trading halt, page-52

looks like gmp set to cover ton

Triton Minerals (TON)
Analyst: Duncan Hughes, GMP Securities
Recommendation: N/A Price target: N/A Thursday’s close: 31.5c
Reason: Site visit to Nicanda Hill
Comments: We recently attended a site visit to Triton Mineral’s Nicanda Hill Project 230km west of the port of Pemba in northern Mozambique. We were impressed by the potential of what looks likely to be a large, high-grade graphite resource at Balama North just 3km from Syrah Resources’ Balama East project. We were impressed by the potential scale of graphite mineralisation at Nicanda Hill. Importantly it seems that grade will be relatively high which should favour low operating costs should the project go into production. Electromagnetic surveys indicate that even more graphite mineralisation is likely at the project, but this becomes somewhat immaterial if the upcoming resource meets our expectations of size and grade. Currently the traditional graphite market is small but demand is expected to increase substantially through new applications and especially batteries. A resource in the region of 1 billion tonnes when taken in combination with Syrah’s resource has the potential to completely flood the traditional market. However, a large resource has a number of benefits as it will enable the company to cherry pick the product to suit demand. This potentially provides scope to supply high value large flake to traditional natural flake markets, fine grained graphite for spherical graphite in batteries and also graphite to the sizeable carbon market. It is this flexibility that is afforded by a large resource base that we feel is more important than the potential to produce large amounts of graphite. The oxide material we viewed on site contained large flakes of graphite and was absent the sulphides seen in fresh material. The product is soft and should be easy to mine and will not require much crushing. The product looks to be very pure and simple processing should produce a high purity product (around 97%) that will be favourable to potential offtakers. The graphite straddles the dip slope of a ridge and this in combination with the width of the overall package is likely to result in low strip ratios as minimal waste will need to be removed (we estimate strip ratios in the region of 0.6:1). All this in combination with a high grade should result in relatively low FOB costs to the port of Pemba. It is early days but, like Syrah’s project, the Nicanda Hill mineralisation also hosts vanadium as well as low-grade zinc. These can be viewed as potential by-products and additional upside potential as the company progresses as a potential graphite producer. We expect a re-rating of Triton’s valuation on the back of a large-high grade maiden resource at Nicanda Hill and further recognition on the back of the scoping study this quarter. Given Syrah’s market capitalisation is currently $600 million, albeit more advanced, we feel there is scope for a favourable re-rating of Triton as it advances its Balama North project. We anticipate completing a full research note and valuation on Triton this quarter.