TTM and Hancock subsidiary seal US$120M JV deal

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 1,113,277 TTM shares at the time of publishing this article. The Company has been engaged by TTM to share our commentary on the progress of our Investment in TTM over time.

It’s been a big few weeks of price runs for gold and silver.

Our Investment Titan Minerals (ASX:TTM) already has a 3.1 million oz gold and 22 million oz silver JORC resource at its Dynasty project in Ecuador.

...and more drilling is scheduled to start in the coming weeks to grow it.

But the big news today from TTM is on one of its copper assets, where TTM has previously hit a 308m thick intercept at ~0.4% copper equivalent....

That project has attracted the attention of Australia’s richest person Gina Rinehart.

This morning, Hanrine (one of Gina Rinehart’s Investment vehicle) executed a BINDING Joint Venture agreement to earn up to 80% in TTM’s copper project in return for spending US$120M on exploration and development.

(TTM gets to keep up to 20% of the project, and is free carried for US$120M of exploration spend)

The first big step has been executed today, which sees TTM receive US$1.75M in the next 30 days for an initial 5% of TTM’s project.

(it already got US$250k back in April when the deal was first announced)

It sounds like Hanrine are moving quickly to start the copper drilling:

TTM CEO Melanie Leighton said: “We are well advanced in our technical discussions with Hanrine who are ready to commence exploration activities at the Linderos Copper Project”

So preparations for a major 10,000m drill program are underway as we write.

TTM’s Linderos copper project is the type of large copper porphyry target that we think will benefit from the firepower Hancock brings to the table in terms of capital, as well as its in-country team.

That team has been exploring in Ecuador since 2017, so we think there’s plenty of technical experience involved.

TTM is currently capped at ~$83M.

Today’s $120M binding JV is for 80% of one of TTM’s copper projects only.

TTM retains 100% of its gold and silver project, as well as 100% of two other copper exploration projects, all in Ecuador.

So with a fresh US$1.75M soon to be in the bank and Hanrine funding and handling the Linderos copper project drilling, TTM now has the cash runway to keep drilling to grow its gold and silver resource.

Gold is at all time highs and silver looks like it wants to test new highs too...

The perfect time to deliver some big hits as gold and silver prices keep running.

7 key reasons why we are Invested in TTM

(Note: the below is from our 29 May 2024 TTM Investment Memo)

1. Advanced stage asset with giant JORC resource - TTM’s primary asset (Dynasty) has an existing 3.1M ounce gold, 22M ounce silver JORC resource. We think the resource at Dynasty underpins TTM’s valuation.
2. TTM has agreed to terms on a US$120M farm-in deal with Hancock Prospecting subsidiary - TTM has agreed to terms on a JV / earn in for its earlier stage copper project. Once binding, we think the deal validates the potential for a seriously big copper discovery, given the deal was signed at such an early stage and for such a large amount.
3. TTM essentially has a free carried option at giant copper porphyry discovery - We think the proposed deal with Hanrine (Gina’s subsidiary) gives TTM a free option at being a 20% holder in a giant copper porphyry discovery in a deal that is worth more than TTM’s current market cap on its own.
4. Right commodities at the right time - TTM gives us exposure to gold, silver and copper. All three commodities are currently running with gold and copper both trading at all time highs and silver breaking out into decade highs.
5. Rare copper exposure with tier 1 discovery potential - we think it is hard to find small cap stocks on the ASX that have genuine tier 1 copper discovery potential. Especially not one with funding secured to drill out a potential discovery. TTM has both at its Linderos project.
6. TTM has institutional backing - For such a small company, TTM already has some impressive funds on its share register including Tribeca, Nero Resources Fund, Bacchus Capital, and Thorney.
7. Ecuador is a mining hot spot - All of TTM’s assets are in Ecuador. The country is well known for being home to big discoveries and blue chip mining companies like Anglo American, Newmont, BHP, Barrick, Lundin. Large cheques are being written for Ecuadorian mining projects. We think TTM’s assets could be of increased interest over the coming months.

Source: 29 May 2024 TTM Investment Memo

TTM - Gold, Silver and... Copper with a Gina JV?

Why we think Gina is interested in TTM

Above we noted TTM’s significant copper hits back in 2022 at the Linderos Project - specifically the 308m at ~0.4% copper equivalent.

At the time of drilling, TTM managed to confirm big zones of copper porphyry mineralisation - but the market seemed to overlook the results...

... but it appears that Gina Rinehart’s experienced team did not - given today’s binding JV to earn into the asset.

We covered those drill results in December 2022, read: TTM honing in on potential copper-gold porphyry discovery

In 2023 TTM ran an IP geophysical survey and found what it thinks could be “a much larger porphyry system than previously recognised in surface mapping, geochemistry, and drilling”.

Here’s what it looks like in “colourful blob” form:

(Note* that monster 308m hit ended in mineralisation and has barely crossed halfway mark of that giant target)

Drilling out a target of this size isn't something we normally see sub $100M capped companies do - usually it's the bigger companies like BHP and Rio Tinto that come in and take the projects on.

That's because while they can be extremely valuable, they also require a lot of expensive exploration drilling to truly define their magnitude.

TTM now has that deep pocketed funding partner (a wholly owned subsidiary of Hancock Prospecting), and the joint venture can go back and drill out what could (with a bit of luck) turn out to be a monster copper deposit.

The deal is also structured in a way where the majority of the US$120M gets spent on the project, meaning the deal will force capital into the ground if Hanrine likes what they see.

(Drilling this asset is something we have wanted to see from when we first Invested in the company back in July 2020)

Below are the key terms for the deal:

• US$2M cash upfront to TTM for a 5% interest in the project (within 30 days of executing a binding agreement).
• 10,000m of drilling (or US$8M spent) for a further 25%.
• 15,000m of drilling (or US$12M spent) for a further 21%.
• The final 29% transfers over once Hanrine declares a “decision to mine” or reaches US$120M in expenditure on the project.

These terms are now binding as of today.

We also noticed in today’s announcement that there is a “first right of refusal” clause, which clearly shows that Gina and her team are committed to the project for the long run.

Gold/silver prices running - TTM to increase its gold-silver resource?

While Gina and the Hanrine team fund TTM’s Linderos copper project, we are looking forward to seeing TTM grow its 100% owned Dynasty gold/silver resource.

Until a few months ago, a large part of TTM’s project hadn't been tested primarily because of land access issues.

TTM recently managed to get that access sorted and can drill out those parts of the project where we think there is potential to multiply TTM’s already giant resource.

(and now it should have the funds to do it following the binding deal with Hanrine)

Back in July, TTM announced new undrilled gold targets along the ~9km strike that the current gold and silver resource sits around.

Below is an image of the Dynasty Gold Project, including the 9km of strike showing soil geochemical anomalies and multiple target areas:

(Source)

Almost ~82% of TTM’s current 3.1M ounce gold + 22M ounce silver resource is from drilling down to ~200m depth so there is potential for TTM to increase the resource with deeper drilling as well.

TTM expects drilling to start in the coming weeks and has flagged a resource upgrade as soon as this quarter.

We are hoping that a mix of the exploration results from TTM’s copper joint venture with Gina Rinehart’s Hanrine and its gold/silver project can help TTM achieve our Big Bet which is as follows:

Our TTM Big Bet:

“We want to see TTM prove up a $1BN plus copper or gold discovery in Ecuador which is so attractive that a mining major acquires the company.”

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 TTM Investment memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

More on the other copper assets - TTM still retains 100%

Copper Duke and Copper Field Projects (Exploration assets)

TTM’s other two copper assets are both relatively early stage, but that hasn't stopped TTM from getting “significant inbound M&A interest”.

At Copper Duke TTM has a similar exploration theory to the one that brought about the monster porphyry copper hits at Linderos.

There, TTM is at a similar stage where Linderos was before that 2022 drill program.

Copper Field is TTM’s earliest stage asset.

As we mentioned above, cashed up majors have the balance sheet to fully drill out big copper porphyry targets, so we will be watching with interest to see if TTM can strike additional deals on these copper assets.

What’s next for TTM?

• Drilling to upgrade the Dynasty JORC resource again 🔲
• Resource upgrade/update at Dynasty 🔄
• Scoping study preliminary results 🔲
• Exploration drilling at Linderos funded by Hanrine (Gina JV) 🔲

Risks

These are the risks we are most conscious of for TTM right now:

Exploration / Drilling risk

There is no guarantee that TTM’s extensional drilling programs will be successful and TTM may fail to uncover enough economic mineralisation to justify the expense.

Source: 29 May 2024 TTM Investment Memo

With a 10,000m drill program being planned at the copper project, and more drilling at TTM’s large gold-silver project to come, it is possible drill results do not meet market expectations.

Commodity price risk

At the time of writing this memo all three of the base metals that TTM’s projects are leveraged to are running hot. Should the price of these commodities fall, it could hurt the TTM share price and the look-through value of its assets in any takeover scenario.

Source: 29 May 2024 TTM Investment Memo

The commodities that TTM (copper, gold, silver) has on its projects may not remain at elevated prices. We will be watching these commodity prices closely.

Funding risk/dilution risk

As a small cap company, TTM is reliant on capital markets to advance its projects if it cannot do strategic deals with partners. If something negative happens at a macro or company level, TTM could struggle to access capital on favourable terms. These capital raises may take place at a discount, and result in the issuance of new shares which incur dilution to existing shareholders.

Source: 29 May 2024 TTM Investment Memo

TTM had ~US$1M (~$1.5M) at 30 June 2024, and will now receive an additional US$1.75M from Hanrine for a 5% stake in TTM’s copper project.

We are also keeping an eye on the ~26 million 35c options that are currently in the money - these could get exercised over the coming months - if they are all exercised it would give TTM another ~$9.2M.

At the same time, while good for TTM’s cash balance, we think these options may see TTM’s share price “churn” or trade in a range for a range for a while if these options are exercised.

It's still worth noting that TTM could look to raise some additional capital at some point in the future, irrespective of the options or the money coming from the Linderos Joint Venture.

Sovereign risk

TTM’s prospects are all located in the developing nation of Ecuador. There is no guarantee that local authorities and/or communities will favour development of TTM’s prospects, and so could hinder advancement. We also note a recent surge in violence could have a dampening effect on investments.

Source: 29 May 2024 TTM Investment Memo

We think Ecuador remains a potentially challenging jurisdiction to operate in due to political volatility.

How does this impact our TTM Investment Memo?

Today’s news sees TTM complete a very important milestone at its JV copper project with Hanrine, which was an essential part of Objective #3 from our TTM Investment Memo.

Now we want to see the 10,000m drill program take place.

Objective #3: Progress Linderos Project through to MRE

We want to see TTM and its JV partner Hanrine and start drilling out the Linderos project all the way through to a maiden JORC resource estimate.

Milestones
✅Complete JV deal with Hanrine (Gina Rinehart subsidiary)
🔄Drill program #1
🔲Drill program #2
🔲Confirmation of copper Porphyry discovery
🔲Maiden JORC resource estimate published

Source: 29 May 2024 TTM Investment Memo

Our TTM Investment Memo

Our Investment Memo provides a short, high-level summary of our reasons for Investing.

We use this memo to track the progress of all our Investments over time.

Click here to read our TTM Investment Memo where you will find:

• What does TTM do?
• The macro theme for TTM
• Our TTM Big Bet
• What we want to see TTM achieve
• Why we are Invested in TTM
• The key risks to our Investment Thesis
• Our Investment Plan