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• Trigon is cashed up (~$C34M) to initiate and ramp production 5x from FY24 to FY27. We are expecting $31M in operating cash flow in FY25
• Tier-1 copper camp in the making; 500 Blbs of copper found on just 4.2km of the 35km strike. Significant exploration upside still exists and cashflow from operations will allow TM to explore without dilution
• TM is trading at just 0.2x NAV compared to copper producing peers at 0.7x NAV
Trigon Metals Inc. (TM:TSXV) is a Canadian exploration, development, and mining company focused on copper and silver assets in Africa. Trigon’s current priority is the restart of its flagship project, the Kombat Mine in Namibia. The Kombat Mine was once one of the largest copper producers in Namibia having historically produced 12.5 Mt of ore at 2.6% Cu. Trigon plans to bring Kombat back into production in FY23 with 4.0 Mlbs of copper expected to be mined in FY24 and growing to 22.1 Mlbs by FY26. The Company also holds an exploration asset called Silver Hill in Morocco, which is showing early signs of strong copper-silver mineralization. TM is led by a strong management team and board of directors and boasts a cash balance of C$34M, mitigating risk as the Company transitions into a junior copper producer. We are initiating coverage on Trigon Metals Inc. with a BUY rating and target price of C$0.60/share.
Investment Thesis Summary
Past Mining Camp Proven Profitable. Kombat historically produced 12.5 Mt grading 2.6% Cu. The past production, strong recoveries, and valuable historical data significantly de-risks the restart of this operation.
$37.5M Silver Stream De-risks Restart. TM received US$37.5M in cash for the future production of silver from the Kombat Mine. This cash further de-risks the story as the Company can achieve production without tapping into the equity markets.
~$150M in Infrastructure. The Kombat Project has exceptional infrastructure requiring little capex relative to a grassroots project. The property hosts three shafts, a fully operational concentrator, two underground declines, power and water supply, and various other mine facilities.
Resource Growth Potential. While the Kombat resource is already sizeable, it is built on a small fraction of the 35km mineralized strike. With drill programs soon funded by future cashflow, we believe the resource will grow dramatically, catching the eyes of major producers who are thirsty for high-grade copper deposits.
High Institutional Ownership. Trigon’s shareholder base is comprised of 37% institutional shareholders and 18% from Eric Sprott. This significantly outpaces the institutional ownership of most junior mining stocks, providing us with further confidence in the TM story.
Significant Discount to Peers. TM trades at 0.2x NAV, one of the lowest in its peer group that averages 0.7x NAV. We derive our C$0.60/share target based on 0.5x our NAV valuation of the Kombat Mine and additional value for the Silver Hill Project.
TM: De-risked and Ready to Execute; Production in 2024
What you need to know:• Trigon is cashed up (~$C34M) to initiate and ramp production 5x from FY24 to FY27. We are expecting $31M in operating cash flow in FY25
• Tier-1 copper camp in the making; 500 Blbs of copper found on just 4.2km of the 35km strike. Significant exploration upside still exists and cashflow from operations will allow TM to explore without dilution
• TM is trading at just 0.2x NAV compared to copper producing peers at 0.7x NAV
Trigon Metals Inc. (TM:TSXV) is a Canadian exploration, development, and mining company focused on copper and silver assets in Africa. Trigon’s current priority is the restart of its flagship project, the Kombat Mine in Namibia. The Kombat Mine was once one of the largest copper producers in Namibia having historically produced 12.5 Mt of ore at 2.6% Cu. Trigon plans to bring Kombat back into production in FY23 with 4.0 Mlbs of copper expected to be mined in FY24 and growing to 22.1 Mlbs by FY26. The Company also holds an exploration asset called Silver Hill in Morocco, which is showing early signs of strong copper-silver mineralization. TM is led by a strong management team and board of directors and boasts a cash balance of C$34M, mitigating risk as the Company transitions into a junior copper producer. We are initiating coverage on Trigon Metals Inc. with a BUY rating and target price of C$0.60/share.
Investment Thesis Summary
Past Mining Camp Proven Profitable. Kombat historically produced 12.5 Mt grading 2.6% Cu. The past production, strong recoveries, and valuable historical data significantly de-risks the restart of this operation.
$37.5M Silver Stream De-risks Restart. TM received US$37.5M in cash for the future production of silver from the Kombat Mine. This cash further de-risks the story as the Company can achieve production without tapping into the equity markets.
~$150M in Infrastructure. The Kombat Project has exceptional infrastructure requiring little capex relative to a grassroots project. The property hosts three shafts, a fully operational concentrator, two underground declines, power and water supply, and various other mine facilities.
Resource Growth Potential. While the Kombat resource is already sizeable, it is built on a small fraction of the 35km mineralized strike. With drill programs soon funded by future cashflow, we believe the resource will grow dramatically, catching the eyes of major producers who are thirsty for high-grade copper deposits.
High Institutional Ownership. Trigon’s shareholder base is comprised of 37% institutional shareholders and 18% from Eric Sprott. This significantly outpaces the institutional ownership of most junior mining stocks, providing us with further confidence in the TM story.
Significant Discount to Peers. TM trades at 0.2x NAV, one of the lowest in its peer group that averages 0.7x NAV. We derive our C$0.60/share target based on 0.5x our NAV valuation of the Kombat Mine and additional value for the Silver Hill Project.
Underlying
TRIGON METALS INC.
Provider
Atrium Research Corporation
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Ben Pirie
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