Trigon update from MpartnersAn informed analysis and opinion on the company.
To the posters that keep on bashing each other, please go away and email each other on your own email, you guys are very annoying.
COMPANY UPDATE We believe that Trigon Metals is significantly undervalued with a sizable resource, production just 5 months away and its Silver Hill asset producing promising results early on in its campaign. TM continues to go unnoticed despite plans to unlock the Kombat Mine and use cash flows to further explore its sizeable assets without dilution to shareholders.
INVESTMENT THESIS - Kombat Mine restart by end of Q4. TM recently announced they would begin production by year-end and have positive cash flow in early 2022. The mill is relatively small with a capacity of 1,100 tpd and expects to produce recoveries between 90-95% as the ore is overwhelmingly sulphides. Production will begin from a newly developed open pit producing head grades of 1.3% Cu. TM indicates there is significant room to optimize the mine for further growth. Firstly, with the grinding process being the bottleneck, TM plans to improve its efficiency to match the spare capacity of the crushing and flotation processes, bringing mill capacity to 2,000 tpd. In years 2 & 3, TM will begin recovering ore from underground operations which will increase the head grade to 2.2% Cu, boosting production to 27 Mlbs Cu by 2024. However, even at 27 Mlbs Cu per year, the mill is still significantly undersized with a mine life of 40 years with the existing resource.
- PEA on “Larger Project” expected in next few weeks. Since the existing mill is undersized, TM plans to release a PEA on a project without mill constraints, to better show the true potential of a resource of this size. We believe this will be a significant catalyst for TM and is expected early Q3.
- Kombat resource update and ongoing exploration. Currently, the resource consists of 19 Mt of 1% Cu accessible by open pit and 20 Mt of 2.8% Cu accessible by underground. About 10 Mt of the open pit resource is indicated and none of the underground. TM plans to upgrade about 85% of the resource from the inferred to indicated category by the end of Q2. In addition, once cashflows come from the mine start up, management plans to continue an expansive drill program and is confident it will be able to grow the resource by 2-3x in the years to come.
- Silver Hill continues to produce results. As mentioned above, strong mineralization was found on the fourth fence located 2km west of the high-grade trench TM has been exploring. The company is going to spend the next few months determining if the two zones connect or are separate ore bodies.
Kombat Valuation: Our model values the Kombat Mine at $96M (modelling mining of open pit and underground M + I resources at resource grades) which equates to an adjusted NAV of $107M and $0.68/share by applying an 8% discount. TM currently trades at $0.40/share with a P/NAV of 0.47x compared to peers at 1.0x.
COMPANY UPDATE We believe that Trigon Metals is significantly undervalued with a sizable resource, production just 5 months away and its Silver Hill asset producing promising results early on in its campaign. TM continues to go unnoticed despite plans to unlock the Kombat Mine and use cash flows to further explore its sizeable assets without dilution to shareholders.
INVESTMENT THESIS - Kombat Mine restart by end of Q4. TM recently announced they would begin production by year-end and have positive cash flow in early 2022. The mill is relatively small with a capacity of 1,100 tpd and expects to produce recoveries between 90-95% as the ore is overwhelmingly sulphides. Production will begin from a newly developed open pit producing head grades of 1.3% Cu. TM indicates there is significant room to optimize the mine for further growth. Firstly, with the grinding process being the bottleneck, TM plans to improve its efficiency to match the spare capacity of the crushing and flotation processes, bringing mill capacity to 2,000 tpd. In years 2 & 3, TM will begin recovering ore from underground operations which will increase the head grade to 2.2% Cu, boosting production to 27 Mlbs Cu by 2024. However, even at 27 Mlbs Cu per year, the mill is still significantly undersized with a mine life of 40 years with the existing resource.
- PEA on “Larger Project” expected in next few weeks. Since the existing mill is undersized, TM plans to release a PEA on a project without mill constraints, to better show the true potential of a resource of this size. We believe this will be a significant catalyst for TM and is expected early Q3.
- Kombat resource update and ongoing exploration. Currently, the resource consists of 19 Mt of 1% Cu accessible by open pit and 20 Mt of 2.8% Cu accessible by underground. About 10 Mt of the open pit resource is indicated and none of the underground. TM plans to upgrade about 85% of the resource from the inferred to indicated category by the end of Q2. In addition, once cashflows come from the mine start up, management plans to continue an expansive drill program and is confident it will be able to grow the resource by 2-3x in the years to come.
- Silver Hill continues to produce results. As mentioned above, strong mineralization was found on the fourth fence located 2km west of the high-grade trench TM has been exploring. The company is going to spend the next few months determining if the two zones connect or are separate ore bodies.
Kombat Valuation: Our model values the Kombat Mine at $96M (modelling mining of open pit and underground M + I resources at resource grades) which equates to an adjusted NAV of $107M and $0.68/share by applying an 8% discount. TM currently trades at $0.40/share with a P/NAV of 0.47x compared to peers at 1.0x.