Transcript: Troilus Gold (TLG) - Reawakening 6.5Moz Gold & Copper Beast
Interview with Justin Reid, CEO of Troilus Gold. Troilus is a Toronto-based, Quebec focused, advanced stage exploration and early-development company focused on the mineral expansion and potential mine re-start of the former gold and copper Troilus mine.
Troilus holds a strategic land position of 142,000 ha (1,420 km²) northeast of the Val-d’Or district, within the Frôtet-Evans Greenstone Belt in Quebec, Canada. From 1996 to 2010, Inmet Mining Corporation operated the Troilus project as an open-pit mine, producing more than 2,000,000 ounces of gold and nearly 70,000 tonnes of copper.
- 2:13 - Company Overview
- 3:05 - Key to Making Money: Strategy for Growth & Team Experience
- 8:01 - Appointment of Richard Harrisson: Why Did He See in Troilus?
- 9:51 - Putting it All Together: Asset Data, Drill Program, & Focus on Targets
- 14:09 - Process towards Production: Exciting the Market & Growing the Company
- 20:23 - "It's Going to be a Mine", but Who's Going to Build it?
Matthew Gordon: Justin, how are you sir?
Justin Reid: I'm well, how are you Matt?
Matthew Gordon: Not too bad, not too bad, actually I'm dying of a slight head cold at the moment, but I'm going to battle through it because that's the trooper I am. So how are you and where are you?
Justin Reid: I am well, fully vaccinated, sitting at the Troilus operation, 180km north of Shaboogamoo, Quebec…
Matthew Gordon: Oh cool.
Justin Reid: … and have been for 10 days, busy place.
Matthew Gordon: Busy place, right and you're living like on-site? You're not staying in a posh hotel?
Justin Reid: Yeah.
Matthew Gordon: Right.
Justin Reid: There is no, well it's very comfortable and the food is great, but yeah we have 145 people up here right now. We have 4 rigs going plus other machinery, we have the watering under way, we have permitting under way. It's a busy place and due to the lockdown in Toronto, why not come here? I can still talk to you.
Matthew Gordon: Fantastic, crikey. Well that must be fun, have you done that before? Have you spent a lot of time on sites around the world?
Justin Reid: Yeah, yeah and you know, as we're really building the team here, I like to spend a lot of time here. Not to get in the way but I'm certainly in Shaboogamoo and at site 2-3 days a month, but this is a 10 day stint and I'm learning a lot as well. It's a lot of fun.
Matthew Gordon: Excellent, I guess the hands-on approach is appreciated by, you know, everyone there as well. Hey, well look, we'd better kick off. Give us that one minute overview of the business for people new to the story. We've seen a few people starting to look at you and ask questions. I know I've got a few for you, so if you don't mind; one minute overview.
Justin Reid: Sure, Troilus Gold, TLG on the TSX. Big Board, we are now just about a USD$200M company developing the 8.1Moz past producing Troilus mine. It produced 2Moz of Gold and 70,000 tonnes of Copper historically; shut down, we purchased it in 2017. Jump to today, 200,000m of drilling over 6½Moz added, infilling for reserve right now. PEA is out, Pre-Feasibility in Q4, targeting an expeditive production scenario.
Matthew Gordon: Okay, brilliant, a lot going on. Former producing and you've kind of come back in there to kind of breathe new life into it, but when you kind of look at it, certainly during this phase, there's not a lot of sex and sizzle is there?
Justin Reid: No, it's not on the surface, right? We're not spending the USD$1M a month on high-price marketing, we're not on every banner that you open when you go to various websites, we're putting all the money into the ground, but what we think is sexy; and we're a low-grade bulk-tonnage deposit. That by itself is not sexy, but you look at the best operations in Canada right now, Detour, Malartic, we're the same grade, we're the same size and they got purchased for what, USD$7Bn and USD$14Bn respectively.
We're about making money and so the faster that I can show you cash-flow, the faster that I can go through the permitting process and I can build a team to deliver this to you. The faster you're going to see the rerate in our equity and that's where you move from the USD$200M to the 1Bn to the USD$3Bn company. Complete rerate, just like Victoria Gold did, just like Osisko did, just like Detour did.
Matthew Gordon: Okay, look well that's some pretty big names you want to be associated with, I get it. Talk to me about how you're going to make me money? If I'm an investor, I'm interested when you say that, but you're going to have to put up a bunch of stuff together, because you know, you are where you are at the moment. You've got a way to run here so, what is going to make you money, I actually mean?
Justin Reid: Well you can't make anybody money if you don't have people to do it, right and so if you look at, you know the 400 PEAs put out in the market last year and half of them are going to Pre-Feasibility and half of them go to Feasibility Study, we're going to have a massive glut of potential Projects, as long as capital's available and the commodity prices are still strong.
For us, our single biggest asset has to be our people and our team to do it, so if we just look at the size of our team. That is not sexy, that people don't talk about, right; but let's talk about our Independent Board. John Hadjigeorgiou runs the Lassonde School Mines, Engineering School of Toronto. He does all the external consulting at Malartic, LaRonde and Goldex; three of Quebec's biggest Gold Projects. Eric Lamontagne, on our Board; he's building the 1.5Bn Hardrock Project right now for Equinox and Orion. What's awesome is that he's 2 years ahead of us, so as we move through development, he's just done it all and we're going to see the hurdles and maybe be able to mitigate some of those issues that he and others have. We have Pierre Pettigrew, who certainly on the permitting side is incredibly important. Andrew Cheatle ran Musselwhite for 10 years. We have a Board set to build, okay.
Then I look at our geologic team, like Hylands, Bergeron and Brassard, Yves Caron and 15 others. They've added 6½Moz in 2½ years. Nobody else has done that. Jacqueline Leroux and Catherine Stretch are permitting in the ESG Team. Only company in Quebec with an eco-logo certification, fully permitted to be water, 30M cubic metres of water out of pit, happening now and then I go to our engineering team.
Corporately there is me and Paul and others and we've done quite a good job remaining capitalised. We have an unbelievable engineering team with Ian Pritchard, Dave Marsh, Joe Milburn but we didn’t have the Quebec builder, right and so we've had a long process, the Board has been intimately involved and we, 2 days ago, we hired Richard Harrison, my age. Quebec royalty, unbelievable mine builder, clean up artist, turned around Kepler for Agnico, turned around Goldex after the big fail in 2010-11 and for the last 7 years, from conception to construction has completed not only all of the engineering, the initial construction, the permitting, the stakeholder communications for the USD$1.7Bn Odyssey Project in Malartic and we are very fortunate to have him join us and it rounds off as our COO. So now I would say as a USD$200M company, I can confidently say we have all the pieces we need to produce that cash for you as soon as humanly possible and that was our focus, building the team. The resource is taking care of itself.
Matthew Gordon: But talk to me about Richard for a second, because like you say, that's a big deal. He's done a lot of really cool stuff. Why's he gone and joined a USD$200M company, what have you sold him, told him or what does he see?
Justin Reid: I've sold him and told him a lot. I think everybody, especially in our space and you talk to them every day right, he works for 7 years at an unbelievable asset at Malartic, run by 2 amazing companies, Agnico and Yamana, I'm going to say like, Gold standard in Canada. He's at a big producing mine, he has an unbelievable Project ahead of him but, you know, I'm here to tell you, and it's my job, that we're massively under-valued. He has completed a huge amount of DD, met the teams, spent a lot of time at site, understands what we're doing and I don't know if Agnico and Yamana are going to go up 10 or 20 times right, and so he has an entrepreneurial flair. I think that he loves the size and flexibility of our team and aggression and so he's going to become a very large shareholder and walk us through this process together and so I think he's going to make a lot of money, I do and I think he realises that Troilus has the potential to be a Top-6 producer in Canada for over 20 years and there are not many assets that can show you that.
Matthew Gordon: Right he's going to make his money because he's got shares, not because you're paying him a lot, okay, want to be clear.
Justin Reid: No I'm not paying him a lot.
Matthew Gordon: Okay, cool. Let's talk about the Asset, which speaks for itself because last time when we talked, back in February, you talked about the budget that you'd got for drilling. Now this isn't necessarily all exploration is it? I mean what's the focus there?
Justin Reid: Yeah, we have 4 production rigs going right now we're drilling about 10,000m a month, which is a big programme. We have other drilling going on but that's more geo-tech and even less sexy stuff. It's infill drilling, we're drilling to reserve, right. We're drilling ounces to mine, not to add to the resource. Now when our new resource comes out in Q3, which is not too far away, you're going to see that continued growth. We've had huge success in the south west, but 90% of our drilling is infilling and we're seeing a very good conversion to be indicated and as such, that's going to set the backstop for Pre-Feasibility, which is what you want.
We can have as many drills as you want drilling, as far afield as you want and we can add 10, we can go from 8 to 10 to 12 very simply actually. We know where the targets are but, for example 2 weeks ago we released results from the J Zone. The western extension or the western flank of what the pit was going to be. It was all a waste in our PEA, while we stepped down 200m and 400m and we put out 68m of a gramme, 38m of a gramme. I'm looking at them here, 13 of 2.1. All within 200m of surface, which is all waste, so that's ore, that is going to obviously decrease your strip ratio, higher margin material and it's going to expedite your payback early on in the mines, so those are good ounces and technical ounces to a mine plan and that's what we're focussing on.
Everything with us is about delivering a mine and so these are the non-sexy things we have to do but they're proving very valuable I think.
Matthew Gordon: Yeah they are and look, not-sexy, I don't mind not-sexy or not having the sex and the sizzle for the market. Even when I look at some of the headlines being thrown around there; I'm just intrigued by the order of play here because you've gone and made an acquisition and I was like wondering, well hang on, you've got the J Zone, 87, the South West Zone and you're picking up the Urban Gold Minerals Project as well. It's like, it's kind of like there's so many moving pieces, I mean how are you putting it together?
Justin Reid: Yeah with the Urban Gold deal closing a couple of weeks ago we now have 1400m² and for us that's about securing the belt to tell you the truth because the geologic model that we put in place, that we talked about last time, so the evolution of it, I won’t bring it up again. We’ve had such success the belt has never witnessed that kind of focus before and so the regional exploration we had previously, the success over the last year. We just kept running into them and so what we thought is it's the best time now to consolidate it while they're small. Plan for the future, 5% of our budget is going to regional exploration and that's future planning. Vangold had the Crassidia showing; it was 1km drilled in the 80s, intersections of like 34m of 1.6 grammes, 44 of 1.
There's this zone down there which is, and it's only 5½, 6km from the mine, on the road so I would actually say it's in the shadow of the headframe if you will. It has the potential to look like a South West to 87, so for us, you don't have a big push back, maybe you can drill out a bunch of ounces at surface. It adds longevity and scale to the mine, showing that Troilus isn't an Asset, it's a District. So, we're going to spend the appropriate amount of time and human capital on them, on those areas but really all eyes are on the mine.
Matthew Gordon: Okay, so what are the rules that you've set yourselves and you're playing on, because if I'm an exploration company I keep drilling till the drill-bit stops giving me mineralisation, okay I understand that. In the case of a former producing mine, with a lot of, you've got a lot of data, you're doing a lot of drilling and you're saying to me this is going to be a mine. How do you set the time frame up for that? Do you say, I want to get into production as quickly as possible, I'll get through this scope and I'll skip through these scoping studies because we've got all this historical data? Would you set it up and do it properly, whatever proper looks like to you?
Justin Reid: Yeah, you can't cut corners, that's the one thing, so yes because we are on an active mining lease and we have permitted tailings facility and we have all this infrastructure we're ahead of the game, but we still have to do the whole EIA. We still have to go through the process, so for us you can say, oh we're going to race to production and be in production in a year and a half or 2 years. That's kind of BS to tell you the truth, because fundamentally in the permitting regime that we're in and the scrutiny that the shareholders and your financiers have, you can't miss a step and so missing a step costs you time and money at the end when you have that inevitable, oops, when you’re developing a mine. So we're not skipping any of the studies, the PEA is out, Pre-Feasibility is going to come out and a Full Feasibility's going to come out. The permitting process for us at the Federal level will start in September of this year and at the Provincial level will start in Q4 and it's an 18 month process but what we do know is we know how the rock reacts. We know what the rock looks like, we know how big this is and how we're going to mine it and so we know how we're going to process it, so for us it's about every single step being able to able to answer any questions and take any scrutiny right.
We want it to be bullet-proof every step of the way and that's how you build a good mine, if you have a metallurgical issue 2 years down the road, after your Pre-Feasibility, that's going to cost you millions and millions of dollars and months, so we're making sure we eliminate all that today, which you don't get value for, right. We're at the PEA, Pre-Feasibility stage, we've just completed a USD$1½M of geo-tech drilling, not putting out a press release that, hey the pit slopes are going steep and here's the value of it. The market says, hey where's your money going. These are things you have to do and tailings studies as well. We have a full permitted tailings facility. We're moving to a thickened tails just like at Malartic, we have to do all of these tests, it costs USD$1M and we are capital consumers now that's the nature of the beast. Our shareholders know that and so we have to spend it very efficiently and efficient spending for us, is making sure we tick all the boxes so we don't delay any longer than we have to, if that makes sense.
Matthew Gordon: But how do you get that back? It does make sense but how do you get that balance between spending the money the right way, spending the money on the things that need to happen for, you know, long term success and giving and returning to the market the sorts of blue sky component, and that blue sky may come through, you know, exploration but it can also come in other ways, so how do you deliver that to the market. We're seeing lots of stories out there, delivering these wonderful high-grade, big headlines, you know, chasing narrow veins, or doing small step outs or whatever it is, but they kind of don't want to talk about those things. They just want sexy headlines, you're saying, I need to do this properly, this needs to be a mine, so what are you doing about it?
Justin Reid: Well I think the team, anybody who really follows mining, actually takes a deep dive at the team, they say okay, there is a hole filled; we're confident with that person and that person. Yeah, we're going to have exploration and I'm actually quite excited about it and maybe that's a little bit of sizzle, but that… for Troilus that doesn't add a huge amount of value. What adds value? And again did the market care, no; that's okay. We bought back the royalty from First Quantum for USD$20M in December of last year. Was that a good use of capital, for our Board and I financially? The MPV of that royalty today in the USD$1900 Gold environment, is probably about USD$180M, we bought it for CAD$20M. Most companies my size are selling royalties, we're buying them back.
Second of all, we haven't spoken a lot about the Copper right, 15% of our revenue comes in Copper. In our PEA we used USD$3 Copper, Copper's at USD$4.60. Troilus is going to be the largest Copper mine in Quebec. It's actually going to be a Top 12 in Canada. We've always just talked about Gold. Well the difference between USD$3 Copper and USD$4.60 I think this morning is about USD$145M. So just on the royalty buy-back and the Copper price appreciation, forget about Gold, in the last 3 months has added almost a USD$¼Bn of value to our Project, not to our equity, so I think I need to do a better job of communicating that leverage but what I like is that it's tangible, fundamental leverage in the sense that, you're going to see it from us, because we're going to build a mine. It's going to be tangible as dollars in a matter of years, where it's just not kind of numbers on a paper and that's how our Board is fundamental, our team's fundamental. You know, we have this massive infrastructure with 150 people on-site. It costs money to run that beast, where a lot of companies with assets like ours, don't have that infrastructure so you don't need the people. You know, we have to operate like a producer right now as a developer.
Matthew Gordon: Okay, but just be honest, you've always been honest with me.
Justin Reid: Yeah.
Matthew Gordon: It’s going to be a mine, it's going to be a mine. That can mean different things.
Justin Reid: Yeah.
Matthew Gordon: You brought people on, it's quite clear you brought people on who build mines or have got mines back up and running or make mines run more efficiently, so you've built a real team. I mean we talked last time about you've got to pay more for those sorts of people but it makes sense for what you're trying to achieve, so I get that. I bought that last time. When you say, I'm going to build a mine, does it mean I'm going to set this up for someone else to build a mine or does it mean, I'm going to build a mine?
Justin Reid: Oh no, we got… I mean you ask that question every time. We get that question every meeting and the answer is we have to build a mine. It doesn't matter whether it's me or somebody else, we have to build a mine because if you put lipstick on it and you say, here we are, wouldn't you like to build this? That costs time and money, right. It's about dollars, it's about getting that Gold out of the ground and producing it, so we're setting up absolutely everything, including the entire team to do that and I fully anticipate that we will be and we want to. Our whole drive is to do it. Now we have 51 global institutions that own our name. Our management team owns 10% of the company and what I would say is it's up to you if we do or not, right. We are going to, if an offer comes in, if somebody's interested in expanding, it's cheaper to buy ounces than find them. Shareholders decide, right. We've gone through it before, we'll go through it again but we think Troilus is special, we think you could make… it's an Asset to form the basis of what could be a great Gold Company in the future, focussed in Quebec; we really do and so everything we're doing is to set that up.
Matthew Gordon: Right, but you drive the narrative you drive the agenda so it's shareholders choice, of which I'm not one, to be clear. Maybe I should be, but I'm not. You drive the narrative by saying, because you did it right at the beginning, we're like a Malartic, we're like a Detour, those are some pretty big numbers you're throwing in. That's what you're saying the potential of this thing is, you've got to believe that and I've got to believe that to hang around.
Justin Reid: Yeah, you know we're coming at it a slightly lower, smaller, 35,000t/day rather than 50 and that's mainly to optimize the infrastructure that we have. We could… if we go from 35,000t/day which is essentially a SAG and 2 ball mills going to 50,000t/day which is 2 SAGs and 4 ball mills, you know, your capital goes bang. You go from that 350M that we're looking at now to the 5, 6, 700M where you start talking about Cote, Hardrock and others, which are all great Assets and very comparable to what we are doing. For us, the perfect… we're trying to optimize what we've inherited to give the best return and once that's paid back, then we can expand. But yeah, it's an Asset that could handle 50-60,000t/day and certainly I think, the resource broke that we've shown over the last 2½ years, and remember we've only been a company for 3 years. With focussed drilling externally, could absolutely deliver a resource basic.
Matthew Gordon: Okay. Justin look, I appreciate the updates. We spoke not so long ago it looks like you've done a lot since then. Stay in touch and let us know, you know how things are progressing and you know, as you start delivering I'd be keen to have that conversation with you so appreciate your time today.
Justin Reid: Great, thanks Matt, feel better.
Matthew Gordon: Thank you.