Position Review: Titan Minerals
Disclaimer
I normally post the disclaimer at the end of articles. This time I'll start up front and say this is a current position I am long having purchased in the open market with my own money. I have in no way been compensated for writing this, but I am talking my book. So do your own diligence and recognize my inherit bias.
For position sizing I think of a full sized position as 5% of my portfolio. I might do a full position size with a royalty company or multi-asset stable producer. With exploration companies I like to start them at 1/4 sized position of 1.25% to spread out the risk in my portfolio. Titan currently falls in that sizing bucket, though the actual percentage varies day to day.
Introduction
Titan Minerals $TTM.AX is developing and exploring for gold and copper in Ecuador. Ecuador currently has a mining friendly administration and laws, which has not always been the case. However, it takes awhile for a country to develop regulatory capacity and a new industry so this is still a frontier country. The geology continues from Chile through Peru into Ecuador. Because Ecuador hasn't had the exploration of neighboring countries it is one of the few places you can walk up to outcropping porphyry targets and drill the first hole.
My thesis with Titan is pretty simple. I think that their Dynasty Gold development project backstops the company value and they have free options for copper porphyries in their other pure exploration projects.
Titan has a market cap of $136m AUD, which is around $102m USD.
It got put on my potential drop list because there hasn't been a lot of forward progress. The drilling got delayed with some access issues. The new resource still hasn't arrived. The managing director left after a new head of exploration came on and then was promoted to COO with a new exploration manager joining as well.
However, after review I think this still has a lot of potential. I think the activity under the surface will start to show in press releases soon. So I'm holding my position to let things develop further.
Dynasty Gold
When I first looked into this project I was pretty shocked how badly the previous operator had run things. The previous owners were trucking ore over 100 miles (160+ kilometers) and were just sending the veins and not the surrounding low grade disseminated material. I have never heard of open pit ore being shipped over 100 miles. Ever. Anywhere.
Let's start with the resource estimate. There is an existing 43-101 resource of 2.1Moz Au (gold) averaging 4.5g/t Au. Open Pit. I think that's pretty great grade for open pit mining.
Titan found 40% more gold was extracted from the same volumes in the foreign resource estimate, where 69% more tonnes were mined versus the resource estimate, at 15% lower grade. The additional density of high-grade veining in combination with indications of low-grade aureoles around veins and vein intersections indicate bulk tonnage potential of the resource in the Cerro Verde prospect area.
If we use those reconciliations things get interesting.
2.1Moz * 1.4 = 2.94Moz
or
2.1Moz * 1.69 * .85 = 3.01Moz
$102m market cap / 3Moz = $34/oz. Which is a reasonable value.
I think 3Moz will end up being much smaller than the eventual size. Starting at 8:17 from their recent Broker Briefing video:
There was 25 000 meters done by the former group we've now done another 20,000 meters so this you know we're coming close to 50 000 meters of drilling that's being done in these areas. So it's given us a high degree of confidence that what we've seen is shaping up to be bigger and better than than what was previously understood about this resource and we're still yet to even test the limits of it so the first parts of drilling. Really, just went back in and retested on different orientations ; some of the previous drilling that had taken place by the former company that had the assets what we've seen is the mineralisation rather than under 150 meters is showing extent down to 450 metres.
And you know there's been a small a small step out in some of the areas and the mineralisation is is carrying through the structure so that structure is running all the way through. We think there's going to be you know probably going to be multiple discoveries here. We're seeing high grade main clusters and we're seeing halos of gold that are sitting in between and around some of these veins of some broad intersections so you know from i guess from where we're going to see the size and scale we're going to see it at depth. We're going to see the long strike we're going to see you know new discovery within this group of concessions so the 9 kilometers to give you an example is 1.5 times the size of the kalgoorlie super pit for those that are familiar with this with the super pit we think realistically this particular group of concessions will go to from being 14.4 million ton we think it's probably 50 or 60 million ton we think the grade probably drops down to sort of around three grams per ton. At the moment it's four and a half but it'll be a huge you know huge opportunity for for us to to show the market size and scale so you know we think we think it's a you know a multi-million ounce deposit on the downside.
50,000,000 tons * 3 g/t = 150,000,000g = 5.3Moz.
That's a little more than doubling of the current resource. They've almost doubled the amount of drilling and are adding low grade material outside the veins, so this seems plausible from more than one angle. Now, this may not all come in the initial resource, but it could be in the intial resource and the potential for that five million ounce size is there on the property.
Did I mention this is already permitted for small scale mining, making it easier to re-permit for larger scale mining?
I'm not sure what 5Moz of 3g/t gold in an open pit is. But I think it's likely more than $20/oz.
We have recently um tested the Calaman porphyry that sits at dynasty we're waiting on some results um but you know what based on that on the historical drilling it looks like a gold rich porphyry. It's sitting under, slightly under the epithermal system so this thing could be could be big, real big
Free gold rich porphyry upside at Dynasty.
Linderos
Some of the so i guess some of the non-core assets will continue to look at divestment or jv options but two priority projects at the moment are Dynasty and Linderos
Michael Skead, when he walked the ground and looked at the data was super bullish on it. He thought it was a you know a real wild card. Something that had massive potential to be a new discovery of a rich copper gold system. This was a big part of why he joined the company. He said he's worked in all different projects in Africa, Canada, and all around the world and he actually hasn't seen an early stage project that looks like this one from his perspective. So you know he's obviously pretty excited about getting to site and looking at the first parts of the drilling.
We're probably not that far away I think. We're you know within the next sort of six weeks we'll probably start first pass at the drilling here. There's two parts to it. There's the Meseta gold camp which is a higher sulfidation epithermal system on on the edge of a copper ridge which is outcropping for free. What we're looking at with the Meseta gold camp is that there had been a history of some holes. They had done a little bit of testing of it. It had come up with some some pretty good results at 28 metres at 2.5g/t; 8.8 meters at 4.7g/t. Since then Mike [Skead] and his team have gone in mapped it. We've done the soils, we've done the aeromagnetic work. A hell of a lot of work and planning has gone into on on next on the next steps on when we're going to go back and drilling some of the older trenching results have shown you know 21 meters at 18.5 g/t; 20 meters at 14g/t. So really strong mineralization and it gives a level of confidence to go in and test this skull prospect which is part of Linderos copper ridges is where mark is super excited about. You've got some stockwork channel sampling that had been done from surface and the results are really encouraging. He describes it as a as a bullseye target it's about one kilometer diameter. He says it's got all the geochemical gateway minerals that you want to see: zinc, lead, molly. And it's a it's a proper bullseye target.
My note here is that there is some historical drilling, but it all focused on the epithermal gold. So it was shallow holes that weren't targeting the porphyry copper. Despite that several of the holes had over 0.3% copper (not CuEq, actual Cu) over wide intervals and often ended in copper mineralization without testing that mineralization's depths.
The size of the prize is finding another Solgold Alpala or Solaris Wartinza. If they do find a porphyry moster they could 10x their stock price as they drill it out. If they don't find a porphyry the Dynasty resource moves forward for a more modest win. Heads I win a lot tails I win a little. I like those kinds of asymmetric setups.
The epithermal gold target is good too, with some historical trenching and drilling to support it actually being there.
Copper Duke
https://www.investi.com.au/api/announcements/ttm/6cfff1e8-92b.pdf
Back in December 13, 2021 Titan did a press release talking about the pre-assay results of the first of two holes. Looking at the detailed logs for the first hole it looks disappointing. There was quartz veining, but only trace amount of Chalcopyrite. No mentions of Bornite, Moly, or visable gold. Assays aren't back yet.
Prior to this drilling Copper Duke was the second project they talked about behind Dynasty. Now it's not one of the two priority projects anymore. It falls into the non-core assets for divestment or JV. I think it's too early to write it off, after all porphyries often have a large pyrite halo. But it's clear it is going to take more work to explore than Titan can afford given their other priorities.
Jerusalem
If this doesn't end up owned by Luminex something is wrong with the world. It is surrounded on 3.75 sides by Luminex's Condor project. It's really close to several of the resources on the Condor project. It also has a historic 1.2Moz Au & 8.6Moz Ag. Those numbers are probably not big enough to stand on their own, but they would be a really nice addition to the Condor project, which is getting quite big.
If you put a value of $20/oz of Au and throw in the Ag for free it would be worth $24m. Titan could sell it outright to Luminex. But it's more likely that they would do some kind of earn-in JV where they retain a carried interest or shares in Luminex. I personally would love to see an earn-in with cash/shares in stages and a retained royalty.
Copper Field
It's on the map but I know nothing about it.
Summary
I'm taking positions in a number of small explorers looking for porphyries, especially copper porphyries. This one is nice because it has what I think is an undervalued gold asset attached. Pre-discovery porphyry explorers usually have a low chance of success and a lot of downside if they fail to find a porphyry, with tremendous upside if they do. I think Titan has the same potential upside and chances of finding a porphyry, but less downside if they fail to find one.