Just released Mpartners – Initial Fact Sheet on Trigon Metals Inc. (TM – TSXV).
Last week Trigon Metals announced it would begin production by year end at the Kombat Mine in Namibia. TM aims to ship its first concentrates before 2021 year-end and have positive cash flow in early 2022. Havana Investments and Epangelo (State mining entity) each hold 10% interest in the project leaving TM with 80%.
The Kombat mine, previously closed in 2008, has a salvageable crushing and grinding facility; however, the flotation circuit requires some equipment to be replaced. The mine has three working headframes with a lifting capacity of 8,000 tpd and two production declines. 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. The feasibility study indicates a restart cost of $6.4M, but management expects costs to be lower as much of the equipment has be sourced from other retired mills in Namibia.
Kombat Growth: 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 (from 1,100 tpd previously). In years 2 and 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. TM is confident that additional drilling will grow the resource and add more ore from high-grade areas like the Asis Far West. The Kombat resource update and revised mine plan are to be released in June. Most importantly TM is planning to release a PEA on a “Larger Project”, without mill constraints, to better show the true potential of an asset of this size.
Silver Hill: Silver Hill is a copper-silver exploration project, acquired by the company in October 2020 (100% interest), located in Morocco. The project includes widely distributed ancient slags on one third of the concession indicating a history of primitive metal recovery. Additionally, an abundance of copper oxide minerals and old workings on the property indicate excellent potential for a copper prospect. Since the acquisition, the company’s drilling program has demonstrated good mineralization over a larger than expected horizon. We are anticipating more positive results to be released soon.
Exploration: With the restart of the Kombat mine and imminent cash flow by Q1/22, TM will be able to fund a significant drilling campaign on the Kombat property. The primary objective is to significantly grow the resource to a point where it has the economic potential to replace the mill and become a major copper producer. Company management is confident that an extensive drilling program will grow the current resource by 2-3x. In the next month, we expect TM to upgrade about 85% of its inferred resource to indicated. In addition, the cash flows from Kombat will fund the continuation of the drilling program at the Silver Hill exploration project.
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 $107 and $0.68/share by applying an 8% discount. TM currently trades at $0.37/share with a P/NAV of 0.45x compared to peers at 0.7x.
I would think as Trigon expands its Namibian resource and more drill results are announced there and in Morocco , the analysts are likely to change their target price to reflect developments .