Pegmatites are the main source for hard rock lithium deposits. TYX has over 600 different outcropping pegmatites spanning a 25km x 10km strike zone.
ASX:TYX
Last Price:
$0.021
Date of Initial Coverage
06-Sep-22
Initial Entry Price
$0.017
Returns from Initial Entry
24%
TYX discovers and defines a large, simple to process lithium resource, that is on par with world class multi-billion dollar ASX peers such as Pilbara Minerals, Core Exploration, and Liontown Resources, AVZ Minerals and Sayona Mining
Opened: 30-Nov-2022
Shares Held at Open: 37,950,000
What does TYX do?
Tyranna Resources (ASX: TYX) is a junior exploration company, focused on making a new hard rock lithium discovery in Angola, West Africa.
This is a very simple story - TYX’s project has over 600 lithium bearing rocks sticking out at the surface and they are a few months away from the first ever lithium exploration drillhole on the project, hoping for a material lithium discovery.
TYX owns 80% of the project.
What is the macro theme?
Lithium is one of the most critical raw materials in producing lithium-ion batteries.
These batteries are required to power electric vehicles (EVs) AND to store energy for managing the ongoing global energy crisis.
Given the increasing focus on decarbonisation, shift away from traditional fossil fuels and global energy crisis we expect to see demand for the raw materials used in these batteries to remain strong and, in turn, expect to see the capital pour into new discoveries.
Lithium prices have been rising since 2020, remain at all time highs and continue to rise each month.
Why did we invest in TYX?
Hundreds of outcropping pegmatites
Pegmatites are the main source for hard rock lithium deposits. TYX has over 600 different outcropping pegmatites spanning a 25km x 10km strike zone.
Never been drilled and has never been explored for lithium
TYX’s pegmatite fields were discovered in the 1960s. The focus at the time was on feldspar and beryl mineralisation. The outcropping pegmatites have never been drill tested, and the project has only had rock chip sampling undertaken on less than 1% of the project's prospects - plenty more analysis to come.
Spodumene bearing pegmatites included in academic research
TYX has confirmed the presence of high quality spodumene bearing pegmatites in its project. Spodumene presence is generally an indicator for high grade lithium mineralisation. TYX will also benefit from extensive academic research completed investigating spodumene presence across its pegmatite fields.
Sampling of the outcropping pegmatites returned high grade lithium
Recent rock chip sampling returned lithium grades as high as 9.75%. The peak grade across the high quality spodumene bearing pegmatites was 7.88% - very high grades. This is a strong sign ahead of drilling.
TYX Technical advisor worked on AVZ Minerals - 4.3c to a peak of $1.35
Peter Spitalny acted as chief technical adviser to AVZ Minerals (capped at $2.7BN, prior to its suspension) for its lithium/tin project in the Democratic Republic of the Congo. Peter Spitalny is TYX’s principal technical advisor. Having successfully defined a large multi-billion dollar lithium resource, we hope Peter can do it all again with TYX.
We have had previous success Investing in Angola
We have been Invested in Angolan fertiliser & green ammonia developer Minbos Resources for over two years. During that time we watched Minbos’ successful progress its project in Angola seeing its share price rise from 3c to a peak of 21.5c per share (~615%) and more recently we have started to see large investor appetite for battery materials projects inside Angola.
What do we expect TYX to deliver?
Objective #1: Fieldwork to confirm spodumene presence and define drill targets
We want to see TYX conduct several field trips to map out and take samples from its project with the aim of identifying the presence of spodumene bearing pegmatites.
Milestones
Rock chip sampling
Geochemical mapping
Define the highest priority drilling targets in a drilling program
Objective #2: Drilling of the targets identified in objective #1
We want to see TYX drill test high priority targets identified after the ground truthing programs are completed across the project area.
Milestones
Drilling permitting
Drilling commencement
Drilling results
Objective #3: Make a lithium discovery
With drilling slated for Q4 2022, we think that if TYX can return assays grading at or above 1% lithium then the company could confirm a new discovery.
Our bull/base/bear case expectations for the drilling results are:
Bull case = Grades of greater than 1.5% lithium [Achieved ✅]
Base case = Grades of greater than 1% lithium
Bear case = Grades of less than 1% lithium
What could go wrong?
Exploration risk
Although TYX has over 600 confirmed outcropping pegmatites across its project, there is no guarantee that these pegmatites host economically recoverable lithium mineralisation. As with any exploration company, there is always a chance that after drill testing its targets, TYX returns uneconomic lithium grades and the project is considered “stranded”.
Commodity pricing
The lithium price is currently trading near all time highs and rising. Any negative change in the lithium price may impact demand for new discoveries. This would particularly hurt the share price of junior explorers like TYX that are still early in the exploration cycle.
Funding risk
TYX is a junior explorer that has no revenues to fall back on, as a result the company is reliant on fresh funding for future exploration programs, this will mean TYX comes to market to raise more capital from investors to finance major exploration programs.
Market risk
If the broader market sells off there is a chance that investors shy away from high risk investment opportunities such as early stage junior explorers. During market downturns, investors will generally look to pull capital away from the highest risk investments. TYX is an early stage explorer and may be impacted by these market wide sell offs.
Geopolitical risk
TYX’s lithium project is located in Angola which is a developing country in the west of Africa. There have been several coups in neighbouring countries and the region has a history of geopolitical uncertainty. As a result there is a risk the regulatory environment changes impacting project permitting, tax laws or tenure requirements.
What is our investment plan?
As with all our new exploration investments, if the share price runs in the lead up to drilling or on a great drill result (by more than 300%), we will likely De-Risk by Top Slicing 20% of our Total Position, in the hope to achieve Free Carry into the remaining drill campaigns.
This is our standard plan across all early stage exploration Investments.
The rest of the Investment plan depends on the outcomes of the company’s drill campaign and will be updated accordingly, and be governed by the 2 to 3 year holding periods as defined in our trading and hold policy disclosure.
Disclosure: S3 Consortium Pty Ltd (The Company) and Associated Entities own 37,950,000 TYX shares and 10,000,000 TYX options at the time of publishing this Investment Memo. The Company has been engaged by TYX to share our commentary on the progress of our Investment in TYX over time.
✅ Initial Investment: @1.7c
🔲 Top Slice
🔲 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
| Date | Share Price $ | Title |
|---|---|---|
| 04-May-2023 | $ | TYX secures up to $31M in financing from $8BN giant Sinomine |
| 22-Feb-2023 | $ | Scratching the Surface: TYX big lithium hit on first drill |
| 07-Nov-2022 | $ | TYX intersects more than 20m of lithium mineralisation |
| 18-Oct-2022 | $ | Lithium drilling started - vast pegmatite field being prodded |
| 15-Oct-2022 | $ 0.038 | Which stock will be our best performer of 2022? |
| 13-Sep-2022 | $ | Potential giant lithium project: First ever drilling within weeks |
| 10-Sep-2022 | $ 0.047 | Two stocks in the spotlight: TYX, EV1 |
| 06-Sep-2022 | $ | Catalyst Hunter: 2022 Pick Of The Year - Tyranna Resources (ASX: TYX) |
General updates from TYX
TYX discovers 10 additional lithium targets - drill program star [08-May-2023]