TMR’s Blue Vein mineralised at depth - now to see what's along strike.

  Email Sent On: 25-11-2021 11:00 a.m.

12 minute read


Share price when sent: $0.130  

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 3,320,000 TMR shares at the time of publication. S3 Consortium Pty Ltd has been engaged by TMR to share our commentary on the progress of our investment in TMR over time.

Our investment Tempus Resources (ASX:TMR) is a junior gold explorer that has just completed a drilling program at it’s Canadian gold project.

TMR’s gold project historically produced over 230,000 ounces of gold. Drilling is now trying to extend this resource with the ultimate aim of getting the project back into production while the gold price remains elevated.

In September this year we covered TMR with a note about the visible gold that was coming up in drill-cores and the potential for a new gold vein zone to be discovered.

TMR had drilled ~150m to the north-west of the SW Vein (the historically mined and already well understood vein) and managed to stumble across a potential new vein completely unexpectedly after returning grades of up to 33.7g/t of gold.

TMR gave this potential new vein its own name: Blue Vein.

With the initial bonanza grade intercepts confirming the new discovery we wanted to see some follow-up drilling to test the new “Blue Vein” both at depth and along strike.

Yesterday TMR released results from the follow up drilling program confirmed that the newly discovered vein continues along strike for at least 380m and is demonstrating continuity down-dip with grades as high as 6.14g/t gold.

With 9 assays still pending (4 of which will extend our knowledge of the newly discovered “Blue Vein”) we expect to see the results from these drill-holes over the next 12 weeks.

Tempus Resources
ASX:TMR

Despite a short and sharp sell-off in the gold price over the last week, gold is still trading near the peak of the 2010/2011 gold bull run - with many gold stocks still retaining strong cash balances and margins.

The TMR share price has taken a fair beating in recent months, being sold off from its August 2021 high of 29.5c to be now trading at around 12c.

This has been disappointing for us and a lot of investors - we have been holding TMR for 18 months now, and have not sold a share. Our average entry price is ~18c.

We suspect yesterday’s sell off in TMR might be due to short term speculators exiting on news that drilling has paused for the year due to the onset of the Canadian winter, to be restarted again around February next year.

We take a long term view with our investments and continue to hold our TMR shares - we want to see the remaining assays come back from the lab and see if TMR can finally re-rate on the back of positive exploration results that the market really likes, specifically proving out the size and grade of the new Blue Vein.

We invested in TMR because we liked that the Canadian gold project could replicate similar geological structures in this part of Canada and it could put together a gold project with multiple economically mineable gold veins.

TMR’s project has a permitted gold mill and associated infrastructure on site which can accelerate a production re-start.

With inflation numbers globally creeping higher, we think that having gold exposure in our portfolio is important to protect against any market volatility.

Of course, ASX small cap stocks can be volatile in their own right, so always invest with caution and only invest what you can afford to lose.

The gold hits from the assays TMR released yesterday tell us that the 4 upcoming results should reveal more about the extent of the TMR’s new Blue Vein in the coming weeks.

Tempus Resources
ASX:TMR

More on TMR’s News:

TMR’s Canadian gold project is a historic mine - in the past it produced over 230,000 oz of gold.

The ultimate goal for TMR is to try and restart this mine via the discovery of new gold resources.

Yesterday’s news shows TMR is making good progress towards this.

This part of Canada is well known for its gold projects sitting on several of these vein type systems. TMR’s results yesterday confirm that the “Blue Vein” system extends down-dip and at depth we are hoping this is the first of many vein sets at TMR’s Canadian gold project.

The assays received were from the first follow-up drillhole designed to test the Blue Vein along strike and at depth. When doing down-dip drilling like this any mineralisation is generally a good sign.

With multiple high-grade intersections returned from the one drill-hole early indications are that the vein system could be extending along strike.

  • 0.5m @4.52g/t Gold
  • 1.5m @4.25g/t Gold
  • 0.9m @6.14g/t Gold

While we are always hoping for high or bonanza grades on this project, we are encouraged that decent grades are being hit as TMR learns more about this new vein.

With all of the historic resource centred around the already well known SW Vein system, the discovery confirmation and all of the drilling works being done could potentially lead to an expansion to the current resource base of the project.

The drilling program has now been paused for the year, as usual during the extreme winter weather conditions and will be resumed in early 2022 after winter.

That is, unless the underground drilling applications that were lodged earlier this year are approved and TMR can drill from underground where the extreme weather conditions don't get in the way.

The timing on the outcome of this application is hard to predict - so this would be an added bonus for us. To get a better understanding of the proposed underground drilling see a previous note we wrote on this.

In the meantime we are still waiting on a further 9 assays, 4 of which will still be testing the Blue Vein discovery.

TMR confirmed that the EZ-21-24 & EZ-21-27 drill holes targeting the Blue Vein had successfully intersected the quartz veins so we are expecting more good news.

We will be hoping TMR can continue to get visible gold hits & extend the strike length for the Blue Vein discovery.

We also liked that yesterday's announcement highlighted the fact that the discovery of the Blue Vein and the success in the follow-up step-out drilling is an indicator of the potential for there to be multiple vein systems at the Elizabeth Project.

TMR already has multiple identified veins that they just haven't got around to drilling as yet (No. 9 Vein, Main Vein and West Vein).

For this style of gold project the more gold veins a company can find the better it is.

For a detailed description of why the new Vein Discoveries are important see our last note on TMR here.

What do we want to see next:

We are now focussed on reviewing the remaining 9 Assays that are pending. The particular focus for us will be on the four assays that are pending over the Blue Vein discovery.

All four of these are step-out drill-holes so any high-grade mineralisation will be a positive for us.

With drilling paused due to the Canadian winter, we will now be waiting on an update on the Underground Drilling applications TMR had submitted on the 13th of September.

The underground drilling applications, once granted, will allow TMR to test the northern sections of the SW Vein from underground.

With the extreme weather conditions above ground not allowing any further drilling, the granting of these permits may mean TMR go back underground & drill from there during the winter months, which contribute to the goal of expanding the gold resource enough to restart the historical gold mill.

ASX:TMR

Could the Blue Vein be a replica of the SW Vein?

Sometimes it’s important to try and take a step-back and put some context around drilling results.

A company could get a decent gold-grade in one intercept but find nothing else around it, no matter how good the grade, this would be uneconomic.

The Blue Vein discovery adds a whole new dimension to TMR’s gold project and this would be a good time to compare it to the known historic mineralisation at the SW Vein.

The remaining four assays that we expect to receive in the next 12 weeks are all step-out drill holes.

Essentially they are moving ~200m to the left/right of the area where the company made the Blue Vein discovery and checking to see if the vein extends along this strike zone.

Now that we know the mineralisation extends at depth, we just need the other box to be ticked, that is that it extends to either side.

If TMR can get grades >4-5g/t across those drill-holes it is game on for the Blue Vein discovery, and we don't think the company would be far off being able to put a resource together for it.

Now lets overlay the images from the SW Vein for some context;

We have drawn around where most of the mineralisation is from the SW vein. This area alone has a resource of almost 144,000 oz of gold, which highlights how important new vein discoveries like the Blue Vein can be for TMR.

We are hoping to see positive assay results with grades above 4-5g/t gold, confirming mineralisation extending along strike. These will be what unlocks the resource potential at the Blue Vein discovery.

Our TMR Investment Strategy:

We made our first investment in Tempus Resources (ASX:TMR) at 20¢ back in February 2020. Since then we have increased our position on 3 different occasions - first at 35¢ and then again at 14.5¢ & 17.86¢.

All of our investments were made well above the current share price of 12.5c.

With the share price down below our average price, we looked at the Volume Weighted Average price of all trades ever made for TMR which is a measure of what price level the bulk of the buying is happening at.

We found that the bulk of the trades had gone through at 23c, well above our average price, and well above the current TMR price.

In a previous note we explained our basic investment plan for TMR:

  1. Build an early position - ✅ We wanted to build our position early and have done so by averaging down our position on 3 different occasions over the last 18 months at an average price of ~18¢.
  2. Drilling and testing derisks project, share price rerates - 🔄 We are now at this stage, although the markets reaction to drilling results has been underwhelming, we think that TMR is on the cusp of making real progress at the Blue Vein discovery and this may finally get the markets interest after the discovery is better understood.
  3. Institutional funds invest in the derisked project - 🔲 (This comes after the 2nd point).

We are still holding onto our entire TMR position and will see through the delineation of the Blue Vein discovery. We hope that this isn't the last vein discovery at TMR’s Canadian Gold project.

Gold is a hedge in our portfolio...

Gold is a strange beast, and with the gold price selling off sharply in the last week it's possible some of the sentiment impacted TMR’s largely positive announcement.

But there’s a reason we have a position in TMR - it provides a hedge against a range of potentially sinister macroeconomic factors bubbling below the surface.

Foremost amongst these factors is the spectre of inflation.

Inflation erodes purchasing power and can spur investors to shift into safe haven assets such as gold.

Amongst some central bankers at least, inflation is the elephant in the room. Seen and not talked about.

Meanwhile, an increasing number of economists are conceding that elevated inflation is not ‘transitory’ but here to stay over the next couple years.

The primary measure of inflation is a Consumer Price Index (CPI) which measures inflation by looking at the increase in prices across a predetermined basket of goods which in the US, is now at 6.2% a 31-year high.

But what does all of this mean for gold and gold stocks like TMR?

Well, the general rule of thumb is that if Inflation rates are high then central bank Interest rates need to rise to combat the inflationary pressures.

With interest rates at record-lows globally & in some countries negative, there is growing pressure on central banks to raise rates.

Some central banks, like the Reserve Bank of New Zealand, have already reacted & started lifting rates, but the most important one is the US Fed.

For now the big whigs in the US are pointing the finger at supply chain issues, perhaps to deflect from going too gung-ho with the money printer.

Regardless of where blame lies, we think a rising tide for gold will eventually come, in turn lifting ships like TMR.

We may look to cycle into more gold stocks in this scenario, or reposition the portfolio should the right pieces align.

Throw in a catalyst from resumed drilling, and we think the picture might not look so bad in a few months.

There’s also the bond market to think about - and what some consider the world’s most important asset - the US 10-Year Treasury.

The US Fed Chair, Jerome Powell was recently reappointed for a further 4 years.

That saw the benchmark 10-year Treasury yield trade at ~1.67% on Tuesday, up from about 1.54% on Friday last week.

We believe this signals that the market thinks rates are more likely to go higher instead of lower.

And if rates begin to rise globally then market volatility is expected to follow.

Bottom line, we like having some gold exposure in our portfolio as we think it's a useful hedge.

TMR is one such hedge - albeit one with its own set of risks.

What are the risks?

Like all small cap exploration stocks, TMR is a speculative investment.

Given it currently has no producing assets, it has no revenue to fall back on.

As with all explorers there is a risk that drilling results come back with no mineralisation and the company is forced to raise more capital to finance new drilling programs looking for new discoveries.

When investing in small cap exploration companies like TMR, investors should carefully manage their risks & never invest more than they can afford to lose.

TMR’s Milestones for 2021 Drilling Season

2021 Drilling Season

✅ 7,500m of Drilling at Elizabeth

✅ New Gold Vein Confirmed - Blue Vein

🔲 Blue Vein size defined and extended

✅ Drilling Restarted 4,000m from 2020 Season (Elizabeth)

✅ 4,000m from 2020 Season Complete (Elizabeth)

Positive Geophysical Results - Gold System Extended

Metallurgical review confirms ~95% recovery rates

🔄 Permit for underground adit

New Potential Gold Vein Discovered

2021 Drilling Results

🟩 Assay Results 3 (Elizabeth, EZ-21-9)

🟩 Assay Results 3 (Elizabeth, EZ-21-12)

🟨 Assay Results 3 (Elizabeth EZ-21-10,11,13,14)

🟩 Assay Results 1 (Elizabeth, EZ-21-4)

🟩 Assay Results 2 (Elizabeth, EZ-21-1,2,3)

🟧 Assay Results 2 (Elizabeth, EZ-21-5,6,7,8)

🟩 Assay Results 4 (Elizabeth, EZ-21-19,12,19)

🔲 Assay Results 5 (Elizabeth)

Next Investors Investment Milestones

✅ Initial Investment: @20c

✅ Increase Investment: @34c

✅ Increase Investment: @14.5c

✅ Increase Investment: @17.86c

🔲 Price increases 500% from initial entry

🔲 Price increases 1000% from initial entry

🔲 Price increases 2000% from initial entry

✅ 12 Month Capital Gain Discount

🔲 Free Carry

🔲 Take Some Profit

🔲 Hold remaining Position for next 2+ years

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 3,320,000 TMR shares at the time of publication. S3 Consortium Pty Ltd has been engaged by TMR to share our commentary on the progress of our investment in TMR over time.




 

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