TNG Limited short term broker target of A$0.27 almost three times last traded price

TNG Limited (ASX: TNG) has a short term A$0.27 price target maintained by broker Old Park Lane Capital, following an announcement earlier in the week of TNG forming a strategic partnership with a Chinese state owned enterprise.
TNG last traded at $0.10.

The following is an extract from the broker report.
TNG announced that it has entered into a binding Letter Of Intent (LOI) to form a strategic partnership with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Company Ltd (“ECE”), a leading Chinese State-owned enterprise.
The proposed transaction would result in a capital raise of A$13.4m that would leave ECE as a strategic partner with a 30% interest in TNG.

The proposed deal
ECE will subscribe for 122m shares at 11¢ per share to raise A$13.4m, a 19% premium to the TNG’s closing price before the deal was announced.
ECE will be offered two non-executive board positions on the TNG Board. ECE will also provide a A$2m loan to TNG for working capital purposes prior to the end of August to underpin the on-going PFS and metallurgical test work.

Rationale
The deal allows TNG to comfortably complete the on-going pre-feasibility study and metallurgical test work for it’s for its flagship 100%-owned Mount Peake Iron-Vanadium Project in the Northern Territory.
It also provides TNG with the corporate and strategic backing of a major Chinese group at a critical time in the development of Mount Peake. ECE has significant financial and technical capability.

Positive
We believe the deal represents a significant step forward for TNG and the development of Mount Peake.
Although ECE will appoint two members to the board, critically TNG retains control with ECE taking a 30% stake.
We view the potential dilution as being balanced by the cash injection allowing TNG to forge ahead with the PFS and commercialization of the metallurgical test work.
The presence of a new cornerstone investor significantly de-risks the project and expands the options for TNG to fund Mount Peake.

ECE
Are a becoming a major player in the global resource industry and have made a series of significant investments in western-based mining-exploration companies.

Exploration JV
ECE will also enter into a separate JV to fund exploration at TNG’s McArthur copper project.

Old Park Lane Capital comment
We maintain our short-term target price of A$0.27 per share (fully diluted) and a BUY recommendation. We will review our valuation on completion of the deal.
Successful execution further de-risks TNG and we remain focused on the completion of the PFS in October.
With a potential new strategic partner on board we reiterate our view that the stock represents good value in the current trading range.


Originally published at: http://www.proactiveinvestors.com.au/companies/news/18381/tng-limited-short-term-broker-target-of-a027-almost-three-times-last-traded-price-18381.html