TTM honing in on potential copper-gold porphyry discovery

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,899,250 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.

Is it a porphyry discovery?

With assays from 2 holes released yesterday, shallow mineralisation has been intersected - and there’s six more assay results to go.

So we will have to wait a bit longer to really know for sure, but what we have now is a very solid start.

Our Investment Titan Minerals (ASX:TTM) is chasing a large copper-gold porphyry discovery in South America.

Porphyries host the largest known exploitable concentrations of copper on the planet. They typically come with gold as well.

Porphyries are typically low grade, but extremely large metals deposits - big miners love these types of resources, as they generate substantial cashflow for decades of mine life.

The most famous example is BHP’s Escondida operation in Chile, which has been running since the 1990s and has estimated copper reserves to keep the mine running economically for ~54 years.

There’s dozens of valuable copper gold mines in Ecuador and Colombia which are from porphyry mineralisation, and TTM wants to add to this list with a new discovery on its ground.

Yesterday TTM put out the first two assays from a total of eight diamond drill holes on its maiden drilling program at its copper porphyry target in Ecuador.

TTM hit wide intervals of mineralised porphyry intersected from shallow depths. That’s a good early sign, especially with six more holes to come.

TTM’s best result was on a 308m interval with a copper equivalent grade of 0.4% from a depth of just ~54m.

Whilst on first inspection, the grades look on the low side, our key takeaways from the two assays results released to date are as follows:

1. TTM has confirmed a porphyry structure from a shallow depth - This is a potentially giant porphyry system from a shallow depth ~54m downhole. So shallow is unusual for large porphyry deposits, which can sometimes be found kilometres deep underground.
2. The same hole ended in mineralisation – This drillhole ended in mineralisation - which means the porphyry system could extend beyond the ~308m intercept released yesterday.

So it’s early days, but initial results suggest there could be a big, mineralised system somewhere here. Of course, there is more work to do to prove this..

This is the first time ever TTM has run a drilling program on this project, and it’s not often that we see intercepts like this on a first pass drill program.

And, TTM still has another six assay results pending.

While waiting for those assays to come in, TTM has already confirmed it is considering running an Induced Polarisation (IP survey) looking to map out the structures below ground.

These IP surveys are similar to the ones run by Carnaby Resources before it made its copper discovery in WA and re-rated by almost 10x.

The whole purpose of the program is to try and map out the EM targets below ground so that future drillhole locations can be refined.

In TTM’s case, instead of looking for completely virgin drill targets, the company will be looking to try and better understand the porphyry system yesterday’s assay results have confirmed.

We see yesterday’s news as a good a start that TTM could have hoped for on a completely new drill target.

The markets, just like us, for the last ~ two years have primarily focused on TTM converting its ~2.1 million ounce gold, 16.8m ounce silver foreign resource estimate into JORC status over at its Dynasty project, 20km down the road from its porphyry targets.

This established resource was one of the key reasons we Invested in TTM and what we think underpins a large part of the company’s current $130M market cap at last close.

While work is ongoing to convert the Dynasty resource to JORC status and potentially increase it (more on this later) we don’t mind seeing the company take shots at potential large scale discoveries, especially after the results received yesterday.

These large scale discoveries have the potential to re-rate the company’s share price significantly.

This forms the basis for our long term ‘Big Bet’ for TTM which is as follows:

Our 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.

To monitor the progress TTM has made since we first Invested and how the company is doing relative to our “Big Bet”, we maintain the following TTM “Progress Tracker”:

See our TTM Progress Tracker here:

Now whilst it's a good start, how can TTM keep funding its exploration plans?

We are conscious of TTM’s drilling programs being deep, diamond drill holes which are often the most expensive type of drilling - but with that does come the potential for new large discoveries.

So before we go too far, we need to talk about TTM’s funding and balance sheet.

TTM is capped at A$130M based on yesterday's closed share price. At the end of the last quarter, TTM only held US$1.6M in cash in the bank (30 September 2022).

We also note that TTM has a fully drawn A$1.5M debt facility that came up for repayment before the 1st of December 2022.

That Sept 30 cash balance does not account for any of the cashburn that is likely to have been incurred from the diamond drilling the company has done since.

Given all of this, we think that TTM is sitting on a relatively low cash balance compared to TTM’s market cap.

To be able to demonstrate scale potential at its project, continue positive exploration momentum, and justify its current valuation - TTM needs to have a stronger cash position.

With a relatively large enterprise value, it's hard to see TTM’s share price momentum improving without a solid cash balance to support it.

US$4M due before year’s end from asset sale

TTM expects to receive ~US$4M from the sale of non-core assets before the end of this year.

The US$4M proceeds from the asset sale should be enough to keep things going until (hopefully) our predicted gold run in 2023 kicks in and TTM can raise at higher levels - hopefully off the back of a new discovery as well.

According to the above October 18 announcement they had US$2M cash coming in, however we haven't seen confirmation that this has been paid yet.

Beyond clearing the funds from the asset sale, it's our view that TTM needs to come up with a bigger funding plan soon - one that gives it enough runway to continue its exploration momentum over the coming 12-24 months.

We think investors would be waiting for the funding puzzle to be in place before taking a position in TTM.

A stronger cash balance will allow it to maintain its valuation / enterprise value and hopefully move the share price north on exploration success.

We are hoping TTM is able to put out an update on this front over the coming weeks which would alleviate the need to raise more funds for the company in the short-term.

More on yesterday’s assay results:

In our last TTM note in September, we explained how the thick sulphides intercepted from TTM’s first two drill holes were promising enough to warrant a keen eye on assay results.

At the time, TTM had completed its first drillhole and hit up to 242.75m of sulphides, and was halfway through its second drillhole where it had already intercepted ~182.76m of sulphides.

Besides the extensive widths encountered, we were encouraged that the host rock was sulphides. These can typically contain copper that is readily extractable utilising conventional means.

Yesterday TTM put out the assay results from drill holes one and three, meaning we still have six assays to look forward to.

Here are our key takeaways from each of the two assays released to date.

Drillhole 1 (CRD22-001):

TTM hit a 52m intercept with a copper equivalent grade of ~0.3% from a depth of 82m.

Drillhole 3 (CRDD22-003):

TTM hit a 308m intercept with a copper equivalent grade of 0.4% from a depth of just 54m.

Included in that intercept was a higher grade section of ~76m at 0.5% copper equivalent.

The main takeaway was that the drillhole actually ended in mineralisation, meaning the structure could extend beyond where TTM stopped drilling.

That point is 575 metres by the way, or 400 metres vertically from the surface - this suggests a big, mineralised system.

This is why we are looking forward to TTM releasing more assay results, and continuing to drill test this project based on all this new information.

We also think the higher grade section is a good sign that there may be variability in grades throughout the structure, and that with future drilling programs TTM could find higher grade mineralisation.

The assays from Holes 1 and 3 also confirmed the presence of copper, alongside other valuable metals such as molybdenum, gold and silver. The table below shows this:

What about the grades from yesterday’s intercepts?

Economically viable projects come in different shapes and sizes.

1. Some can be giant in size and low in grade - becoming economically viable because of the economies of scale advantages.
2. Others can be small but high grade - becoming economically viable because the concentration of mineralisation is higher.

So far, TTM’s assays fit into the first category.

Now granted that the copper equivalent of 0.3 and 0.4% would typically be too low for an economic deposit, this is somewhat offset by their long width being indicative of a large system.

For some context, a project that comes to mind is the Warintza copper-gold project, owned by $800M capped Solaris Resources of Canada.

Warintza (like TTM) is a porphyry system that is also located in Southern Ecuador, but is much more advanced than Copper Ridge - it has an indicated resource totalling 579 Mt at 0.59% CuEq, and an inferred resource of 887Mt @ 0.47% CuEq.

Warintza is the kind of porphyry discovery TTM would like to make, and Solaris is valued at the kind of levels TTM would like to get to.

Just last week, Solaris delivered the latest drilling results from Warintza, highlighted by one hole returning 604m at copper equivalent grades of 0.51% from near surface.

Our hope is that TTM’s prospects could be an early sign of a project which ends up resembling Warintza, in that a big system is ultimately defined.

At this stage we are hoping TTM is able to prove up the scale potential and future drill programs continue to delineate an even larger porphyry system.

The obvious caveat is that there is no guarantee that this happens, sometimes intercepts like yesterday’s can be a one off OR the grades in a large porphyry system decline as a company does more drilling leaving the project stranded labelled uneconomic.

What’s next for TTM?

Assay results from Copper Ridge prospect (Linderos project) 🔄

Yesterday we received the first two assay results from TTM’s ~8 hole diamond drilling program.

With the first two assays released we are expecting to see the results from the remaining holes come through December into January 2023.

Below is a map of the drillholes with assays pending:

Assay results from Meseta Gold prospect (Linderos project) 🔄

In late October TTM put out an update on the company’s diamond drilling program targeting gold at its Linderos project (Meseta prospect).

Here the company completed 14 diamond holes with sulphides intercepted measuring as high as ~130m in thickness.

We are now waiting for the assay results from that drilling program with TTM saying that results would take ~6-8 weeks from the end of October.

This should mean results start to come in either later this month or early in Jan 2023.

Geophysical surveys 🔲

TTM is currently considering whether or not to run geophysical surveys (IP) on Q1 of 2023.

With these surveys TTM will be looking to enhance its understanding of the project and structures below the ground.

All of this work will allow for TTM to better target future drill holes.

Target generation at Dynasty gold project 🔄

This is TTM’s project which has an existing foreign resource estimate of 2.1m ounce gold and 16.8m ounce silver resource.

When we first launched our Investment in TTM back in July 2020 we mentioned the company would be looking to convert that foreign resource estimate into JORC status and hopefully grow its resource.

TTM is currently running sampling programs, primarily to look for new drill targets that can be included in future drilling programs.

With the project having over 9km of strike, mineralisation being open in all directions and only ~50% of the project explored, we are hoping TTM is able to build on that foreign resource estimate and release an even larger JORC resource.

At the moment the two mineralised sections of the project are below, TTM’s sampling program is looking to drill out the project to see if the two structures come from a single source and make up a larger gold deposit.

Our 2022 TTM Investment Memo

Below is our TTM Investment Memo, where you can find a short, high level summary of our reasons for Investing.

The ultimate purpose of the memo is to record our current thinking as a benchmark to assess the company's performance against our expectations for the year.

In our TTM Investment Memo, you’ll find:

• Key objectives we want to see TTM achieve
• Why we are Invested in TTM
• What the key risks to our Investment thesis are
• Our Investment plan