TG1 finds 7% antimony in rock chip - nice timing

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 5,810,000 TG1 Shares and 1,133,929 TG1 Options at the time of publishing this article. The Company has been engaged by TG1 to share our commentary on the progress of our Investment in TG1 over time.

Copper, gold...

... and now antimony?

Our micro-cap exploration Investment, TechGen Metals (ASX:TG1) just released news of rock chips with grades as high as 7.05% antimony.

Commodities can go in and out of fashion quickly, and antimony is definitely the flavour of the month for the ASX small cap market...

(hint: it has something to do with China - we explain more, further down)...

... so finding a rock chip with grades as high as 7% antimony is good news.

In total, TG1 has picked up over five different rock chips with grades above 1% across a ~1.2km x 400m soil anomaly.

TG1 is a very early stage Australian minerals explorer.

At yesterday’s close TG1’s market cap was ~$4M, and it had $2.3M cash in the bank at June 30th - so its Enterprise Value is under $2M.

This valuation reflects the current low market sentiment for resources exploration, and the fact that TG1 hasn't found anything meaningful just yet...

... but this can all change pretty quickly with one discovery drill hole...

These kinds of early stage, multi-project, “pre-discovery” minerals explorers are high risk / high reward investing and not for the faint of heart.

And sometimes a lucky break in a new “commodity of the moment” can really pay off too...

WA1 Resources is one example of a micro cap explorer that was seemingly going nowhere - until it accidentally hit a new, niche commodity called niobium, making a giant discovery, which took it on a massive run.

At its peak WA1 was capped at over $1BN...

It doesn't happen every day, but it does happen.

It’s far too early to tell if that will be the case for TG1 right now of course.

But tiny TG1 has a trio of “leads” or potential catalysts right now, across not just antimony but copper and gold too...

With a number of WA projects on its books, here’s what we are currently most interested in for TG1:

1. Antimony: The 7.05% antimony rock chip sample it has published, and...
2. Stage two drilling at its Pinnacles gold target: TG1 finished drilling late last month. Results should come any day now.
3. Geophysical surveys on copper projects: until now the projects haven't seen any geophysical work done on them - we want the surveys to firm up drill targets for later drilling.

Firstly - what’s antimony?

And why is it important?

It comes down to a major geopolitical rupture - China has recently announced export restrictions on antimony.

Antimony is a commodity needed for a range of defence applications which include infrared missiles, nuclear weapons and night vision goggles, and it’s mostly as a hardening agent for bullets and tanks.

Stocks with significant amounts of antimony have responded to the China export news, with ASX one stock recently re-rating as much as ~245% in the space of a week this month.

More on that in a moment...

So that’s why we’re intrigued by TG1's latest bit of antimony news (7.05% grade rock chips).

The rock chip grades announced today are seriously high grade, especially for a material that is usually found in bulk at <0.1% grades...

TG1 picked up over five different rock chips with grades above 1% across a ~1.2km x 400m soil anomaly.

TG1’s project has never been explored for antimony despite the high grade rock chips.

All of the previous work was focused on gold and base metals.

As we mentioned before, it sounds like a bit of a random pivot, but some of the biggest discoveries in the last 5 years have come from last-minute pivots...

Think WA1 Resources’ accidental niobium discovery and Azure Resources' accidental lithium discovery.

(both went on to trade with market caps in the billion of dollars)

It's still very early days and TG1 is a “pre-discovery” explorer, so we don't mind seeing TG1 put some cash into reviewing its project's antimony potential.

For a relatively low cash outlay, TG1 could produce some unexpected good news...

While the antimony reviews happen in the background, TG1 should also be close to some news from its WA copper & gold projects:

1. Stage two drilling at its Pinnacles gold target - TG1 finished drilling late last month. Results should come any day now.
2. Geophysical surveys on copper projects - until now the projects haven't seen any geophysical work done on them.

Both bits of news could be triggers for a re-rate in TG1’s market cap (assuming the news is good).

Especially considering that TG1’s market cap at yesterday's close was just under $4M.

TG1 also had $2.3M cash in the bank on 30 June 2024, which means the company’s enterprise value is ~$1.7M.

With news coming due from its copper/gold projects and now the surprise upside from antimony, we think any good news could impact TG1’s share price positively.

IF we get some of those big colourful blobs (geophysical anomalies) on the copper projects, TG1 will have copper drill targets the market may show an interest in.

If the antimony targets are enough to warrant drilling, then that could also bring some market interest to the company.

We think that going into a drill program for either commodity, TG1’s market cap could be a lot higher.

And of course, TG1 could still declare a new gold discovery...

But at the same time - early stage exploration is hard, and sentiment is currently low - TG1 remains a high risk investment.

For now, let's get back to antimony - why do we want to see TG1 put some cash into its antimony prospectivity?

Why are “antimony stocks” moving?

Antimony isn't a “new material” for geologists, it's actually relatively well understood.

Antimony usually sits around gold/silver mineralisation, so there is likely to be a lot of gold/silver explorers hitting antimony while drilling but completely ignoring it.

Until now, antinomy hasn't gotten any significant (sustained) ASX market attention, but it's important from an industrial use perspective.

It is used in military supply chains AND in batteries.

Right now, about 85% of supply comes from China, Russia and Tajikistan.

China is the biggest supplier at ~55% of global supply...

And just last week, China announced a potential export ban, which triggered the sudden market interest.

Off that news out of China alone, one ASX-listed stock saw its share price re-rate ~500%.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

In addition, antinomy prices have also been ripping, moving ~100% higher over the last 6 months...

The market is sending a clear signal to the juniors to go back and look at whether or not their projects have any antimony potential.

For that reason, we don't mind our “pre-discovery” junior explorers going back and spending a relatively small amount of cash to see if there is any antimony potential in their assets...

At the end of the day, antimony could do what lithium and niobium did and create some billion-dollar companies out of a select few small caps.

Spending a small amount of cash for that potential upside (IF it pays off) is a risk/reward payoff that we think is worth taking.

We covered the sudden antimony interest in our weekend email on Saturday:

How will the Restrictions Impact the Critical Metals Market?

Again... TG1’s market cap is just $4M (Enterprise value ~$1.7M).

So any news that surprises to the upside could be big for TG1.

As mentioned earlier, it's still early days, and TG1 still has a lot of work to do before we know how “real” its antimony prospects are.

It's also worth noting the antimony grades from rock chip samples usually don’t mean too much on their own - drilling is required to understand the true extent of mineralisation.

For now, we are watching to see if TG1 can put together a set of drill targets.

If TG1’s project can throw up a few strong antimony drill targets where those rock chips came from, we expect to see a lot more market interest in the company.

Three TG1 catalysts to watch out for over the coming weeks:

Gold drill results 🔄

TG1 recently finished a second round of drilling at its WA gold project.

Drilling finished on the 30th of July, so we should see assays any day now.

TG1 is following up on a previous 4m thick intercept where gold grades were ~6.73g/t.

TG1 just drilled nine holes to see if that previous hit extends in any direction.

As a result, our bull, base & bear case expectations for the drill program are as follows:

• Bull case = Extensions to the 4m intercept with gold grades above 2g/t
• Base case = Extensions to the 4m intercept with gold grades between 1g/t and 2g/t.
• Bear case = No extensions or gold grades <1g/t.

Antimony 🔄

At this stage, the antimony newsflow is relatively hard to predict.

TG1 will probably be doing data reviews first before getting on site to see if there is further evidence of antimony mineralisation.

IF TG1 can rank a few high risk/high reward antimony drill targets then we think that would be a win for the company.

Copper 🔄

TG1 recently picked up its copper assets in WA...

We covered the new acquisitions in our last TG1 Note here:

TechGen Metals has just acquired TWO new copper exploration projects in WA.

The projects are relatively early stage but have had high grade rock chips grading up to 50.5% and interestingly, had never been explored for copper before.

Interestingly, the projects hadn't even had any geophysical surveys done on them.

Right now, TG1 is running geophysical surveys across those assets aiming to rank some drill targets.

We are looking forward to that news, and IF TG1 is able to put out any interesting drill targets we expect to see investor interest come back into TG1.

Especially considering the huge investor demand (and lack of supply) of high risk/high reward copper explorers on the ASX.

We recently followed one story (Renegade Exploration) which rallied pretty strongly going into its own copper focused drill program...

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Whilst it was going after a very different type of copper drill target, we think something similar could happen for TG1 (as long as the geophysics delivers strong targets)...

Ultimately, it will be the drilling across either of these projects where TG1 can achieve our Big Bet which is as follows:

Our TG1 Big Bet:

“That TG1 will return 10x by discovering and defining a significant enough deposit to move into development studies for one of its projects.”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our TG1 Investment memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

How today’s news relates to our TG1 Investment Memo:

Tiny market cap leveraged to a discovery

As of 27 April 2023, TG1 has ~64 million shares on issue with a market cap of just $4.5M (at 7 cents per share). This means TG1 is highly leveraged to a large exploration discovery from a drilling campaign.

Source: Why did we Invest in TG1? - TG1 Investment Memo 27 April 2023

TG1’s market cap is now even lower than when we had written our Investment Memo back in April 2023.

Whilst we are down on our Initial Investment and that is painful, the bright side (especially for investors with a lower entry price than us) is that now the company is even more leveraged to the upside in the event the company does make a new discovery.

We see any upside from the antimony potential of TG1’s project as upside to all of the company’s existing assets.

What could go wrong?

With assay results pending from its gold project and the work being done across copper and now antimony the key risk for TG1 in the short term is “Exploration risk”:

Exploration risk

TG1 has made a gold discovery at its NSW gold project but is yet to define an in-ground JORC resource. Most of TG1’s other projects are still pre-discovery. As a result we think exploration risk remains a key risk for TG1

Source: “What could go wrong?” Section - Investment Memo 27th April 2023

There is always a chance that drilling returns no economic mineralisation.

The rock chip samples put out by TG1 today could also fail to produce any meaningful drill targets.

The antimony might just be pathfinder mineralisation for gold/silver and nothing more than that.

IF the market starts to build in expectations from the antimony prospects and TG1 isn't able to deliver drill targets the company’s share price might come off in the short term.

Our TG1 Investment Memo

In our TG1 Investment Memo, you can find the following:

• Our TG1 Big Bet
• Key objectives we want to see TG1 achieve
• Why we are Invested in TG1
• The key risks to our Investment thesis
• Our Investment plan