Kozak on the Troilus Gold $22.8M bought deal financing and why its on the capital market radar….gold.
“All that glitters is not gold” is an expression we are all familiar with. However, in the case of Troilus Gold Corp. (TSX: TLG | OTCQB: CHXMF), the opposite is true – it is gold and possibly a lot of it.
The capital markets agree as the company just closed the THIRD equity raise of 2020. In February, the company closed a $12.8 million common and flow-through equity financing, in June the company closed an upsized $25 million equity offering and on December 1, 2020, closed a $22.1 million common and flow-through equity financing. That’s $59.9 million of new equity (before issue costs) in a coronavirus-plagued 2020 for a company with an estimated $130 million market capitalization.
How did the company get there? Great results. Recall that Troilus was formed in late 2017 and management commenced acquisition of the Troilus Gold property. Troilus Gold now owns 100% of 1,988 mineral claims and one surveyed mining lease that collectively cover approximately 107,320 hectares and includes the former Troilus mine. The assets were acquired in a series of transactions up to and including July 2020, mostly by acquisition but also by staking claims to complement the existing acquired assets.
The Troilus open pit mine produced more than 2.0 million ounces of gold and nearly 70,000 tonnes of copper from 1996 to 2010 at which time the property was believed to be fully exploited. As we all know, mines are first found in the minds of men. Secondly, you always find gold where gold has been found and that is exactly what the team at Troilus Gold have done.
The company has drilled 80,500 meters since 2017 and gold mineral resources increase by 142% and copper resources increase 350%. The Preliminary Economic Assessment (PEA) announced on August 31, 2020 was very positive for combined open pit/underground mining project over a 22 year mine life. The PEA supports a combined open pit/underground mining scenario with low initial capital costs and high rate of return for a 35,000 tonne per day operation.
The project inherited approximately $350 million of value including the J4 and Z87 pits plus extensive infrastructure including a 50 MW substation, water treatment facilities, core storage and logging, an initial construction starter camp and a 60 km power line, site roads and river crossings.
In addition to the infrastructure and vastly expanded resource potential of the project, the company announced in early November 2020 that it had entered into an agreement pursuant to which it has repurchased and cancelled the sliding 2.5% Net Smelter Royalty from First Quantum Minerals Ltd. attached to the 81 mineral claims and one surveyed mining lease known as the Troilus Mine, for cash consideration of C$20 million. The buy-back transaction was completed shortly after its announcement and while not incorporated in the August PEA, the transaction definitely makes the economics of this project all the better.
Combining everything (and yes, there have been a lot of moving parts in this dynamic company), according to a recent study conducted by Laurentian Bank/Company, the Troilus mine project would have the fourth lowest AISC* among top Canadian gold producers and the second lowest AISC in Quebec. AISC is a relatively new metric introduced in 2013 by the World Gold Council, in essence to allow for project comparisons on an “apple-apple” basis.
* All-In Sustaining Costs (AISC) = Cash Costs (including by-product credits) + Sustaining Capital + Exploration expenses + G & A expenses.
The company is well on its way to becoming a substantial gold (and copper) miner in Quebec. Regional exploration work is expected to continue through 2020 and into 2021. The company is advancing the Environmental and Social Impact Assessments and is working towards a Pre-Feasibility Study in 2021. Everything appears to be coming together for a new Val-d’Or region gold mine in the near future – watch this stock!
Frederick Kozak is a Professional Engineer with extensive oil and gas, and international business experience and has more than 25 years involved in capital markets ... <Read more about Frederick Kozak>