Tyranna flexes financing force in $31M funding feat.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 29,630,000 TYX shares and 10,000,000 TYX options at the time of publishing this article. The Company has been engaged by TYX to share our commentary on the progress of our Investment in TYX over time.

Over $14.5M in cash and a multi-billion dollar mining giant in its corner.

Our 2022 Catalyst Hunter Pick Of The Year Tyranna Resources (ASX:TYX) is close to starting a new drilling campaign on its Angolan lithium project.

We only have a couple of months to wait before the next fully funded drilling campaign starts and for TYX to have the chance to deliver some market moving drill results.

Late last year TYX started drilling its project and in February confirmed a discovery with a 23m intercept and lithium grades up to 2.02%.

That was the first time TYX’s project had been drilled, and the drill result de-risked the project from a discovery perspective.

The project is no longer a “pre-discovery” exploration project where TYX may find nothing - instead now it's about trying to work out how big the lithium discovery is.

TYX expects to be on the ground for its second round of drilling in October 2023.

TYX isn’t just de-risked from an exploration perspective but also on the financing front.

TYX has a $31M funding deal with $6.9BN capped Chinese mining giant Sinomine AND a binding offtake agreement with a US$10M prepayment to TYX as part of the deal.

In total, the funding/offtake deal is for up to ~$46M in funding over the life of the project.

Just last week TYX closed the first tranche of the deal worth $14.5M.

This included Sinomine making a direct investment of $4.5M into TYX at the company level, priced at 2.5c. This is a premium to today’s market price.

For some context, Sinomine is a Shenzen listed global mining and industrial powerhouse with operations across more than 40 countries all across the world. Sinomine’s dozens of projects include lithium development projects, and it has invested heavily in Africa.

All up, the deal gives TYX’s project a look through valuation of ~$100M - despite this TYX is currently capped at $70M.

The $31M funding deal is split over two phases with the first phase completed as of last week:

Phase 1 (NOW COMPLETED - $14.5M from phase 1 is now secured):

• Sinomine invests $4.5M in TYX at 2.5c per share.
• Sinomine invests $10M in exchange for a 10% stake in TYX’s Angolan lithium project.

Phase 2 (Sinomine will have the option to exercise this phase):

• Sinomine can invest $6.75M in TYX at a minimum of 3.75c per share OR a 25% discount to the 5-day volume weighted average price TYX share price (whichever is higher).
• Sinomine can invest another $10M in exchange for a further 10% stake in TYX’s Angolan lithium project.

Offtake agreement with a US$10M prepayment (in addition to the $31M funding deal):

• Sinomine has offtake rights to 50% of the lithium/pollucite from TYX’s project and the right to take up the remaining 50% of production.
• Sinomine to pay TYX US$10M as a prepayment once TYX has its ball mill on site and bolted into position.

In total, the funding and offtake deals will see ~$46M Invested into the project and TYX through to production.

TYX is now fully funded through its next phase of exploration. As such, we thought now is the perfect time to reset expectations for the company and release our new TYX Investment Memo.

But first, lets take a look at hat TYX has been up to since its lithium discovery was made:

What has TYX been up to:

TYX’s maiden drill program was completed in December last year and the assays from the program came back in February confirming a new lithium discovery.

Since then TYX has:

(1) New targets areas identified ✅ - TYX identified new target areas based on re-processed spectral and satellite data. TYX has also taken rock chip samples from the targets. Below is a map of the five key target areas:

(2) Metallurgical testwork completed ✅ - TYX produced a product with lithium grades >3% which could be sold as Direct Shipping Ore (DSO) OR used to produce high grade concentrates (>7%). TYX achieved recoveries of ~80-82% and produced concentrates >6% using a relatively simple processing method. For context most of the worlds lithium products are sold as 5%+ concentrates.

(3) Rock chip sampling results from new target areas ✅ - Lithium grades up to 4.24% from pegmatites at new target areas.

(4) $31M funding deal signed with $6.9BN Sinomine ✅ - TYX signed a funding/offtake deal with multi billion dollar mining giant Sinomine for an investment of up to $31M into TYX and its Angolan lithium project. The first $14.5M was received on 18 July 2023. Sinomine also agreed to offtake deal with US$10M prepayment when the project is being put into construction.

What’s next for TYX?

TYX will be running a helicopter assisted sampling program so that more of its project area can be sampled quicker.

After the samples are assayed, we want to see TYX rank the highest priority drill targets, get permitting completed and start drilling its high priority targets.

TYX expects the sampling program to start in September and then drilling in October.

The main target we want to see get drilled is the Muvero East prospect where TYX has been picking up rock chip samples grading ~4.24%.

We are long term Investors in TYX and are here to see the company take its project from a pre-discovery exploration project to a project with size/scale comparable to some of the world’s biggest hard rock lithium projects.

The definition of a large scale lithium resource forms the basis for our TYX Big Bet which is as follows:

Our TYX Big Bet:

“TYX discovers and defines a large, simple to process lithium resource, that is on par with world class multi-billion dollar ASX peers such as Pilbara Minerals, Core Exploration, and Liontown Resources, AVZ Minerals and Sayona Mining”

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

Our new TYX Investment Memo:

The main objective for our first TYX Investment Memo was to see the company make a new lithium discovery.

Now that TYX has made that discovery we have done a review of our original Investment Memo.

To see our review of our first TYX memo click here.

TYX expects to be drilling again in October and so today we will be launching our new TYX Investment, where you can find:

• Why we are Invested in TYX
• Our long term Big Bet - what we think the upside Investment case for TYX is.
• The key objectives we want to see TYX achieve
• The key risks to our Investment thesis
• Our Investment Plan

Click here to see our Investment Memo

Investment Memo, Tyranna Resources (ASX:TYX)

Memo Opened: 28-Jul-2023

Shares Held at Open: 29,630,000

Options Held at Open: 10,000,000

What does TYX do?

Tyranna Resources (ASX:TYX) is a junior exploration company defining a hard rock lithium discovery in Angola, West Africa.

TYX made a discovery in February 2023 and has explored ~2% of the outcropping pegmatites scattered over its project area.

TYX owns 70% of the project, Sinomine recently acquired 10% of the project for $10M.

What is the macro theme?

Lithium is one of the most critical raw materials in producing lithium-ion batteries.

These batteries are required to power electric vehicles (EVs) AND to store energy for managing the ongoing global energy crisis.

Given the increasing focus on decarbonisation, shift away from traditional fossil fuels and global energy crisis we expect to see demand for the raw materials used in these batteries to remain strong and, in turn, expect to see the capital pour into new discoveries.

Our Big Bet for TYX

“TYX discovers and defines a large, simple to process lithium resource, that is on par with world class multi-billion dollar ASX peers such as Pilbara Minerals, Core Exploration, and Liontown Resources, AVZ Minerals and Sayona Mining”

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

Why we are Invested in TYX:

1. Lithium discovery already made - TYX has already made its discovery with its first drill program. Now it is about growing the size/scale of its project through additional drilling.
2. High grade outcropping pegmatites - TYX’s project has over 1,000 outcropping pegmatites over a ~25km x 10km strike zone. Rock chip samples have returned grades up to 7.49% lithium.
3. Explored less than 2% of the project area to date - TYX to date has explored less than 2% of its project area. TYX, therefore, has plenty of exploration upside. Of the ~1,000 outcropping pegmatites, only 34 have been sampled.
4. $6.9BN mining giant invested in TYX and at the project level - TYX signed a deal with $6.9BN capped mining giant Sinomine worth up to ~$31M. Having a multi billion dollar project partner with deep experience in African EV metals projects provides TYX with a derisked pathway to finance project level progress.
5. Offtake agreement with a US$10M prepayment - TYX also signed an offtake deal with its project partner, the $6.9BN capped Sinomine. Under the terms of the offtake deal Sinomine pays TYX a prepayment of US$10M while the project is in construction.
6. First mover in Angola - Angola has no operating lithium mine at the moment, TYX has a first mover advantage in the lithium space in Angola. The Angolan government is looking to support the build out of its lithium industry and has mentioned TYX in presentations in the past.
7. TYX Technical advisor worked on AVZ Minerals (4.3c to a peak of $1.35) - Peter Spitalny acted as chief technical adviser to AVZ Minerals (capped at $2.7BN, prior to its suspension). Peter Spitalny is TYX’s principal technical advisor. Having successfully defined a large multi-billion dollar lithium resource, we hope Peter can do it all again with TYX.
8. We have had previous success Investing in Angola - We have had success Investing in Angola with our other Investment Minbos Resources going from a share price of ~3c to a peak of 21.5c (~615% increase).

What do we expect TYX to deliver?

Objective #1: Follow up drilling at the Muvero discovery

We want to see TYX drill out its Muvero discovery which includes testing the pegmatite swarms to the east at the Muvero East prospect.

Milestones

✅ Rock chip sampling

🔲 Drilling at Muvero

🔲 Drilling at Muvero East

🔲 Drill results

Objective #2: Drilling of other prospects

We want to see TYX run a project wide geochemical/geophysical survey program to define other high priority drill targets. We want to see TYX drill at least one of these other targets.

Milestones

🔲 Rock chip sampling across the project

🔲 Project wide geophysics

🔲 High priority drill targets defined

Objective #3: Maiden resource estimate

We want to see TYX define a maiden JORC resource estimate. A JORC resource would allow TYX to engage with potential offtake partners and let the market compare it with peers.

We will be putting out our expectations for the JORC resource after the company’s drill programs.

Milestones

🔲 Resource definition drilling starts

🔲 Resource definition drilling completed

🔲 Maiden resource estimate announced

Objective #4: Feasibility studies

We want to see TYX start a feasibility study (scoping study or pre-feasibility study) at some point over the next 12 months following resource definition (Objective #3). We also want to see TYX look at whether or not the project can produce Direct Shipping Ore (DSO).

Milestones

🔲 Feasibility study commenced

🔲 Direct Shipping Ore (DSO) suitability testwork

What could go wrong?

Exploration risk

TYX has already made a discovery at its Muvero prospect, but the company is yet to put together a JORC resource estimate for its project. As a result, there is no guarantee that the discovery becomes an economically recoverable lithium project.

Commodity pricing

Any negative change in the lithium price may impact demand for new discoveries. This would particularly hurt the share price of junior explorers like TYX that are still early in the exploration cycle.

Market risk

If the broader market sells off, there is a chance that investors shy away from high risk investment opportunities such as early stage junior explorers. During market downturns, investors will generally look to pull capital away from the highest risk investments.

Geopolitical risk

TYX’s lithium project is located in Angola, which is a developing country in the west of Africa. There have been several coups in neighbouring countries and the region has a history of geopolitical uncertainty. We have also seen several licensing problems across other African countries, which have impacted other ASX listed companies. As a result, there is a risk of the regulatory environment changes impacting project permitting, tax laws or tenure requirements.

Investment plan

As with all our exploration investments, if the share price runs by more than 300%, we may de-risk by Top Slicing 20% of our Total Position, in the hope to achieve Free Carry into the remaining drill campaigns, but are less likely to do so with the amount of funding TYX has recently secured from Sinomine.

The rest of the Investment plan depends on the outcomes of the company’s drill campaign and will be updated accordingly, and be governed by the 2 to 3 year holding periods as defined in our trading and hold policy disclosure.

To read our investment retro for our last TYX memo click this link and select “TYX-IM1” tab.