Investment Memo: Techgen Metals (ASX:TG1)

16th May 2022

What does TG1 do?

Techgen Metals (ASX: TG1) is a junior metals exploration company currently focused on copper and gold projects in Western Australia and New South Wales.

We are currently most interested in:

• the newly acquired gold project in New South Wales,
• copper projects in the Ashburton Basin,
• its copper/gold project in the Paterson Province.

What is the macro theme behind TG1?

Copper is already the third most widely used metal in the world - and with demand set to increase from things such as electric vehicles and semiconductor wiring — we see it as leverage to the global electrification boom and anticipated commodities supercycle over the coming decade.

The Gold sector generally outperforms other asset classes in times of volatility (e.g market bubble crash, inflation taking hold) and we believe gold provides a good hedge to a portfolio of longer term investments.

Why do we continue to hold TG1 in 2022?

1. Well defined gold prospect that has never been drilled: TG1 has just completed the acquisition of a 90% interest in a gold project in NSW where the previous surface trenching returned 160m @1.2g/t Gold. These targets have never been drilled before and could be indicative of an intrusive related gold system.
2. Well located projects: TG1 has projects in regions that are home to some of the biggest Copper/Gold discoveries in WA. Ashburton Basin - which hosts Northern Star’s Paulsens Gold mine & the Paterson Province - where Rio Tinto recently made the massive Winu discovery.
3. Copper/Gold prices near all-time highs: Copper is trading at US$4.20/lb just shy of its all time high. Gold is currently trading at US$1,820/oz just shy of its all time high.
4. Tiny enterprise value (EV) means leverage to a discovery: TG1 has ~53 million shares on issue with ~14 million under escrow. With a market cap of $7.3M (at 14c/share) and cash in the bank of $2.6M (at March 31st 2022), the current enterprise value is only $4.7M. This means TG1 is highly leveraged to any exploration discovery.

What do we expect the company to deliver in 2022?

Objective #1: Drilling at the newly acquired gold project

• We want to see TG1 get an RC drilling program done over the newly acquired gold project before the end of the year.

Milestones:

✅ Drill rig contracted

✅ Drilling commencement

🔃 Drilling results

Objective #2: Drill test the Ashburton Basin copper projects:

• Target generation works through Geophysical surveying from the Mt Boggola and Station Creek projects.
• Drilling to test geochemical/geophysical anomalies at both the Mt Boggola and Station Creek projects.

Milestones:

✅ Geochemical/geophysical survey results

✅ Drilling permitting

✅ Drill rig contracted

✅ Drilling commencement

🔃 Drilling results

Objective #3: Drilling at the Paterson Province copper projects:

• We want to see the EM targets recently identified at the Harbutt Range prospect drilled in the next 12 months.

Milestones:

🔲 Drilling permitting

🔲 Drill rig contracted

🔲 Drilling commencement

🔲 Drilling results

What could go wrong?

• Exploration risk: TG1’s projects are all considered early stage prospects, this means TG1 is yet to make a discovery on the projects. Inherently there is a risk that drilling programs return results with no mineralisation and the projects are considered stranded.
• Commodity pricing: Copper is an industrial metal that is reliant on buoyant economic growth, if there is any significant decline in economic activity globally then copper prices are likely to de-rate.
• Funding risk: TG1 is a very early stage exploration company with zero revenue and is reliant on continuous capital raises so it can undertake high-risk / high reward exploration programs. There is a risk that market conditions deteriorate and investors shun high-risk explorers like TG1, and TG1 is unable to raise capital without significant dilution of existing shareholders.
• Market risk: TG1 is an early stage exploration company chasing new discoveries. There is always a risk that a market wide sell off will hurt TG1’s share price the most, given investors will look to withdraw capital from the high risk high reward investments in their portfolios first.

What is our investment plan?

Our investment plan for TG1 is the same as for all our early stage, exploration investments:

• Invest early (way before the main, initial drilling event)
• Patiently wait till the drilling event approaches (late 2022)
• Free carry and take some profit prior to the initial drill results
• Hold a position into the result
• Reassess the plan based on the initial results.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 1,250,000 TG1 shares at the time of publication. S3 Consortium Pty Ltd has been engaged by TG1 to share our commentary and opinion on the progress of our investment in TG1 over time.

We have revised our 2022 TG1 Investment Memo to incorporate TG1’s new project acquisition.

You can see the previous 2022 TG1 Investment Memo version here.

We periodically revise our Investment memo’s when key material events take place that impact the Investment thesis - see our Investment Memo revision policy for more details.

Investment Milestones for TG1

✅ Initial Investment @ 20c
🔲 Free Carry
🔲 Price increases 250% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increases 1,000% from initial entry
🔲 Take Some Profit
🔲 Hold position for key drilling event
🔲 Decide New Investment Plan after results of key drilling event