial CAPEX savings identified between the two DFS's. It seems to me that some components/plant was pulled out for the revised DFS being the ORP (A$33 mill) and C-AP (A$95 mill), (total, A$ 128 mill) which substantially accounts for the reduced CAPEX from A$ 970 mill to A$ 853 mill (A$ 117 mill) . That may be far too simplistic but it stands out to me.

Any way its all food for thought and id appreciate any input or clarification from others.

PS. I note that Snowdens have been involved with TNG since 2009 and had a hand in the 2013 PFS , compiled and audited the 2015 DFS and conducted the financial modelling , flow sheets for OPEX and CAPEX of the 2017 revised DFS. John Elkington was GM for Snowdens in Australia from 2014 to 2017 so in all probability at the time of both DFS's. He truely would know the workings of TNG.