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Meet the Customer: Tongling Nonferrous Metals

While we wait for the next announcement, I thought I'd share some of my research on Tongling to help fill the news void and refresh those who are newer to the board.

Tongling is a Chinese state-owned enterprise that ranks among China's largest copper producers. Its products include alloy powder, tubes, coils, and cathodes; other non-ferrous items include brass wires and tubes, gold and silver ingots, palladium, platinum, silver nitrate, and sulfuric acid.   It was founded in 1949 in Tongling, Anhui, China and it was put into production in 1952. It is one of the largest copper smelting companies in the country.

Tongling’s home page [scroll to bottom] for a visual representation of their products.  English language version here.

Tongling distributes its copper and other products in the provinces of eastern China. It is owned by the Anhui provincial government.

There is a precedent for Tongling to buy a copper company [knock knock Nautilus].  In 2009, the company joined with China Railway Construction Corp to buy Canadian copper company Corriente Resources for $650M USD.

Shipping the ore from PNG to China is a breeze – check out this Google map

The Deal

The three-year deal with Chinese copper smelter Tongling will commence upon delivery of first product from Nautilus Minerals’ Solwara 1 deposit [currently targeted for 1Q 2018]

  • Nautilus agreed to sell ~1.1 million tonnes of material from Solwara 1 to Tongling
  • 1.1 million tonnes per annum (+/- 20%) of Solwara 1 material for a period of three years on a take or pay basis
  • Price based on of copper concentrate and market conditions
  • Further value via 50/50 profit share for residual material, gold pyrite, masonry material, etc.

Nautilus will issue bank guarantee in 3 stages over nine months, not to exceed $11.5M USD as security for 50% of Tongling's concentrator investment costs, starting at 1st order of major equipment.

I haven't seen this stated by the company, but my guess is that the ore is so rich (more than 10x "regular" ore) that Tongling's smelter requires new concentrators to process it.  Regardless, it is an additional budget item (though not a huge one).


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