Thomson Resources Limited


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Investment Memo: Thomson Resources (ASX:TMZ) - LIVE

Opened: 08-Feb-2022

Shares Held at Open: 5,472,728

What does TMZ do?

Thompson Resources (ASX:TMZ) is exploring and developing Australia’s highest grade undeveloped silver asset by combining a number of previously uneconomic projects into a much larger project with a central processing hub.

What is the macro theme?

Silver is both a precious metal and an industrial metal - it typically trails the gold price, is a hedge against inflation and also a key component in the photovoltaic cells in solar panels.

Why did we invest in TMZ?

Highest grade undeveloped silver asset in Australia

TMZ spent much of 2021 in ‘quiet execution mode.’ They’ve spent a lot of time getting the metallurgy work done, necessary to produce an economic project. Should the silver price make a big move upwards the economics of the project would improve increasing the likelihood of production.

Trading at a discount relative to ASX-listed silver peers

As of October 2021, had a EV/Resource Ounce of 54 cents compared to the two other silver focussed ASX-listed peers, which came in at 85 cents and $1.19. For us, this means that pound for silver pound, TMZ could be due for an outsized re-rate if the silver price and development factors click into place.

Strong team

TMZ’s approach to their work is detailed and meticulous. TMZ’s team has decades of mining experience and we think this will aid their strategy of combining multiple different resources into a cohesive whole.

What do we expect TMZ to deliver in 2022?

Objective #1: Combine multiple deposits’ Mineral Resource Estimates to Hit 100 Moz AgEq (silver equivalent)

This is the threshold which TMZ believes it needs to hit in order to validate the project as economic. These Mineral Resource Estimates take into account all the latest data, and update the resources to the latest JORC standards. Given TMZ has multiple deposits, TMZ is in the process of updating its Mineral Resource Estimates which should help TMZ reach this threshold.

Objective #2: Complete metallurgical work

A core component of the project is understanding how to process the silver. Metallurgical work is needed to establish recovery rates at TMZ’s collection of deposits - and higher rates of recovery mean it is cheaper to pull the silver out of the ground and turn it into a finished product. We think success on the metallurgical front could unlock TMZ’s potential.

Objective #3: Move to Scoping Study/Pre-Feasibility stage

Metallurgical success may accelerate the Scoping Study and Pre-Feasibility work. The Scoping Study and Pre-Feasibility work is important for attracting institutional investors and giving the market greater confidence that the project is viable.

What could go wrong?

Market risk

Silver price takes a major hit, hurting the TMZ share price. A lower silver price hurts the chance that TMZ goes into production.

Development risk

Metallurgy work fails to find the right way to process TMZ’s resources, and they prove uneconomic.

Funding risk

Margins for success may be thin based on TMZ’s ability to secure funding. TMZ completed an institutional placement of ~$4.8M in October 2021 and subsequently secured $5M via an Equity Funding Facility which allows them to issue new shares in exchange for the ability to pull down more money as needed. TMZ’s access to funding hinges on investor sentiment towards silver, broader market sentiment towards small-caps and factors inherent to TMZ’s development progress.

What is our investment plan?

We have been holding TMZ since December 2020, our entry prices for TMZ are 8.8c and 10c

We still hold 87.7% of our total position in TMZ.

We will hold a position in TMZ to see them get into production around 2023. If objectives in this memo are achieved and the share price re-rates accordingly we will look to take some profit and de-risk our position by selling about 20% of our holding.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 5,472,728 TMZ shares and 112,500 TMZ options at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by TMZ to share our commentary on the progress of our investment in TMZ over time.

Our Investment Strategy in TMZ:

✅ Initial Investment: @ 8.8¢
✅ Increase Investment: @ 10¢
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
🔲 Price increases 2000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Free Carry
🔲 Take Some Profit
🔲 Hold remaining Position for next 2+ years

Our Past Commentary on Thomson Resources

Date Title
18-Jun-2022 $ 0.026 Raising cash in a rough market and what to watch out for
16-Jun-2022 $ TMZ’s Releases Webbs MRE Chasing 100Moz Target
06-Jun-2022 $ 0.029 The need for significant investment in rare earths, other critical materials
11-Apr-2022 $ 0.000 Why we invest in IPOs and our investment approach
12-Mar-2022 $ 0.057 Nickel, the War and Under Investment in Exploration
05-Mar-2022 $ 0.060 Mainstream Media Catching on to the Commodities Supercycle
21-Feb-2022 $ 0.066 Why we invest in Oil & Gas and Precious Metals
12-Feb-2022 $ 0.072 Energy Transition Metals, Raw Materials, McKinsey, Supply and Demand Economics
08-Feb-2022 $ TMZ Pressing Ahead with Highest Grade Undeveloped Silver Project in Australia
05-Feb-2022 $ 0.067 The "Lesser Kown" Energy Transition Metals: Copper, Aluminium, Graphite, Helium, Rare Earths
31-Jan-2022 $ 0.070 Inflation, US Fed Reserve, Bond Yield, Cash Buffer Portoflio
22-Jan-2022 $ 0.081 Our Investment Approach, Energy Cold War, Ukraine, Supply Chain Crisis
18-Dec-2021 $ 0.062 Investing 101: Taking Stock of your Stocks and Diversification
18-Sep-2021 $ 0.105 Why uranium stocks are soaring, one good movie recommendation
11-Sep-2021 $ 0.110 The thematics we are investing in right now
09-Sep-2021 $ 0.105 TMZ closes in on silver production — we increased our position at 10¢
21-Aug-2021 $ 0.105 Market fluctuations and portfolio news and quick takes
14-Aug-2021 $ 0.115 Bookmark it, a new Pick of the Year is coming next week
26-Jun-2021 $ 0.125 June tax loss selling is behind us, KNI IPO expected in August
12-Jun-2021 $ 0.145 What did our investments do this week? CPH, ONE, TMZ, 88E and more...
09-Jun-2021 $ 0.135 Experts Re-Analyse TMZ’s Historical Silver Assets
03-May-2021 $ 0.115 TMZ’s Tin Asset is Suddenly Very Interesting.
27-Apr-2021 $ 0.110 Our Portfolio Performance from January 1st to March 31st 2021
05-Mar-2021 $ 0.135 TMZ Eyes 100 Million oz. Silver Equivalent Resource Base
24-Feb-2021 $ 0.170 News in From Our Favourite ASX Stock to Surf the Silver Squeeze
31-Jan-2021 $ 0.200 Thomson Resources Set to Surge on Savage Silver Squeeze?
07-Jan-2021 $ 0.125 Our Stock Picks for 2021
11-Dec-2020 $ 0.092 Our Latest Portfolio Addition: Australia’s Highest Grade Undeveloped Silver Asset

Investor Presentation

Mt Carrington restated MRE gets TMZ close to 100Moz target

ASX:TMZ Jun 22, 2022 Announcement

Investment Memo: TMZ 2022

Objective #1: Combine multiple deposits’ Mineral Resource Estimates to Hit 100 Moz AgEq (silver equivalent)

Today, our silver exploration Investment Thomson Resources (ASX:TMZ) released its restated Mt Carrington MRE to include base metals.

This gets TMZ mighty close to hitting the important 100Moz silver equivalent target that TMZ thinks is needed to make their “Hub and Spoke” strategy work.

The fresh look at Mt Carrington increases TMZ’s total resource base to 22.8 Mt at 119 g/t silver equivalent for 87.1 Moz of silver equivalent across the various deposits that TMZ is working with.

This 21% increase in tonnes was driven by a 2% increase in gold ounces, 17% increase in silver ounces and 100% increase in the zinc and copper tonnes.

We flagged how zinc and copper would be an important part of the Mt Carrington restated MRE given they had a good swathe of historical zinc and copper hits to incorporate.

Importantly, this was from just the Kylo and Strauss deposits at Mt Carrington with a cohesive and Mt Carrington-wide polymetallic resource to come.

We set out our bull, base and bear cases for TMZ in our latest note which can be found below:

What’s next for TMZ: We want to see TMZ complete all of its resource updates and come as close to our base case target of a portfolio wide 100m ounce silver equivalent JORC resource base. With metallurgical testwork ongoing, we are watching to see what comes from the rest of the Mt Carrington deposits (Guy Bell-Carrington-Lady Hampden-Silver King-White Rock).

Drill targets identified, rig on its way

ASX:TMZ May 31, 2022 Announcement

TMZ: Drill targets identified, rig on its way

Investment Memo: TMZ IM

General: Drilling update

Today our precious metals development investment Thomson Resources’ (ASX:TMZ) announced results from their latest geophysical survey delivering “compelling high priority targets” at their Texas project in southern QLD.

Drilling will commence shortly to see what lies below at Texas, particularly at the Twin Hills and Silver Spur deposits.

Today’s news fits in with our Objective #1 of our 2022 Investment Memo - for TMZ to deliver a total combined resource across its silver deposits of ~100 million silver equivalent ounces. Presently, TMZ sits at ~40.2 million silver equivalent ounces. The hope is that the new drilling campaign will find more resources that can be added to the current tally.

Next news we are keen to see are the assay results from this drilling, which should be available in the next quarter.

Mt Carrington silver/gold deal terms revised

ASX:TMZ May 24, 2022 Announcement

Investment Memo: TMZ IM

General: Project acquisition

Yesterday our precious metals development investment Thomson Resources’ (ASX:TMZ) announced a revision to its Mt Carrington agreement with White Rock Minerals (ASX:WRM).

The amendment allows TMZ to focus expenditure on advancing the Mt Carrington Polymetallic Project, thereby providing a pathway to earning up to 70% of the project.

Thomson will initially focus on integrating the known gold-silver-zinc-copper mineralisation at Mt Carrington into its Mineral Resource Estimates.

This fits in with our Objective #1 of our 2022 Investment Memo - for TMZ to deliver a total combined resource across its silver deposits of ~100 million silver equivalent ounces. Presently, TMZ sits at ~40.2 million silver equivalent ounces.

The Amended Agreement changes the earn-in structure to now be a 2-stage exploration earn in and option to joint venture whereby Thomson can earn in up to 70% of White Rock’s Mt Carrington project:

  • Stage 1 – Thomson earning 51%

Thomson to complete at least $5M in expenditure, by March 2025;

  • Stage 2 – Thomson can elect to earn a further 19%:

Thomson to complete at least a further $2,000,000 in expenditure, by March 2027;

White Rock is free-carried through the exploration earn-in period.

TMZ’s CEO David Williams provided some insight on the news yesterday.

Next up, we’re awaiting more resources to be added to the current JORC resource to draw nearer to the 100Moz silver-equivalent goal.

Convertible note deal terminated, $3.8M raised via placement

ASX:TMZ Apr 19, 2022 Announcement

This morning our silver exploration investment Thomson Resources (ASX: TMZ) announced that it had cancelled the previously announced convertible note financing arrangement and instead raised $3.8M via a placement @ 4.1c per share.

Just a few weeks ago we wrote about the convertible note agreement TMZ had managed to raise $3M through.

In that Quick Take we detailed how we thought the convertible note agreement could put more pressure on the company’s share price in the short to medium term.

In today’s announcement, TMZ has completely cancelled that deal and has instead raised $3.8M via a direct placement.

This placement takes away the risk of conversions from the note creating selling pressure.

To summarise, we think the cancellation of the convertible note agreement is a good move and with the $3.8M placement @ 4.1c due to be settled on the 22nd of April, we suspect the share price will move closer to the placement price in the short term.

What’s next for TMZ: We want to see TMZ complete all of the resource updates as part of its Hub and Spoke strategy at its Silver projects.

TMZ:Positive metallurgy from historic intercepts, MRE coming

ASX:TMZ Apr 06, 2022 Announcement

Today our precious metals development investment Thomson Resources’ (ASX:TMZ) put out its updated interpretation of the historic drilling results at its Webbs silver deposit.

This news comes ahead of its final JORC 2012 mineral resource estimate (MRE), which is well advanced and due this quarter.

The newly interpreted data was used to produce a new 3D geological model of the deposit and we think it is likely to have significantly improved TMZ’s geological understanding of the deposit.

This is effectively TMZ taking all of the drilling data and putting it into a modern software suite that can model the resource based on all of the input data. This is normally then used to put together future exploration programs and try to work out which parts of a deposit should be targeted with drilling to test for extensions.

The image below really helps visualise this for us:

At the same time, TMZ also confirmed the previous metallurgical testwork done by the CORE Resources which returned a ~87.3% recovery of silver which should mean a large part of the drilling data can be put into an updated resource estimate for the project.

TMZ is now moving forward with the updated resource estimate for the Webbs project and expects to have it delivered before the end of this quarter.

We note that the previous resource estimate over the Webbs deposit which was put together by previous owner Silver Mines had a silver resource of ~16.5m silver equivalent ounces, so we will be hoping TMZ’s work will lead to an upgrade to the total silver equivalent figure.

Objective #1 of our 2022 Investment Memo is to see TMZ go on and deliver a total combined resource across its silver deposits of ~100 million silver equivalent ounces. At the moment TMZ sits at ~40.2 million silver equivalent ounces.

We will now be watching to see what number the Webbs resource estimate comes in at.

Here is why we invested in TMZ and what we expect them to achieve in 2022 - TMZ Investment Memo.

Another $3M raised via a convertible note

ASX:TMZ Mar 30, 2022 Announcement

Earlier this week, TMZ announced that it has secured a $3M capital raise via a convertible note agreement. This comes in addition to the $2.6M raised with Patras Capital via a similar funding agreement earlier this month.

These capital raises provide cash in the bank to execute on delivering resource updates across its project portfolio. We listed these resource updates as our primary objective for TMZ to achieve in 2022 in our 2022 TMZ Investment Memo which can be viewed here. Specifically, we are looking to see TMZ combine multiple deposits’ Mineral Resource Estimates to hit 100 Moz AgEq (silver equivalent).

Below are the key terms of the latest convertible note:

The Patras Capital funding agreement was structured similarly where conversions are being made below a 6.9c benchmark price.

We suspect that the two capital raises combined with the recent selling from major shareholder SVL will put some pressure on the share price of TMZ over the coming months as the funds are converted into shares at discounts to the market price.

What’s next: We want to see TMZ complete all of the resource updates as part of its hub and spoke strategy at its Silver projects.

On the path to 100Moz Silver Eq. Resource in 2022

ASX:TMZ Mar 25, 2022

It was good to catch up with David Williams, chairman of our silver investment Thomson Resources (ASX: TMZ), following his presentation at the Brisbane Mining and Energy Conference yesterday.

TMZ has its hands on Australia’s highest grade, undeveloped silver asset - a good place to be with positive sentiment returning of late for precious metals as a safe haven/ anti-inflationary investment.

David provided us an update on their near-term ambitions to build a 100Moz silver equivalent (AgEq) resource feeding a central processing facility in NSW’s Lachlan Fold Belt. That ties in with our main objective we’d like to see TMZ deliver this year, as per our Investment Memo.

David mentioned that TMZ recently doubled its total JORC AgEq resources to 40.2Moz. There are also over 78Moz AgEq in outdated resource estimates across several projects that they are working on bringing into JORC standard quickly. We anticipate that the 100Moz AgEq resource should be ready by Christmas this year.

We also received an updated development timeline. TMZ should commence a pre-feasibility study on their flagship project this year, with a view to a definitive feasibility study commencing later in 2023.

We look forward to seeing the first resource update in the months ahead.

Major shareholder Silver Mines sells $206k in shares on market

ASX:TMZ Mar 17, 2022

TMZ has confirmed that its major shareholder Silver Mines had sold $206k in shares on market at 6c per share, leaving them with ~58.6m shares (9.98% of TMZ).

With such a large shareholding we would prefer to see Silver Mines exit via a block trade whereby someone buys their entire shareholding via one transaction as opposed to continuous selling pressure on market, which may put downward pressure on TMZ’s share price.

Generally, major shareholders who own >5% of a company will need to lodge any changes to their shareholdings within ~2 business days. With the first sale being made on the 11 March we will be watching to see if Silver Mines continue to slowly sell on market over the next few weeks.

In the meantime, TMZ is working on updating its mineral resource estimates across its deposits as it aims to reach the milestone combined 100 million ounce silver JORC resource.

The updated resource estimates are objective #1 in our 2022 Investment Memo for TMZ, to view the remaining two objectives we have set for the company in 2022 click here.

$2.6M placement with strategic investment fund

ASX:TMZ Mar 08, 2022

Today, TMZ announced a $2.6M placement with energy and resources focused institutional investor Patras Capital.

The placement is split into 4 separate tranches meaning TMZ will get the $2.6M over a 4 month period with the first $650k received today.

The placement is being done at a 15% discount to a “benchmark price” set by TMZ at 6.9c meaning the first $650k was placed to Patras at 6c/share. Patras will also be receiving listed TMZOA options on a 1:2 basis (1 listed option for every 2 shares issued).

We generally prefer simple cap raise structures, but at least this give TMZ to raise subsequent tranches at less dilutive share price levels during a time when silver (and all precious metals) prices are likely to rise (which would likely improve TMZ’s share price)

TMZ is currently in the middle of updating its resource estimates across its deposits so the extra funding comes at a good time, check out our 2022 Investment Memo here to see what we want to see TMZ achieve in 2022:

MRE for Texas Silver District

ASX:TMZ Mar 01, 2022

It’s a positive that TMZ got its Texas updated JORC 2012 MRE out on time for Texas.

It now means that TMZ has 40.2 Moz AgEq combined after the Conrad MRE which had 20.7 Moz AgEq.

We’re looking for the completion of the remaining MRE update for Webbs and we think TMZ may now need to drill to hit the 100Moz AgEq nark to do so.

That 100Moz AgEq threshold forms Key Objective #1 in our TMZ Investment Memo.

TMZ has flagged a geophysics program is advancing at Texas so we believe there could be some drilling upside to come there.

TMZ moves methodically, but it’s our view that this is necessary to advance Australia’s highest grade undeveloped silver resource.

The silver price got as high as US$25.60 an ounce on February 24.