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ASX:TG1

TechGen Metals Ltd

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ASX:TG1
- TechGen Metals Ltd
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$0.029

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Investment Memo:

TechGen Metals Ltd (ASX:TG1)

- LIVE

Opened: 27-Apr-2023

Shares Held at Open: 2,331,081


What does TG1 do?

Techgen Metals (ASX: TG1) is a junior exploration company focused on gold and nickel-copper-PGE projects across Western Australia and New South Wales.

TG1’s current focus is its NSW gold project (John Bull).

What is the macro theme?

TG1 holds gold projects that are both pre and post-discovery.

Gold generally outperforms other asset classes in times of market volatility and we believe it provides a good hedge to a portfolio of longer-term investments.

TG1 also has nickel-copper-PGE exploration prospects, all of which provide exposure to the battery metals theme.

Demand for batteries is set to increase exponentially over the next decade from things such as electric vehicles and semiconductor wiring.

Our Big Bet for TG1

That TG1 will return 10x by discovering and defining a significant enough deposit to move into development studies for one of its projects.

Why did we invest in TG1?

Tiny market cap leveraged to a discovery

As of 27 April 2023, TG1 has ~64 million shares on issue with a market cap of just $4.5M (at 7 cents per share).

This means TG1 is highly leveraged to a large exploration discovery from a drilling campaign.

Existing gold discovery with scope to grow

TG1 has already made a gold discovery at its NSW gold project and has scope to grow the discovery with drilling to its north/south and at depth.

The company has an exploration theory that its project may contain an intrusive related gold system. If this theory is correct, there may be a deeper lying large source to its gold discovery.

At present, the project has only been drilled for seven RC holes (by TG1 in 2022) where it hit 94m at 0.95g/t of gold.

Gold prices trading near all time highs

Gold is currently trading at ~US$2,000/oz - just shy of its all time high in US dollar terms.

Relative to the Australian dollar and many other currencies gold is now trading at all time highs.

Free carried exploration with majors

TG1 has farm out agreements in place with Rio Tinto and IGO Ltd who are free carrying TG1 for exploration expenditures across two of its projects. This means there is always a chance TG1 could be a partner to a discovery made by one of the majors without having to spend any capital on it.

Large portfolio of projects

TG1 holds ground across multiple regions in WA and in NSW. In the event that new major discoveries are made in any of these regions, TG1 will already hold ground nearby and could see market interest off the back of its land position.

What do we expect TG1 to deliver?

Objective #1: Drilling at its NSW gold project

We want to see TG1 drill to the north and south of its existing gold discovery in NSW. TG1 has defined targets over an area measuring ~1km in length and 200m in width.

Given this is an existing discovery our bull, base, bear case expectations for the drill programs are as follows:

Bull case = TG1 proves continuity in its discovery to the north/south or at depth with intercepts >10m and gold grades >1g/t.

Base case = TG1 proves continuity in its discovery to the north/south or at depth with intercepts <10m and gold grades >1g/t.

Bear case = TG1 hits no significant mineralisation to the north/south or at depth of its discovery.

Milestones

complete Rig mobilisation

complete Drilling commencement

complete Drilling results

Objective #2: Drilling across at least one of TG1’s other projects

TG1 holds projects right across WA with potential for nickel-copper-PGE and rare earths discoveries. We will set up expectations for drill programs as TG1 announces them.

Milestones

not done Drill permits

not done Drilling commencement

not done Drilling results

Objective #3: Progress from farm out agreements with Rio Tinto and IGO Ltd

We want to see Rio progress the Harbutt Range project and IGO the North Nifty project.

Objective #4: Explore new project opportunities

Given TG1 is capped at just $4.5M the company can be nimble and take advantage of new project opportunities should they come its way.

Milestones

not done New project acquisition

What could go wrong?

Exploration risk

TG1 has made a gold discovery at its NSW gold project but is yet to define an in-ground JORC resource. Most of TG1’s other projects are still pre-discovery. As a result 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.

What is our investment plan?

We would like to see TG1 strengthen its balance sheet to fund exploration activities in 2023.

We may look to increase our position in TG1 and “average down” on our Investments in the company to-date.

We intend to hold onto the majority of our position in the lead up to the NSW gold project (John Bull) drilling campaign in May. We may sell ~20% of our Total Holdings if the share price runs on speculation in anticipation of the drilling or a successful drilling result.


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

Our Investment Summary

Date of Initial Coverage

07-Apr-21

Inital Entry Price

$0.200

Returns from Initial Entry

-86%

High Point

88%