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Tyranna Resources Ltd: THE INVESTMENT CASE

Tyranna Resources adds another string to its bow with acquisition of Nevada cobalt asset

The near-term transition of the Eureka Gold Project to a cash-generating asset will be a major milestone for Tyranna.
Signpost saying Nevada
The company is punching above its weight given its market capitalisation of less than $20 million

Tyranna Resources Ltd (ASX:TYX) should suit investors who place a substantial emphasis on diversification.

The company and its asset spread improved even further this week with the proposed acquisition of a cobalt project in Nevada.

Not only does Tyranna now have multiple projects in Australia and overseas, but it is leveraged to a wide range of commodities.

Importantly, the company also offers its shareholders exposure to producing assets and exploration prospects.

Entry into cobalt

Tyranna entered into a binding option agreement to acquire private company, US Cobalt Pty Ltd (US Cobalt), the owner of Goodsprings Cobalt and Base Metals Project.

Tyranna managing director Bruno Seneque said: “Tyranna Resources has grown as a diversified minerals exploration business which, for a junior resources company, now has an extensive portfolio of assets that we can develop for the benefit of shareholders.

“The company is well funded and nimble enough to take advantage of good opportunities when they arise and the board identified US Cobalt, its management and its assets as an excellent opportunity to bring further value to the company.” 

WATCH: Tyranna Resources develops new battery minerals division

Given Tyranna’s mandate as an active explorer, and one with considerable success, Seneque’s justification for entering the battery minerals space was hard to fault.

With the company already having exposure to precious and base metals, the obvious area to invest in was the battery minerals space.

The location also appealed with Nevada being a mining friendly jurisdiction.

Production history at Goodsprings

The Goodsprings project comprises 329 mining claims covering 6,580 acres in southern Nevada, 48 kilometres from Las Vegas.

Earliest reported mining production was conducted in 1856 and the district contains numerous copper, zinc, lead, gold and cobalt mines.

Goodsprings cobalt and base metals project claims in blue shading.

The diverse range of minerals extracted within the district is hosted in vein, bedded and replacement deposits.

Zinc and lead were recovered from carbonate-hosted MVT (Mississippi Valley Type) replacement occurrences.

Cobalt oxide present in copper deposits

Cobalt oxide is found in the wall rock of nearly every copper deposit in the district and historic reports note that locally, cobalt is abundant.

In the early 1920’s, about 20 tonnes of cobalt-rich ore was shipped from four separate copper mines to processing facilities.

These shipments assayed between 6% and 29% cobalt.

Records indicate that mining in the district ceased in 1921-1922 and it appears that little work has been undertaken in the Goodsprings district since this time. 

Investors embrace Tyranna’s adventurous approach

Tyranna's thirst for exploration and diversification has been welcomed.

Seneque said: “Australians have a reputation for being good explorers.

“We’re not scared of taking risks and so we’ve been welcomed with open arms by the Americans and I think that bodes very well for our strategy going forward.”

It is this proactive approach that appears to have attracted high profile investors to the company but it also suggests that Tyranna has a good feel for the risk-reward equation.

Given the strong increase in the cobalt price which is now around US$93,000 per tonne, representing a near 200% increase since the start of 2017, the Goodsprings deal makes sense.

Shares post intra-day gain of 50%

The acquisition received a vote of confidence from shareholders with Tyranna’s shares surging about 50% to an intraday high of 3.1 cents on the day the news was released.

The timing of the Goodsprings purchase was also right as the company’s balance sheet had been strengthened by capital raisings.

Tyranna completed an oversubscribed share placement in February, raising $2.5 million at 1.7 cents per share.

READ: Tyranna Resources raises $2.55 million in heavily oversubscribed placement

At the time of the placement, management highlighted the fact that this capital would be used to advance the Eureka Gold Project in Western Australia.

Though this remains the case, it also gave the company the financial flexibility to consider options such as Goodsprings.

Tyranna remains well-funded for other growth initiatives

Seneque noted that the company had $8 million in cash and investments, providing ample near-term cash flow to fund exploration and development across its portfolio.

Realisation for the acquisition was predominantly in the way of shares, leaving sufficient working capital to quickly progress exploration at Goodsprings.

Near-term share price catalysts

Seneque pointed to key announcements to monitor in the coming weeks relating to the battery minerals expansion as well as the Eureka, Wilcherry Hill and Jumbuck gold and base metals projects.

With regards to Goodsprings, it is likely to be deal completion and early stage rock chip sampling data that provides the most interest.

Tyranna has completed drilling at the Greenwood Gold/Campfire Bore prospects in the Gawler area of South Australia, a highly prospective gold region.

The area being explored is close to the Jumbuck Gold Project with similar style mineralisation to that being mined at the 6.3 million-ounce Tropicana gold project.

Prospects at the Jumbuck Gold Project.

The company established a maiden inferred gold resource of 219,000 ounces at Jumbuck in 2017.

Seneque said an upgrade of this resource was a near-term priority, and indeed this would be a potential share price catalyst.

Tyranna transitioning to producer at Eureka

An agreement to acquire the Eureka Project was signed in December 2017 and drilling is expected to enhance the exploration upside outside the known pit mineralisation.

Grade control drilling for the planned cutback will commence immediately after the local contractor has completed mining within the pit.

Eureka has a historical non-JORC mineral resource of 451,000 tonnes at 4.4 g/t gold for 64,200 ounces of contained gold.

The project is being mined by a local contractor and production is scheduled to extend the depth of the current open pit by approximately 20 metres.

This is expected to be completed during the March quarter and Tyranna will receive a 4% net smelter royalty from the sale of gold during this campaign.

Cash generation adds a whole new dimension

As Tyranna receives maiden revenues from production, the diversification will be complete with the company having a cash-generating project in its portfolio.

This is no mean feat for a company with a market capitalisation of less than $20 million, suggesting it is punching well above its weight.

Furthermore, it should provide the company with internal funding to drive exploration and development of other projects rather than relying solely on capital raisings.

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