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ASX:TTM

Titan Minerals Limited

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ASX:TTM
- Titan Minerals Limited
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$0.585

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Investment Memo:

Titan Minerals Limited (ASX:TTM)

- LIVE

Opened: 29-May-2024

Shares Held at Open: 12,152,769

What does TTM do?

Titan Minerals Ltd (ASX:TTM) is an exploration and development company on the hunt for world class gold, silver and copper assets in Ecuador.

What is the macro theme?

As of writing this memo gold, silver and copper price are moving upwards.

Gold and silver are both precious metals that are thought of as hedges against currency inflation.

Silver also has industrial use cases including in the manufacture of solar panels. Demand for silver from solar panels is forecast to go exponential and as such can be considered important to the energy transition.

Meanwhile copper is predominantly used for electricity transmission. Renewable energy projects require A LOT of copper to link them up to the grid from remote areas.

Copper is also used in data centres for AI and in electric vehicles (EVs) - there are roughly 80kgs of copper in an average EV.

Our Big Bet for TTM Big Bet Tooltip

We want to see TTM prove up a $1BN plus copper or gold discovery in Ecuador which is so attractive that a mining major acquires the company

Why did we invest in TTM?

Advanced stage asset with giant JORC resource

TTM’s primary asset (Dynasty) has an existing 3.1M ounce gold, 22M Ounce silver JORC resource. We think the resource at Dynasty underpins TTM’s valuation.

TTM has agreed to terms on a US$120M farm-in deal with Hancock Prospecting subsidiary

TTM has agreed to terms on a JV / earn in for its earlier stage copper project. Once binding, we think the deal validates the potential for a seriously big copper discovery, given the deal was signed at such an early stage and for such a large amount.

TTM essentially has a free carried option at giant copper porphyry discovery

We think the proposed deal with Hanrine (Gina’s subsidiary) gives TTM a free option at being a 20% holder in a giant copper porphyry discovery in a deal that is worth more than TTM’s current market cap on its own.

Right commodities at the right time

TTM gives us exposure to gold, silver and copper. All three commodities are currently running with gold and copper both trading at all-time highs and silver breaking out into decade highs.

TTM’s 9kms of strike has new gold/silver targets [18-Jul-2024]

Rare copper exposure with tier 1 discovery potential

We think it is hard to find small cap stocks on the ASX that have genuine tier 1 copper discovery potential. Especially not one with funding secured to drill out a potential discovery. TTM has both at its Linderos project.

TTM has institutional backing

For such a small company, TTM already has some impressive funds on its share register including Tribeca, Nero Resources Fund, Bacchus Capital, and Thorney.

Ecuador is a mining hot spot

All of TTM’s assets are in Ecuador. The country is well known for being home to big discoveries and blue chip mining companies like Anglo American, Newmont, BHP, Barrick, Lundin. Large cheques are being written for Ecuadorian mining projects. We think TTM’s assets could be of increased interest over the coming months.

What do we expect TTM to deliver?

Objective #1: Upgrade Mineral Resource Estimate at Dynasty

  • We want to see TTM grow its existing 3.1M ounce gold and 22M ounce silver JORC resource at its Dynasty project.
TTM’s 9kms of strike has new gold/silver targets [18-Jul-2024]
TTM reports high grade gold, new targets [15-Oct-2024]

Milestones

in-progress JORC resource upgrade #1

complete Drilling Results 1

not done Drilling Results 2

not done JORC resource upgrade #2

Objective #2: Economic assessment of the Dynasty project

  • We want to see TTM move the Dynasty project into the feasibility study stage. TTM’s first target for this stage is a pre-scoping study which should give a high level overview of the project's economics.

Milestones

not done Metallurgical Testwork Results

not done Pre-Scoping Study results

Objective #3: Progress Linderos Project through to MRE

  • We want to see TTM complete the deal with Hanrine and start drilling out the Linderos project all the way through to a maiden JORC resource estimate.
TTM and Hancock subsidiary seal US$120M JV deal [18-Sep-2024]

Milestones

in-progress Complete JV deal with Hanrine (Gina Rinehart subsidiary)

not done Drill program #1

not done Drill program #2

not done Confirmation of copper Porphyry discovery

not done Maiden JORC resource estimateMineral Resource Estimate published

Objective #4: Sign JV/strategic partnership on earlier stage projects

  • We want to see TTM progress its earlier stage assets (Copper Duke and Copper Field) through a farm out deal similar to the one signed on Linderos.

Milestones

not done Joint venture or farm-in partner announced

not done Drilling exploration program commences

not done Drilling exploration program results

What could go wrong?

Exploration / Drilling risk

There is no guarantee that TTM’s extensional drilling programs will be successful and TTM may fail to uncover enough economic mineralisation to justify the expense.

TTM and Hancock subsidiary seal US$120M JV deal [18-Sep-2024]

Funding risk/dilution risk

As a small cap company, TTM is reliant on capital markets to advance its projects if it cannot do strategic deals with partners.

If something negative happens at a macro or company level, TTM could struggle to access capital on favourable terms.

These capital raises may take place at a discount, and result in the issuance of new shares which incur dilution to existing shareholders.

TTM and Hancock subsidiary seal US$120M JV deal [18-Sep-2024]

Commodity price risk

At the time of writing this memo all three of the base metals that TTM’s projects are leveraged to are running hot.

Should the price of these commodities fall, it could hurt the TTM share price and the look-through value of its assets in any takeover scenario.

TTM and Hancock subsidiary seal US$120M JV deal [18-Sep-2024]

Deal risk

Specific for the Linderos Project, the deal with Hanrine is subject to conditions including a formal earn-in and JV agreement being signed.

It is possible that the deal falls through for whatever reason, in which case we think the market would react negatively and lead to a fall in TTM’s share price.

Sovereign risk.

TTM’s prospects are all located in the developing nation of Ecuador.

There is no guarantee that local authorities and/or communities will favour development of TTM’s prospects, and so could hinder advancement.

We also note a recent surge in violence could have a dampening effect on investments.

TTM and Hancock subsidiary seal US$120M JV deal [18-Sep-2024]

What is our investment plan?

We plan to hold the majority of our position in TTM for the next 12 months (and beyond) as it progresses through both its Dynasty project as well as completing its deal with Hanrine for the Linderos Project.

However we may de-risk a portion of our Investment if the share price appreciates materially in line with our standard de-risking plan.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 12,152,769 TTM shares at the time of publication. S3 Consortium Pty Ltd has been engaged by TTM to share our commentary and opinion on the progress of our investment in TTM over time.

Investment Memo:

Titan Minerals Limited (ASX:TTM)

- CLOSED

Opened: 01-Mar-2022

Closed: 29-May-2024

Shares Held at Open: 4,249,250

Shares Held at Close: 12,152,769

Reason Memo Closed: New Material News

What does TTM do?

Titan Minerals Ltd (ASX:TTM) is an exploration and development company on the hunt for world class gold and copper assets in the emerging global minerals hotspot, Ecuador.

What is the macro theme?

Gold remains a safe haven investment and hedge against inflation, and has historically outperformed in times of volatility (e.g market bubble crash, armed conflicts…).

Bullish gold market conditions persist, particularly with the go-to response to the pandemic being unprecedented worldwide monetary and fiscal stimulus (i.e. ripe conditions for sustained inflation).

Copper demand is set to grow from its already robust position on the back of unprecedented stimulus spending on infrastructure and construction projects globally.

[Memo Assessment - 29-May-2024]: Sentiment = Strong

For a while market sentiment for gold, silver and copper was all relatively weak.

However, in recent months the price of gold, silver and copper have all started rallying and sentiment has started to pick up again.

We are marking the sentiment for TTM’s macro theme as “strong” but we are conscious of the sentiment having been low at points during our first Investment Memo

Our Big Bet for TTM Big Bet Tooltip

We want to see TTM prove up a $1BN plus copper or gold discovery in Ecuador which is so attractive that a mining major acquires the company

Why did we invest in TTM?

Prime gold/copper real estate

TTM is an early mover in securing prime real estate within one of the world’s latest exploration and mining hotspots - Ecuador. TTM owns several exploration and development assets in the country. Ecuador has only recently become an attractive exploration and mining jurisdiction through improved and stable legislation. With Ecuador mirroring the geology of several of its mining-rich neighbouring nations, there is a good opportunity for big discoveries still to be made here. TTM could appeal to larger mining groups now seeking to attain or grow a significant land position within this hotspot.

Promising gold intercepts at Meseta [16-Feb-2023]

[Memo Assessment - 29-May-2024]: Grade = B

While the overall prospectivity of this part of Ecuador has only improved as TTM has gone about its exploration efforts - the current political situation in Ecuador is markedly more tense.

In a positive for TTM, we note that recently elected President Noboa attended PDAC in Toronto to re-emphasise Ecuador’s attractiveness as a home for mining investment.

Additionally, a number of mining majors have invested heavily in the region of Ecuador that TTM operates in.

However, since our initial TTM Investment Memo was published, we note that a surge in violence in Ecuador may have a dampening effect on potential investment.

Friction between the Ecuadorian federal government and local stakeholders could be a source of risk for TTM, along with the potentially volatile political environment in the country.

Flagship project already with a big resource base

TTM’s Dynasty gold project has a “foreign resource estimate” of 14.5Mt @ 4.53 g/gold + 36g/t silver for a total contained resource of 2.1Moz gold + 16.8Moz silver. TTM is drilling in order to re-classify the resource to JORC standards, with potential upside of further growing the deposit. This could form the basis of a possible local mining operation down the track.

[Memo Assessment - 29-May-2024]: Grade = B

Although TTM managed to deliver an upgrade to the Foreign Resource Estimate, it took much longer than expected.

This caused investor sentiment to wane in the project and the JORC upgrade wasn’t enough to offset the delays in the project.

Copper side bets

TTM has two highly prospective copper projects in their pipeline, not far from where several major copper discoveries have been made of late. These provide blue-sky potential upside, should a discovery be made.

CEO appointment ahead of Copper Ridge results [12-Jan-2023]

[Memo Assessment - 29-May-2024]: Grade = A

TTM managed to sign a Joint Venture agreement for one of its copper side-bets “Linderos” with a subsidiary of Gina Rienhart’s Hancock Prospecting.

For TTM to extract some value from these “side-bets” is a big win in our eyes.

What do we expect TTM to deliver?

Objective #1: Resource conversion to JORC standards at Dynasty

  • We would like to see TTM convert their existing ‘foreign estimate’ resource into a maiden JORC resource estimate this year.
  • We also want to see extensional drilling produce an expanded exploration target that highlights the potential to grow the current resource base.

Here is how we will rank the JORC resource estimate result (our opinion only):

ASX:TTM

Drilling commences at Dynasty Gold Project, Ecuador [14-Apr-2023]

[Memo Assessment - 29-May-2024]: Grade = A

TTM managed to publish an upgraded JORC resource of 3.1M ounces of gold and 22M ounces of silver. This beat our “Bull Case” scenario for the project.

Objective #2: Follow-up drilling at Linderos

  • With promising early exploration results late last year, it shouldn’t take too long for TTM to prioritise the prospects at Linderos, and generate numerous drill targets.
  • Follow-up drilling at the targets is already underway, and we anticipate assays in 2Q22.
Maiden drilling program at Cu/Au prospect commences [17-Aug-2022]
Promising early results at Ecuadorian gold project [25-Oct-2022]
More promising results from Copper Ridge Porphyry prospect [26-Oct-2022]
More Cu-Au porphyry mineralisation intersected at Copper Ridge [06-Feb-2023]

[Memo Assessment - 29-May-2024]: Grade = B

Assays from TTM’s follow up drilling came back strong, with 308m at 0.4% copper equivalent. TTM did not follow up this program with more drilling but did conduct IP surveys for more target generation.

From this work, TTM was able to sign a Joint Venture worth up to US$120M to develop the project (in exchange for 80%).

Objective #3: Commence drilling at Copper Duke

  • Following the recent recon-drilling program alongside ongoing geophysical surveys and geochemical soil sampling, TTM should be in a position to define drill targets for 2H22.
  • We want to see an extensive drilling program later this year, with initial assay results before year-end. This will shed light on the potential for Copper Duke.

[Memo Assessment - 29-May-2024]: Grade = D

TTM was able to define drill targets for Copper Duke but no drill program was done. This was due to financial constraints and resources allocated to the Dynasty project.

What could go wrong?

Capital requirements

TTM is not a producer, remaining an explorer, and so requires continuous funding as it continues to advance its assets. As such, the company will be required to raise capital for survival when the current cash at bank drains. However, there is no guarantee that capital markets will be conducive at that point. We note that they have a substantial cash balance at present, which minimises this risk for 2022.

US$5M cash injection following revised asset sale [18-Oct-2022]
TTM completes $5.5M capital raise [07-Aug-2023]

[Memo Assessment - 29-May-2024]: Risk = Materialised

Through this TTM Investment Memo the company has raised $5.5M at 5 cents per share, $4.1M at 3.3 cents per share.

Each of TTM’s last four capital raises has been done at a lower and lower valuations, which has been painful for existing investors.

Underlying commodity risk

TTM is exposed to commodity price risk, which depends on macroeconomic factors and demand and supply dynamics of the underlying commodities, i.e. gold and copper. Market sentiment closely correlates with commodity prices, and hence TTM’s valuation will be impacted by commodity prices as well. There is no guarantee that gold and/or copper sentiment will trend positively this year.

[Memo Assessment - 29-May-2024]: Risk = Materialised

Although the sentiment for copper, gold and silver is strong, in 2023 when TTM was raising capital, the sentiment for these commodities was relatively weak.

This has meant that TTM has needed to raise capital at depressed valuations, diluting existing shareholders.

Geological risk

The resource for the flagship project is an estimate only, and there is no guarantee that the current “Foreign resource estimates” is substantially converted into JORC resources. Even if the JORC reclassification occurs, it could be at a much lower grade, size or level of confidence, which would impact its value.

[Memo Assessment - 29-May-2024]: Risk = Decreased

TTM was able to publish a JORC resource and de-risk the project from a geological perspective.

Sovereign risk

TTM’s prospects are all located in the developing nation of Ecuador. There is no guarantee that local authorities and/or communities will favour development of TTM’s prospects, and so could hinder advancement.

[Memo Assessment - 29-May-2024]: Risk = Unchanged

What is our investment plan?

We first invested in TTM at 6.67c and increased our position again at 10c in anticipation of the JORC resource estimate on its Dynasty gold project.

We intend to de-risk our investment keeping 80% of our position in the lead up to the JORC resource definition.

We plan to sell up to 50% of our investment in TTM if the share price increases 4-fold from our initial investment price in the lead up to the JORC resource.

Depending on the outcome of the JORC resource estimate, our investment strategy for TTM will change:

  • TOP OF CLASS OUTCOME - We will de-risk our position if the share price increases 4-fold from our initial investment price.
  • PASS OUTCOME - we will likely hold on to our TTM position and evaluate the project's merits going forward based on the gold price at the time.
  • FAIL OUTCOME - we will need to evaluate the merits of TTM’s other projects at the time, either buying back into the stock at a lower price or selling a portion of our holding to de-risk.

[Memo Assessment - 29-May-2024]: Grade = D

TTM’s share price did not materially appreciate during the life of the memo and we did sell down a portion of our holdings at a loss.

Although the “Top of class outcome” was beat by TTM’s results, the JORC resource was delayed and the commodity price risk materialised.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 4,249,250 TTM shares at the time of publication. S3 Consortium Pty Ltd has been engaged by TTM to share our commentary and opinion on the progress of our investment in TTM over time.

Our Investment Summary

Date of Initial Coverage

08-Jul-20

Inital Entry Price

$0.667

Returns from Initial Entry

-12%

High Point

-6%

Investment Milestones

✅ Initial Investment: @ 6.6c
✅ Top Slice
🔲 Free Carry
✅ Initial Investment: @ 10c
🔲 Free Carry
🔲 Take Profit
🔲 Price increases 300% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years