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Price Performance (1-year)
*See the bottom of this report for important disclosures, ratings, and risk definitions. All figures in US$ unless otherwise specified.
100% interest in three polymetallic projects in Ontario, and one in Peru
This advanced-stage project, covering 4,108 hectares, is located in the Kenora mining district in northwest Ontario.
Located 80 km north of New Gold’s (TSX: NGD) Rainy River gold mine which has been in production since 2017
Favorable location and infrastructure
Power can be accessed from a major powerline 40 km from the project. Topography in the area is relatively gentle
The company has an exploration agreement in place with First Nations groups in the area.
The project hosts a high-grade nickel sulphide deposit. Mineralization has been tested to a depth of 900 m below surface, with a shaft descending 622 m, featuring two levels at 107 m and 152 m. Since 1937, 667 drill holes (99,741 m) have been completed on the project
Open-pit and underground resources totaling 146 Mlbs Ni, and 78 Mlbs copper
The deposit measures 250 m long x 60 m wide x 900 m deep
Underground resources have an average nickel grade of 1.08%; we view grades of 1%+ as high
In 2022, a Preliminary Economic Assessment (PEA) was completed. The study was based on underground operations (1,500 tpd) spanning nine years, involving conventional crushing/grinding/floatation processes, producing nickel/copper concentrates.
The PEA targeted deeper/higher-grade resources
Higher-grade ore will be accessed in the initial years, implying potential for relatively high cash flows in the early stages
The project’s initial CAPEX of US$134M is relatively low, given the existing infrastructure
AT-NPV5% of $109M, and a high AT-IRR of 20%, using US$10/lb nickel, and US$3.8/lb in cash costs
The break-even nickel price is US$8/lb
AT-NPV5% increases to $160M at US$11/lb nickel vs the current spot price of US$8.6/lb
We believe the PEA was conservative as it excluded open-pittable resources
We believe there is resource expansion potential, as the deposit remains open laterally, and at depth
Drill intercepts below the existing shaft returned high grades of up to 1.15% Ni, and 0.71% Cu
We note that nickel sulphide deposits often have extensive vertical depths, with offset or parallel zones
TN is planning borehole geophysics, and a deep penetrating airborne survey, over the entire property to test for hidden conductivity features
Management’s proposed budget for 2024/2025 is $15M, allocated as follows:
Management intends to raise $6-$8M this year
Maintains a reasonably healthy balance sheet
As of April 2024, TN had cash, and marketable investments, totaling $2.2M
The following table compares TN to other high-grade nickel juniors.
TN is trading at $0.10/lb NiEq vs the sector average of $0.27/lb, a 62% discount
Applying $0.27/lb to TN’s resources, we arrived at a fair value estimate of $0.38/share
Juniors with higher grades generally exhibit a higher EV/lb
Our DCF valuation is $0.55/share
Unlike the PEA, we are using both underground and open-pit resources in our models
However, we are using a more conservative discount rate, and relatively low metals prices
We are resuming coverage with a BUY rating, and a fair value estimate of $0.47/share (the average of our DCF and comparables valuations). Upcoming catalysts include drilling, and positive sentiment towards juniors focused on EV metals. With larger players actively pursuing M&A opportunities in the EV space, we believe TN could become an attractive acquisition target if its upcoming resource expansion drill program yields promising results.
We believe the company is exposed to the following key risks (not exhaustive):
We are assigning a risk rating of 5 (Highly Speculative
