Troilus Gold Corp. (TLG:TSX; CHXMF:OTC; CM5R:FRA) should have a “transformative” 2022, reported Sprott Equity Research analyst Brock Salier in a March 17 research note after a site visit. Thus, his firm initiated coverage on the mining company with a Buy rating and a CA$2.80 per share target price (current share price is around CA$0.80.)
“Combined with a disciplined track record of ounce growth (+195% since 2016), we think this is an overlooked growth story with no signs of slowing down,” Salier wrote.
The analyst presented the investment thesis for Troilus Gold. The “monster gold-copper developer in Quebec,” he noted, has “the scale and valuation to attract mergers and acquisitions (M&A) already, [a] location on infrastructure to drive margin on low-grade pits plus underground-regional upside, Salier noted.
Regarding the scale of the Troilus project, the current resource is estimated at 8,100,000 ounces (8.1 Moz) of 0.9 grams per ton gold equivalent (0.9 g/t Au eq), but the company is targeting a 10 Moz resource.
In terms of the project’s value, the Q4/20 preliminary economic assessment outlines an open pit and underground operation having an after-tax net present value discounted at 5% (NPV5%) of CA$1.156 million. Based on a 5.1 Moz resource, production would be more than 210,000 ounces per year (210 Koz/year) of Au eq.
Since the PEA, Troilus Gold drilled more than 100 kilometers to infill and expand the resource, work Salier believes will pay off in the upcoming Q2/22 resource estimate update and Q3/22 prefeasibility study. With those, the analyst expects to see a boost in the resources and the pit inventory, higher grades from a larger Southwest zone start pit and a lower life-of-mine strip.
Specifically, Salier estimates just the open-pit portion of the Troilus mining operation will produce 255 Koz/year Au eq over a 15-year mine life, based on a pittable inventory of 4.6 Moz of 0.75 g/t Au eq, at a cost of US$880 per ounce. This scenario equates to an NPV5% of CA$1.5 billion (CA$1.5B), using a US$1,850 per ounce gold price.
In addition, the underground portion of the mining operation will provide long-term upside.
Further, there will be revenue from the copper, more than CA$1.5B of it at a spot price of about US$4.50 per pound, Salier wrote, and that will likely attract streaming companies.
Salier pointed out that Troilus is among the few advanced large bulk-tonnage gold projects in Canada located on existing, accessible infrastructure and not close to any provincial parks or major wildlife habitats.
“We think [Troilus] will be a mine this cycle, not the next, making this a conviction name for us,” added Salier.
Further, Troilus Gold offers investors significant discovery upside, up to 15 Moz worth, with its robust pipeline of prospective targets in the Archean Greenstone Belt. These include Pallador Regnault, Testard and Beyan.
Salier concluded the report by writing, “This is a drill bit story, backstopped by existing endowment, so price drivers are more ounces and rerating to definitive feasibility study-M&A-build.”
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Disclosures for Sprott Equity Research, Troilus Gold Corp., March 17, 2022
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( Companies Mentioned: TLG:TSX; CHXMF:OTC; CM5R:FRA,
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