TG1 drilling for gold in WA - gold price at all time highs

Published 22-JUL-2024 12:51 P.M.

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Our microcap exploration Investment, Techgen Metals (ASX: TG1) just kicked off a second phase of drilling at its WA gold project.

This round of drilling is following up TG1’s hits from its drill program earlier this year.

For some context - TG1 drilled its Ida Valley project in WA back in April and hit a 4m thick intercept with a gold grade of ~6.73g/t.

Now TG1 is going back to test the ~1.5km long gold soil anomaly around that intercept.

What we want to see from the drill program:

At a very high level, we want to see two things:

Gold mineralisation extend to either side of the 4m intercept.
Gold grades >1/gt at a minimum.

As a result our bull,base & bear case expectations for the drill program are as follows:

Bull case = Extensions to the 4m intercept with gold grades above 2g/t
Base case = Extensions to the 4m intercept with gold grades between 1g/t and 2g/t.
Bear case = No extensions or gold grades <1g/t.

How today’s news relates to our TG1 Investment Memo:

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.

Source: “Why we Invested in TG1” Section - TG1 Investment Memo 27 April 2023

Since our Investment Memo, TG1’s share price has come down and its shares on issue have become slightly higher.

Regardless, TG1’s market cap is lower now than it was when we published our Investment Memo.

With TG1’s market cap now at ~$3.6M we think any hint of drilling success could re-rate the company’s valuation a lot higher.

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.

Source: “Why we Invested in TG1” Section - TG1 Investment Memo 27 April 2023

Since we published our TG1 Investment Memo, gold prices have gone higher to new all time highs (~US$2,450 per ounce).

We think it's a good time for TG1 to be drilling for a new gold discovery.

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

Source: “What could go wrong” Section - TG1 Investment Memo 27 April 2023

With TG1 now drilling, the key risk in the short term is “Exploration Risk”.

There is always a chance TG1 finds nothing with this round of drilling which could put a weight on TG1’s share price.