Strong SOP pricing keeps Trigg on investor radars
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Spiralling fertiliser prices and promising exploration and development activity have combined to make Trigg Mining an attractive buy according to research firm Corporate Connect.
Geopolitical pressures such as Russia’s invasion of Ukraine have sent the prices of fertilisers soaring and Sulphate of Potash (SOP) – a chloride-free premium product that is essential for high-value chloride sensitive crops such as fruits and vegetables, nuts and cocoa – is no exception.
SOP typically commands a US$200 to US$300 per tonne, or 80% to 120%, premium to the more widely available Muriate of Potash (MOP).
While this premium has contracted in recent months due to rapid increases in MOP prices, Corporate Connect – the same Sydney-based equity research outfit that identified runaway lithium success story Lake Resources (ASX: LKE) last year – believes the lower frequency of trades along with higher energy and other input costs suggests upside to SOP prices in the near-term.
This is all good news for Trigg Mining (ASX:TMG), whose Lake Throssell project in Western Australia has an Indicated and Inferred Resource of 14.4Mt of SOP at a high-grade of 10.4kg/m3.
Under the Scoping Study, this resource will fuel a 21-year mine life and deliver pre-tax net present value and internal rate of return of $364m and 18% respectively.
Given that SOP prices are currently trading well above the US$550 price assumption, the study’s findings are looking very conservative. Benchmark SOP prices have recently risen to ~US$940/t due to recent geopolitical developments, Corporate Connect notes.
“The Oct 2021 Scoping Study assumed an SOP price of US$550/t and contained a sensitivity analysis showing every 10% increase in price drives a +$144m increase in the process NPV of $364m,” said Corporate Connect analyst Joh Snyman.
“The ~70% increase above the Scoping Study thus implies a project NPV of ~$1.4 billion”.
The research firm added that not only is the brine-hosted SOP a naturally occurring primary source with significantly lower production costs than chemically derived secondary SOP, Western Australia-sourced SOP is also expected to be a premium product due to higher grades, lower levels of impurities, water solubility and potential organic certification.
It valued Trigg at 32c per share with potential upside as its projects, which are still in relatively early stages, de-risk through further development stages.
This is well above the current price of 9.5c per share.
Corporate Connect noted that the company was granted new tenements that doubles the strike length of Lake Throssell to about 70km while increasing the granted tenure to 1,085sqkm.
This paves the way for potential substantial expansion of the Project and/or extended mine life by adding to the existing and places the company in a strong position to accelerate Pre-Feasibility Study work.
It adds to the November 2021 grant of tenements at Lake Yeo that could host a potential significant expansion of the same palaeo-channel to the south-east.
Meanwhile, two gravity surveys carried out at Trigg’s projects have exceeded expectations.
At Lake Throssell, the 216km infill survey extends the interpreted Lake Throssell palaeovalley both north and south within the newly granted tenure.
This represents a strong growth target immediately along strike from the current resource.
Importantly, the width extensions of the existing MRE are into areas that may provide off-lake locations for drilling test production bores for test pumping, making the drilling of these more cost-effective than previously planned on-lake drilling.
Meanwhile, the maiden survey at Lake Yeo has identified a palaeovalley 80km long, up to 3.5km wide and potentially up to 100m in depth within the granted tenure
During 2022, Trigg will focus on work for its PFS.
At Lake Throssell, this will include aircore drilling at sites identified by the geophysical surveys to further refine the locations for test production bores as well as installation of test production bores and hydraulic testing of the aquifer to determine aquifer properties, brine grade and allow estimates of sustainable pumping rates.
Drilling is expected to begin early in the third quarter to support the PFS and any future ore reserve estimates.
The research firm added that at Lake Yeo, aircore drilling will test the gravity interpretation, confirm the geology and brine composition of the groundwater, and identify locations for potential future test production bores.
This article was developed in collaboration with Trigg Mining, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.