$0.085
Opened: 30-Nov-2022
Shares Held at Open: 2,631,247
What does LYN do?
Lycaon Resources (ASX: LYN) is a junior explorer focused on making a valuable metals discovery in Western Australia.
LYN is currently exploring for niobium, rare earths, nickel and copper.
What is the macro theme?
Niobium and rare earths exploration in the newly opened West Arunta region in WA. WA1 Resources recently made a discovery here, which saw it run from 13c to over $2.
Niobium, rare earths, copper and nickel, are highly topical “energy transition metals”. New supplies are needed to move the world away from fossil fuels.
Our Big Bet for LYN
"See LYN’s share price to re-rate by over 1,000% off the back of a new metals discovery, and the definition of a deposit significant enough to move into development studies."
This is our standard “Big Bet” for any early stage minerals exploration company with multiple 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 LYN Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true
Why did we invest in LYN?
Ground pegged before a region opening discovery
LYN holds a GRANTED Exploration licence in an emerging rare earths/critical minerals region. This means LYN can start firming up a drilling program over the project area immediately. LYN’s project is ~94km north of WA1 Resources and Encounter Resources.
Similar drill target to WA1 Resources
WA1 Resources discovery was made after the company drilled into a distinct geophysical anomaly. LYN’s project hosts a similar geophysical anomaly that warrants drill testing. We see this as a key drilling target for LYN.
Historic data confirming the right type of geology
In 1982, BHP ran a six hole drilling program on LYN’s ground and intersected “intrusives and strong carbonate alteration” that may be prospective for rare earth carbonatite mineralisation. BHP’s intercepts came from only 6m below the surface. BHP at the time were attempting to drill for diamonds.
Low shares on issue & tight capital structure
LYN has only ~34.5 million shares on issue, with ~4 million in escrow until November 2023. If a new discovery is made, the supply of shares available to buy could be relatively low, which may increase the strength of a re-rate in the company’s share price, should it materialise.
Relatively low market cap leveraged to exploration success
LYN has a current market cap of $18M, with $3.3M in cash at Sept 30, 2022, and an enterprise value of $14.7M. If a successful discovery is made, the share price should re-rate significantly. For example a ~$70M market cap on the back of a discovery would see LYN trading at around $2.
What do we expect LYN to deliver?
Objective #1: Pre drilling work at its niobium & rare earths project in WA.
We want to see LYN complete target generation work to refine its existing data further. This work will help improve the company’s understanding of its project and help design a drilling program.
Milestones
Geochemical surveys
Geophysical surveys
Select Drill Target
Objective #2: Drilling at its niobium & rare earths project in WA.
We want to see LYN get on the ground and drill its project in the West Arunta region.
Milestones
Complete Heritage Surveys
Commence Drilling Program
Publish Assay Results
Objective #3: Target generation and then drilling at its Nickel/Copper/PGE projects
We want to see LYN complete target generation work across its other projects to identify the highest-priority drill targets. We want to see at least one of these projects get drill tested in 2023.
Milestones
Geophysical surveys
Geochemical surveys
Commence drilling
Assay results
What could go wrong?
Exploration risk
LYN is yet to make an economic discovery, with all of its projects considered early stage prospects. Inherently there is a risk that future drilling programs return nothing and LYN’s projects are considered stranded. There is plenty of time before drilling starts in 2023 - so there could be periods of share price weakness prior to drilling.
Macro Theme Risk
The West Arunta province is hot right now after WA1’s discovery and incredible share price run, but it could cool off before LYN drills its West Arunta prospect in the second half of 2023.
Nearology Risk
We have observed that Nearology plays rarely succeed - as we have seen over the years with failed investments in the Fraser Range Nickel rush, the Julimar Province PGE rush and the Earaheedy Basin lead-zinc rush. Whilst LYN’s current key project sits near existing discoveries and is prospective, the chances of the company actually making a discovery are low.
Funding risk
LYN is a junior explorer with no revenues to fall back on to fund its exploration. As a result, the company relies on new funding for future exploration programs. LYN may need to regularly raise new capital from investors to finance its exploration programs.
Market risk
LYN is an early stage exploration company chasing new discoveries. There is always a risk that a market wide sell off will hurt LYN’s share price the most, given investors will look to withdraw capital from the higher risk investments in their portfolios first.
What is our investment plan?
We are a substantial holder in LYN with 7.13% of the company. We Invested in the 10c pre-IPO, at the 20c IPO and again at 40c. Our average entry price over the last 18 months is 25.6c.
There are still at least three months before any drilling will take place (from the time of publishing this memo) - leaving plenty of time for a “pre-drill result speculation” price rise to creep in and probably also a few quiet periods where the share price may drift down.
The key goal is to hold a material position for discovery, but if the share price is trading at over $1.20 in March/April next year, we will consider selling around 15% of the position to de-risk, claiming some capital back for tax, operational costs and new investments elsewhere which is our general model.
Also see our trading policy here
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,631,250 LYN shares and 300,000 LYN options at the time of publishing this memo. The Company has been engaged by LYN to share our commentary on the progress of our Investment in LYN over time.
LYN about to drop holes in West Arunta
Sep 16, 2024
Sep 16, 2024 |
8 min
Two years in the making. And we are almost there. Today our WA exploration Investment Lycaon Resources (ASX: LYN) received its long awaited heritage clearance…
LYN set to drill near West Arunta niobium runners WA1 and Encounter
Jul 12, 2024
Jul 12, 2024 |
8 min
Our Investment in the West Arunta region is Lycaon Resources (ASX: LYN). AND LYN is gearing up to drill its project in the coming months.
LYN drilling targets mid-year next to WA1's West Arunta discovery
May 1, 2024
May 1, 2024 |
7 min
The winter drilling season has just started in the region, and a handful of “next WA1” hopefuls are all about to start spinning the drill bit… Our Investment with ground in the West Arunta is Lycaon Resources (ASX: LYN).
“The Last Frontier”: LYN (finally) closer to drilling WA1 Resources look-alike target in the next few months
Apr 16, 2024
Apr 16, 2024 |
9 min
Our micro cap exploration Investment, ~$9M capped Lycaon Resources (ASX: LYN) is about to drill three look-alike magnetic features in the same region.
Potential for large nickel-copper mineral system
Sep 26, 2023
Sep 26, 2023 |
8 min
Our micro cap exploration Investment Lycaon Resources (ASX: LYN) has now completed its second drillhole at its Bow River nickel-copper project in WA hitting sulphides over 43m.
LYN's drilling starting in one week
Nov 18, 2024
Nov 18, 2024 |
2 min
Lycaon Resources (ASX: LYN) is now a week away from drilling its niobium project in the West Arunta, WA.
LYN Awards Drill Contract
Oct 15, 2024
Oct 15, 2024 |
1 min
Today, our microcap exploration Investment, Lycaon Resources (ASX: LYN) has awarded a drill contract to Topdrill for its maiden drilling program at the high-priority Stansmore prospect within its West Arunta project.
LYN set to begin drilling soon
Oct 14, 2024
Oct 14, 2024 |
1 min
Our microcap exploration Investment, Lycaon Resources (ASX: LYN) has received all the necessary approvals to commence its maiden drilling program at the high-priority Stansmore prospect within its West Arunta project in Western Australia.
LYN completes heritage surveys in the West Arunta
Jul 22, 2024
Jul 22, 2024 |
2 min
Our West Arunta exploration Investment Lycaon Resources (ASX: LYN) just completed a key permitting milestone on its project.
LYN’s West Arunta peer trading up by almost 200%
Jul 9, 2024
Jul 9, 2024 |
2 min
West Arunta explorer Encounter Resources just hit what looks like its second niobium/rare earths discovery…
What Newsflow is left for this Year?
Dec 7, 2024
Dec 7, 2024 |
19 min
In the business world, the christmas break is often treated as an “artificial deadline” to get deals done and finish projects. Three weeks ago we said we are watching 16 companies that had guided the market to expect material news before christmas… Usually only a handful of companies that guide news actually deliver it on time.
Market Optimism Peaks Ahead of the Holidays
Nov 16, 2024
Nov 16, 2024 |
11 min
The world is still digesting what exactly the US election result will mean for the next four years. The weeks after an election is often a “honeymoon phase”.
Major Announcements Driving Volatility in Small Caps
Oct 12, 2024
Oct 12, 2024 |
15 min
The mood is good in small cap land. Cautious… but good. It was another positive week, with plenty of green across the board.
Rising Precious Metals Prices Fuel Optimism in Small Cap Markets
Sep 21, 2024
Sep 21, 2024 |
13 min
What a week for precious metals. Both silver and gold clocking in yet ANOTHER price rise overnight. And the market clearly has a growing appetite for precious metals stocks. Which is FINALLY trickling into small cap silver and gold stocks this week.
Our AL3 site visit and what we learnt
Jul 27, 2024
Jul 27, 2024 |
11 min
Yesterday our team made a trip to Adelaide to visit AML3D (ASX: AL3)’s facility.
