Interview with Troilus Gold Corp.
Interview Troilus Gold: "We are convinced that Troilus is more than just a mine".
time to read: 12 minutes | The interview was conducted by Nico Popp on July 28th, 2021 in Toronto, Ontario (CAN).
President and CEO | Troilus Gold Corp.
36 Lombard Street, Floor 4, M5C 2X3 Toronto, Ontario (CAN)
+1 (647) 276-0050
Table of contents:
Potential of the project
news|financial: "In the Canadian district of Quebec, you are bringing the Troilus Gold Project back into production, a historic mine that produced 2 million ounces of gold and around 70,000t of copper between 1996 and 2010. What makes you think there is still potential there? Why was production stopped at that time?"
The Troilus mine was not of great importance to the owners at the time. They saw themselves as a company that mined industrial metals and had gold as an attractive by-product in their portfolio. Then the current Cobre Panama mine was bought, which is now the sixth-largest copper mine globally. With this purchase, the focus on the Troilus mine was completely lost. As a result, the exploration budget for Troilus was almost non-existent. Although the mine was profitable even at lower gold prices at that time, the focus was set differently and put the undoubtedly first-class Cobre Panama copper mine in the foreground. Finally, the Troilus mine was shut down in 2010 in the wake of a weakening gold market. For us, all of these circumstances present a unique opportunity. We have been able to lift many additional ounces with our exploration work and will continue our work. The project still offers intact infrastructure and great potential.
news|financial: "You have drilled 250,000 meters in recent years, expanding your resource to 8.1 million ounces of gold. Where are these deposits located in the historic mine, and what does that mean for potential production?"
"[...] Troilus has the potential to be an entire gold belt. All of our work to date points to this, and each drill hole makes the picture we have of the Troilus project much clearer. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
We have made three significant discoveries. The first is the J Zone, which was initially only about 120 meters deep, and we have since been able to expand it both in length and depth. We have also been able to expand the Z zone step by step. Perhaps most important is the discovery we made last year. We discovered the SW Zone in early 2020, and in just one month of exploration, we were able to add 600,000 ounces to our resource estimate. We have since drilled 30,000 meters on the SW Zone alone, extending the area to a length of about one kilometer, a width of more than 600 meters and a depth of 400 meters. All of these discoveries have a major impact on the mine's potential production. The SW zone, in particular, allows us to start production directly from the existing pit. The other two zones, on the other hand, would require minor preliminary work. At present, we are drilling with two rigs on the SW zone and are continuing our work. The SW zone offers us high margins right at the start of production, precisely what a mine needs. Investors need to know that Troilus is most likely more than just a deposit of gold. Troilus has the potential to be an entire gold belt. All of our work to date points to this, and each drill hole makes the picture we have of the Troilus project much clearer.
New Resource Estimate
news|financial: "You plan to incorporate your exploration work into a new resource estimate. Will this be the last such estimate before you go into production? After all, you have already documented considerable deposits."
"[...] We are also a growth company. The reason is the never-ending potential of the Troilus property so far. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
We update our resource estimate once a year. We are currently drilling 10,000 meters every month. So it is logical to summarize the results regularly. Since our drilling has not yet reached areas where gold is no longer found, we continue our work. We are very confident that we will soon report reserves for an open-pit mine with a 20 to 25-year life. We are also a growth company. The reason is the never-ending potential of the Troilus property so far. The more reserves and resources we prove, the better. That is why we are steadily continuing our exploration work.
news|financial: "You emphasize that almost all of the infrastructure of the old mine is still in place. Can you quantify what Troilus Gold is saving in developing the mine compared to a project without infrastructure?"
We are very fortunate with the infrastructure that is still in place on the site. Over the past three years, we have invested a large amount of money to put ourselves in an even better position in this area. We have built 60 km of power grid, we have 40 km of two-lane road suitable to be driven on by heavy equipment, and we have a substation with a capacity of 50 MW. One kilowatt-hour of electricity currently costs us around 3 cents. That is a meager price for energy, even by international standards. Best of all, our hydroelectric power is sustainable and produces no CO2 emissions. We currently have a camp on the property that can accommodate 150 workers, which we plan to expand. In addition, we have a stripping plant. When you add it all up, Troilus Gold has about CAD 350 million worth of existing infrastructure. This figure alone shows how good the starting position is for our Company. Nevertheless, we will continue to invest because it will ultimately have a positive impact on our numbers and is in the interest of all shareholders.
news|financial: "The Québec government and the Fonds de Solidarité recently invested CAD 11.15 million in your Company. What is the investment about, and what does it mean for Troilus?"
"[...] Since Québec is also responsible for approving our projects, we see the investment as a massive vote of confidence. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
Just three weeks ago, institutional investors injected CAD 45 million into our Company as part of a bought deal financing. The fact that the District of Québec and the Fonds de Solidarité pension fund have now followed suit on equal terms is a great sign of confidence for us and an event that significantly lowers the risk associated with the project for all shareholders. For the relationship between Troilus and Québec, the recent announcement is only a first step. The investment was preceded by a thorough due diligence phase that examined technical issues and social and environmental concerns. The analyses also showed that our project would bring taxes and jobs to the region. The two state investors now have a 5% stake in the Company and will support us on the road to production. Since Québec is also responsible for approving our projects, we see the investment as a massive vote of confidence.
The Evolution of Troilus Gold
news|financial: "You are in the resource definition and feasibility study stages of the project. Explain how project risk and company valuation typically behave during the development to production phase and what stage Troilus is at."
"[...] If we invest CAD 350 million, we will be able to produce 250,000 ounces of gold annually over 22 years, as well as appreciable copper deposits. The mining cost for gold is USD 850 per ounce - which is a very comfortable situation given the current gold price. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
We submitted our preliminary feasibility study last year. That was a big step for our Company because the key data showed that we have a large project that is also very robust. If we invest CAD 350 million, we will be able to produce 250,000 ounces of gold annually over 22 years, as well as appreciable copper deposits. The mining cost for gold is USD 850 per ounce - which is a very comfortable situation given the current gold price. After taxes, our project offers us an internal rate of return of 33%.
We are currently working on another feasibility study, which will be crucial for the permitting process we will go through at the end of the year. A definitive feasibility study is then expected in mid-2022. We want to be in production by the end of 2023. We have only been around as a company for three and a half years. In that time, we have achieved a great deal, are solidly financed, and are on a course that will lead us to production. We see ourselves as an advanced project developer with notable land packages and, therefore, additional potential for growth. We are already doing the exploration necessary to achieve that. We believe Troilus is more than a simple deposit and will continue to confirm that with corporate announcements over the coming months. For investors, this is a very solid and, at the same time, promising starting position.
news|financial: "Reflecting on your operational progress, how do you see your current valuation?"
It is very attractive. Our many institutional investors, who have been following the project for years, but whose investment philosophy is more in favor of a buy-and-hold approach, confirm this. When looking at our peer group, we reach around 60% of their valuations. That is a risk buffer that can be crucial, especially in the current market phase. Although we haven't done a lot of advertising in the past, we have put together a team that can build a mine. For example, I would like to mention Richard Harrison, whom we hired as COO starting in August. Richard is a specialist in mine project development and knows Québec very well. In the long term, this focus on mine development will pay off.
What do the analysts say?
news|financial: "Analysts at Cormark called your stock a top pick in May and called for a price target of CAD 4.50. Troilus is also the focus of other analysts. What is the feedback from the financial community?"
"[...] All industry insiders mirror to us that there are very few projects of our size in secure locations. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
We maintain a lively exchange with our analysts, keeping them up to date and offering site visits. In addition to Cormark, we have relationships with Stifel Institutional, Haywood, Red Cloud and many others. All industry insiders mirror to us that there are very few projects of our size in secure locations. Canada offers legal certainty and is a mining nation. Our Quebec location is very open to mining projects and their development. These are major advantages over many other regions in the world. At the same time, projects of our size are extremely rare. It is this combination that distinguishes Troilus and convinces many analysts. In addition, there is the existing infrastructure that we have already talked about.
When will the share price rise?
news|financial: "On the one hand, there are the analysts' price targets and, on the other hand, the current valuation. Do you think it is just a matter of time before the price goes up, or does it need catalysts to get the price going?"
"[...] We have many resources, we are heading towards a final feasibility study and publishing regular drill results. These are all events that show the market that the risk of our project is disappearing bit by bit. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
Most recently, the latest financing has weighed on the price a bit. In addition, the gold market went through one of its weakest months in the last thirteen years in June. Compared to our peer group, we are not an underperformer. So the weakness we have seen recently is weakness in the overall market. This phase, in particular, can be a great opportunity given our outstanding key data. We have many resources, we are heading towards a final feasibility study and publishing regular drill results. These are all events that show the market that the risk of our project is disappearing bit by bit. Even the recent financing is hugely positive news in the long term because we now have enough funds in the treasury not to dilute the stock further for a long time. So, on the one hand, it is a matter of time before the undervaluation is reduced, but at the same time, we are actively working to provide the catalysts necessary for that to happen.
Acquisition of UrbanGold
news|financial: "In the spring, you acquired UrbanGold, whose properties are adjacent to your project. How do you assess the transaction for the future of your business?"
UrbanGold was an investment into the future from which our shareholders will still benefit. Despite the low valuation of about CAD 17 million, UrbanGold has delivered some spectacular results. Many of these results coincided with what we had also found. Since their property is adjacent to the Troilus area, the acquisition was very obvious to us. We knew what we were getting. That includes a lot of potential for the future. We believe the combination of the two properties represents new discoveries and additional resources.
About the gold price
news|financial: "The gold price has developed hesitantly in 2021. How do you see the market performing over the next few months?"
"[...] Many gold producers are improving their balance sheets, achieving good credit ratings, paying dividends. In every industry, the phase of financial consolidation is followed by growth. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
You have to look at the gold price in a broader context. We passed the USD 2,000 mark last year. In the meantime, the gold price corrected to below USD 1,700 and is now trading in a secure area again. When we bought the property around the Troilus project in 2017 and 2018, gold was USD 1,300. The long-term trend is intact and short-term corrections should not unsettle investors. I am far from disappointed with gold. In fact, I am observing an aspect that can be seen as very positive for the entire industry. Many gold producers are improving their balance sheets, achieving good credit ratings, paying dividends. In every industry, the phase of financial consolidation is followed by growth. I am firmly convinced that our industry is facing good years. This is supported by gold's status as a safe haven, which will certainly be needed in a period of rising prices and many changes in the global economy in the wake of the pandemic.
What will be important in the coming months
news|financial: "The Troilus Gold Project is moving in leaps and bounds toward production. Can you name key milestones that will be important to investors?"
"[...] since Troilus Gold has CAD 55 million in cash, we are well prepared for whatever comes along without diluting the stock further. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
We are drilling 10,000 meters every month. It includes locations directly at the mine but also around it. Investors should keep an eye on this continuous news flow. We will show that we have the growth potential and that our mine is moving step by step towards production. In the coming weeks, we will release a resource update, and by the end of the year, we will deliver another feasibility study. Each of these announcements reinforces how solidly positioned we are and the potential we have. At the same time, since Troilus Gold has CAD 55 million in cash, we are well prepared for whatever comes along without diluting the stock further. I am already a significant shareholder of Troilus Gold, and I am convinced that now is a perfect time to invest.
news|financial: "Thank you very much for talking to us."