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Overview:
TNR Gold Corp has early to mid-stage exploration assets, with 18 active projects held as three
groups: Argentina gold-copper; lithium and rare metal projects; and Alaskan gold. A TSX spin-out of the Li-
REM projects, as International Lithium Corp, is planned for July 2010. The Alaskan projects could follow.
Lithium-REM projects and corporate spin-off: TNR has nine early stage lithium brine and hard-rock lithium /
rare metal projects, commodities that are used in high-tech applications (e.g. batteries and magnets), and have
a growing market in the automotive industry as it moves towards the production of electric vehicles. TNR plans
that these assets will be spun off as International Lithium Corp in 3Q10. The parent company and
shareholders should retain ~87% of ILC, and there will be a C$2.5m IPO. Year 1 exploration budget is
expected to be C$1m-$1.5m. The initial focus is on Mariana (ARG), which covers 160km2 among the Andean
Salars (ARG). Brine samples range 250-650mg/L Li – current producers range from 150-1500mg/L of Li. A
resource could follow drilling in 4Q10 (up to 20 holes to 100m depth). ILC will also advance brine projects in
Nevada (5,285 hectares), in the area of Clayton Valley (producing Li since 1967). The pegmatite projects,
prospective for lithium and the rare metals (e.g. tantalum, niobium and the REE) include Moose (CAN), which
lies 12km from Thor Lake (TSX:AVL) and is a past high-grade producer of Li and Ta (samples include 6.7m @
2.07% Li2O). The Mavis Lake Project (CAN) has channel samples including 5.3m @ 1.24% Li2O.
Argentina projects (Au-Cu-Ag): Among 5 active projects in San Juan Province, the primary focus is on El
Salto (13,300 hectares) and El Tapau, which are both early stage and have potential for bulk tonnage Au-Cu-
(Mo) porphyry discoveries. El Salto has a 6 x 1.5km chargeability anomaly and limited drilling (incl 55m @
0.21% Cu and 0.012% Mo). El Tapau has three target areas; exploration includes grab sampling averaging
2.2g/t Au over 4.5km strike, and limited drilling (incl 82m @ 0.49% Cu). Both projects will be the target of
geophysics and follow up drilling. TNR retains a 25 per-cent back-in right to certain of the properties at the Los
Azules Cu-Au-Ag deposit, which contains 11.2 billion lbs Cu grading 0.55%, with a high grade core of ~2.3blbs
grading 1% Cu. The back-in terms are the subject of a legal dispute with Xstrata, which assigned its interest to
Minera Andes Inc. TNR served a back-in notice in April 2010 and has a C$5m loan facility that can be drawn
down to support Los Azules. Minera Andes rejected the back-in notice and the validity of the back-in notice is
the subject of a legal dispute with Minera Andes. The project has a high conceptual NPV: with capex
US$2.7bn, opex US
.85/lb, and production 170ktpa (375mlbs) for 23.6 years, and applying no adjustment for
risk, the NPV is US$2.9bn, or US$725m for 25% (LT Cu US$2.50/lb, disc rate 10%).
Alaskan Projects (Au, Cu): TNR has 50% of Shotgun, a breccia-hosted Au target with a non compliant
resource of 980koz Au grading 0.93g/t and drill ready gold targets. The Iliamna Project is < 80km from the
giant porphyry-hosted Pebble Deposit (18.8blbs Cu and 31.3moz Au), with which it has geological similarities.
Investment Comment: TNR has built its exploration portfolio to the point where discrete groups of projects
can be spun off as separate listed entities. This is a well tested strategy for unlocking the value of mineral
assets. If listed on the TSX with a starting market cap of C$15m, ILC should be seen as significantly
undervalued in comparison to its immediate peers (capitalised at C$15-C$150m). Further value should be
added to both TNR and ILC by ongoing exploration and resource definition, e.g. at Mariana, which bears early
comparison to the nearby Hombre Muerto (Fenix) mine of FMC, currently providing 14% of global lithium
supply. For TNR, a positive decision over the Loz Azules back-in would be a boost but is not vital – other share
price catalysts would be exploration success at El Salto and El Tapua.