We're Hopeful That Tungsten Mining (ASX:TGN) Will Use Its Cash Wisely

Tungsten Mining NL (ASX:TGN) has been making strides in the exploration and development of tungsten projects in Australia. With a current resource inventory of 41 million MTU's of WO3 (tungsten trioxide) and 71,000 tonnes of Mo (molybdenum), 1 million ounces of Au (gold), 44 million ounces of Ag (silver), and 92,000 tonnes of Cu (copper), the company is well-positioned to become a globally significant player within the primary tungsten market. However, TGN's cash flow management has been a challenge in recent years, with negative net cash flow and free cash flow margins. To differentiate itself and create value for shareholders, TGN must allocate its cash strategically.

TGN's primary capital expenditure (CapEx) priorities align with its long-term growth strategy, focusing on project development and exploration, resource growth, infrastructure development, technical excellence, and rigorous capital management. By investing in these areas, TGN can grow its resource inventory, develop mining and processing operations, and ultimately produce tungsten concentrate and valuable by-products. However, the company must also ensure that it preserves cash and manages its debt levels to maintain financial flexibility.



To compare TGN's cash allocation strategy with its peers in the mining sector, we can analyze the company's financial data and compare it with industry averages. TGN has been investing in its projects, with CapEx totaling AUD 0.14 million in FY 2022. This is relatively low compared to the industry average, which can vary depending on the specific peer group. For instance, in the same period, BHP Group spent AUD 14.4 billion on CapEx, and Rio Tinto spent AUD 10.5 billion. This indicates that TGN is focusing on preserving cash while still investing in its projects.

TGN has been allocating a significant portion of its cash to exploration and evaluation activities, spending AUD 0.07 million on exploration in FY 2022. This is a higher proportion of its total cash spend compared to some of its peers. For example, in the same period, Newcrest Mining spent AUD 0.17 billion on exploration, which is a lower proportion of its total cash spend. By allocating more cash to exploration, TGN can discover new resources and reserves, leading to future growth and increased cash flows.

TGN has not paid any dividends or undertaken share repurchases in recent years, unlike some of its peers such as BHP Group and Rio Tinto. This strategy allows TGN to preserve cash and reinvest it in its projects. Additionally, TGN has been focusing on reducing its debt levels, repaying AUD 0.29 million of its long-term debt in FY 2022. This is a higher proportion of its total cash spend compared to some of its peers, such as BHP Group, which repaid AUD 2.5 billion of its debt in the same period.

Opportunities for TGN to differentiate itself in the mining sector include focusing on exploration and evaluation, preserving cash and reinvesting, reducing debt levels, and diversifying its product portfolio and exploring new markets. By pursuing these strategies, TGN can create value for its shareholders and achieve its long-term growth objectives.

In conclusion, TGN's cash allocation strategy differs from its peers in the mining sector, with a focus on exploration and evaluation, debt reduction, and cash preservation. By using its cash wisely and pursuing strategic opportunities, TGN can differentiate itself and create value for its shareholders. As investors, we are hopeful that TGN will continue to make informed decisions regarding its cash allocation and capitalize on the opportunities available to it.