TG1 now working up WA lithium drill targets near $294M Delta Lithium

Disclosure: S3 Consortium Pty Ltd (The Company) and Associated Entities own 2,331,081 TG1 shares. The Company has been engaged by TG1 to share our commentary on the progress of our Investment in TG1 over time.

The market is loving Western Australian ASX lithium stocks at the moment.

Our tiny sub $5M capped exploration Investment TechGen Metals (ASX:TG1) has just announced that they have found high concentrations of lithium and caesium in three locations from historical soil samples on one of their gold projects in WA...

Lithium we are all familiar with.

Lesser known is caesium - which is actually a “pathfinder” element for lithium.

Meaning if you find caesium, it’s possible there is lithium around too.

These are good early signs for a micro cap explorer...

The next step is for TG1 to fly out to these locations to do some mapping and soil sampling (and hopefully find some pegmatites) to figure out if it’s worth doing some drilling...

Finding lithium in projects that were first explored for gold has happened before.

TG Metals (TG6) did this recently, and is currently a market darling after delivering an unexpected lithium hit - going from 11c to 92c in a few weeks.

Also, back in 2021, a company called Ora Banda sold what they thought was an unexciting gold project to Red Dirt Minerals for $11M.

Ora Banda didn’t realise that while the gold drill hits at the project weren’t very exciting, the long pegmatite hits buried deep in the drill logs were very interesting.

These pegmatite hits are what the Red Dirt Minerals’ geologists had identified and why they wanted to buy Ora Banda’s “gold project”.

~2 years later, after making lithium discoveries on the same ground Red Dirt Minerals has changed its name to Delta Lithium and is now capped at $294M.

Delta Lithium’s project is less than 50km away from where our little TG1 has identified high soil concentrations of lithium.

When we say tiny, we really do mean it.

TG1 is currently capped at ~$3M and had $912k cash at 30 September 2023 - meaning it trades with a tiny enterprise value of ~$2.1M.

Note: just because Delta Lithium and TG Metals have performed well it is not an indicator that TG1 will perform the same way. Early stage exploration, especially by tiny companies, is high risk.

TG1’s project has never been explored with a focus on lithium but has been drilled for gold in the past.

Using the data from all the gold exploration programs, TG1 has defined a set of soil anomalies with lithium grades up to ~144.5ppm.

Now TG1 is going back to map any outcropping pegmatites and to see whether or not it's worth running a lithium focused drill program on the project.

It's a similar strategy to the one TG Metals (TG6) used before its share price re-rated by 13x over the last few weeks.

Note: just because TG6 has performed well is not an indicator that TG1 will perform the same way. Early stage exploration is high risk.

Lithium Exploration 101:

Typically, the way to make a lithium discovery is to:

1. Map the ground and find pegmatites.
2. Sample the pegmatites and confirm they have lithium mineralisation.
3. Confirm the pegmatites contain spodumene.
4. Drill into them and see if they form a big deposit.

More recently, companies across WA have started running soil sampling programs looking for lithium in areas where there are no obvious outcropping pegmatites.

Instead the strategy is to sample the soil, find areas where lithium grades are high and then drill beneath them to see if there are pegmatites underground.

Soil sampling is a pretty common method to generate drill targets when exploring for things like copper, nickel and gold but is just now starting to be used to find lithium.

The theory is that the high lithium grades in the topsoil actually sit on top of areas where pegmatites are underground (hidden undercover).

It's the same process TG Metals (TG6) followed, eventually leading to its 13x re-rate.

Note: just because TG6 has performed well is not an indicator that TG1 will perform the same way. Early stage exploration is high risk.

Before its drill program a few weeks ago, TG6 had soil anomalies grading ~40-80ppm lithium oxide across a 4km x 1.5km area with no mapped pegmatites at surface.

TG Metals drilled under the soil anomalies and hit 9-12m intercepts with lithium grades up to 2.02%.

Off the back of that news, TG Metals share price went from ~10c per share to a high of ~$1.30 per share.

That's a re-rate of ~13x from the lows.

TG1 is in a similar situation with soil anomalies and no mapped outcropping pegmatites... yet.

TG1 does have old drilling data which shows pegmatites intercepted underground - at the time none of those returned any lithium mineralisation and the primary objective was to find gold.

TG1’s plan is to now:

1. Run a sampling program to try and map pegmatites.
2. Identify high priority drill targets for testing in the future.

As of today’s announcement, TG1 is working with two key areas of interest - a 1.6km long Northwest target and a 2.5km long central target.

In between there is ~2.2km of ground where TG1 can go and start soil sampling - none of that area has been mapped or sampled in the past.

Low expectations - Strong result?

Typically, when one of our portfolio companies announces a pivot at a non-core project like TG1’s Ida Valley, we wait for the company to firm up some drill targets before really taking an interest in them.

The difference this time is that TG1 is capped at ~$3M.

Most of the WA focused lithium juniors run to $20-30-40M market caps off the back of rock chips and even sub 5m lithium intercepts. So we think there is plenty of upside if TG1 actually hit lithium in drilling (if they find enough targets to drill).

We have previously touched on this where if a company goes into any exploration program with low expectations, it can deliver a big re-rate for its share price IF it produces strong results.

We wrote about all of this in a previous weekend email here: How share prices can still go up in a bear market

Obviously at this stage, TG1 still has a lot of work to do. Plus, the company will likely need to raise additional funds to deliver on any meaningful drilling. And even if drilling happens, there is always a chance this “exploration pivot” finds no prospective lithium targets.

What else is TG1 working on?

NSW Gold project

At this stage TG1’s main project is still its NSW gold project where TG1 made a discovery back in 2022.

In total the project has had two drill programs completed on it with the first delivering the big 68m intercept with gold grades of 1g/t and the 94m intercept with grades at 0.95g/t.

Today, TG1 announced that drilling approvals had been received for the project's stage three drill program.

The third stage would focus on the areas to the north (where soil anomalies returned 10g/t gold) and the south (soil anomalies of 4.77g/t + monzonite anomaly).

Basically the next round of drilling will be testing for extensions to the north and south of the known gold mineralisation.

Pilbara lithium projects?

We also noticed in today’s announcement that TG1 made applications for ground in the East Pilbara region near the Pilgangoora mine owned by Pilbara Minerals, the Wodinga mine owned by Mineral Resources and Albermarle and the Tabba Tabba project owned by Wildcat Resources.

The Pilbara region has some of the hottest lithium properties in the world, especially with the recent battle to acquire Azure Minerals project by Gina Rinehart, Mineral Resources and Chilean major SQM.

It's still very early days for TG1, but it could signal a bigger land grab in that region.

Something we will keep an eye on...

We have seen companies like Raiden Resources peg ground and then re-rate by over 10x before.

What we want to see next - funding:

The next major catalyst we want to see is TG1 shore up its funding situation.

TG1 had ~$900k in cash at the end of the September quarter.

To run any meaningful drill programs, TG1 will need to raise funds.

Typically, companies with low cash balances can fall into a category where investors choose to hold off any buying on market, waiting for the discounted capital raise to get announced first.

Usually, it acts as a weight on a company's share price until the cash is raised.

Once raised, that weight is lifted, and if the company’s prospects are strong enough, the share price can start moving higher as investors realise they need to buy on market to get exposure to the company.

A recent example was Woomera Mining, which we saw trade sideways for months between 0.9c and 1.2c per share.

Then, finally, after raising $2.3M in cash, Woomera’s share price started moving and peaked earlier this week at ~2.3c per share.

Ultimately, we want to see TG1 raise funds, run high risk high reward drill programs, deliver a discovery and achieve our Big Bet for the company 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.

TechGen MetalsASX:TG1

What’s next for TG1?

Lithium mapping/sampling program at the Ida Valley project 🔄

Mapping at Station Creek Copper project 🔄

What could go wrong?

Exploration risk

At this stage TG1 has early signs of high concentrations of lithium in soil samples. There is a good chance that further investigation may reveal there are not any drill targets worth pursuing.

We think exploration risk remains a key risk for TG1.

Market risk (macro)

Broader market conditions could change for the worse. This could mean small cap exploration stocks, like TG1, suffer from a “risk off” market move.

Funding risk

As a junior exploration company, TG1 will need to seek additional capital to advance the company’s projects. Access to capital could be impacted by a combination of the above risks.TG1 also has a lot of tenements that each carry ongoing licensing costs. In order to fund exploration of these tenements, TG1 will need to raise capital.

Our TG1 Investment Memo

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

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