Treasury Metals (TML) - Understanding the Reality of Building a Mine

Treasury Metals Inc. is a Canadian-based exploration and development company. The Goliath Gold Complex is a wholly-owned asset that features the Goliath Gold Project, Goldlund Mine Project, and Miller Mine Project in northwest Ontario. The company’s projects are slated to become some of Canada’s next producing gold mines. The company has announced results from a PEA (Preliminary Economic Assessment) on all 3 projects and has highlighted the growth potential along with a prospective 65km trend in a 330 km² land package.

Matt Gordon caught up with Jeremy Wyeth, President, Director, and CEO, Treasury Metals. Mr. Wyeth previously served as an Operations Director (2017-2020) at Wood Canada Ltd., a large engineering company, where he led the Oakville office with a strong focus on both local and international projects. He started his career with De Beers (1988-2009) and worked on mines in Canada, Russia, Brazil, and South Africa. While working with De Beers, he moved to Canada to lead the development, construction, commissioning, and ramp-up of the Victor Diamond Mine in Northern Ontario.

He took the Victor Project from Pre-Feasibility Study to nameplate capacity. Notably, the Victor Project had a $1Bn capital budget and under Mr. Wyeth’s leadership, it was completed under budget and 9 months ahead of schedule. He has also held various senior management positions with Excellon Resources and Anglo American. He previously served on the boards of Vector Resources Inc, DRA Americas Inc, DRA Brazil, and the Ontario Mining Association. His educational credentials include a B.Sc. in Mining Engineering from the University of Witwatersrand.

Company Overview

Treasury Metals was founded in 1997 and is headquartered in Toronto, Canada. The company is listed on the Toronto Stock Exchange (TSX: TML), the OTC markets (OTCQX: TSRMF), and the Frankfurt Stock Exchange (FSE: TRC1). Goldeye Explorations Limited is the company's subsidiary. The company's flagship asset is the Goliath Gold Complex located in Ontario, Canada. It features a first-rate infrastructure with gold mineralization that extends to the surface.

Treasury Metals’ representatives recently attended the PDAC (Prospectors & Developers Association of Canada) conference. The company is looking to bring visibility to its project fundamentals. The company has a background of serial raises. It has acquired capital through multiple small raises.

The company carried out a PEA (Preliminary Economic Assessment) 15 months ago. It is looking to put the updated resource in place with achievable timelines and credibility. The previous production timelines weren’t well-received by the market. This was a 2-year timeline following the receipt of the federal EA (Environmental Assessment). The company understood that it would take longer than 2 years to produce due to the permitting and construction process. It is currently looking to establish realistic project timelines to ensure credibility.

Supply Chain Issues and Inflation

Treasury Metals has a 2.1Moz M&I (Measured and Indicated), and 0.8Moz Inferred resource. Collectively, the measured, indicated, and inferred resource accounts for 3Moz. The company is committed to developing a team that can build the mine. In fact, the entire team is made up of personnel who possess part mine-building or operating experience.

The project features a strong infrastructure along with favourable logistics. The project has road, and rail connectivity along with power lines and gas supply that either run across the site or are located in close proximity. The company is currently working on provincial permitting and community work. It is still working on the same timelines that were put forward 18 months ago. The company is looking to enter production by the end of 2025.

Despite the ongoing supply chain issues and inflationary pressures, the company was able to continue operating as planned due to a solid base. From the first day, the company challenged its financial model from both cost and revenue perspectives. It is already working on strategies to reduce costs in order to offset some of the inflationary pressure. The company realised that repurposing its offices as mine offices could potentially save between $6M-$8M. Utilising rail for logistics would cut down the company’s transport costs from $6.5 to $0.50.

It is confident about the upside potential in resource growth around the Goldlund Mine Project. The company is looking for cheaper ways to move the material. The company is also looking at the possibility of redesigning the tailings. It is also considering the use of rail networks to bring non-acid material from Goldlund in order to help with the tailing raises.

The company has already conducted a PFS on the project. It understands that battery and electric technologies are evolving each year. The company currently has 18 months to a construction decision and 3.5 years to production. During this time, the company is looking to design and implement the required changes and optimization for the project.

Treasury Metals is mindful to not take shortcuts in order to reduce the initial CapEx (Capital Expenditure). This is because the company is committed to building the project and operating it for the next 20 years. Over the course of the next 18 months, the company will be in a position to make an investment decision.

Cash Position

Treasury Metals raised funds in early 2022 through a royalty with Sprott Resource Streaming. This raise has enabled the company to fund its operations for the next 18 months, and through a construction decision. Although the gold markets are currently unfavourable, the company is largely satisfied with its current position.

Through the Sprott royalty deal, the company was able to step down and get a buyback option. At 1.5Moz, the royalty will be halved and the company would then have the option for a 50% buyback. The company has the option to bring the 2.2% royalty down to 0.55% through a buyback. At the time of the deal, the company was trading at 0.3% of the NAV (Net Asset Value), and following the capital raise, the company was trading at 0.95% NAV.

In April 2022, the company published a resource update where it observed a 9% growth in the M&I resource. It is currently working on a PFS. Since the company is focused on the M&I resource, the inferred resource won’t play a major role in the PFS. It is looking to develop the resource estimates into mine plans. Notably, in the PEA, the company had a 2.5Moz measured, indicated, and inferred resource, while the mine plan was only at 1.1Moz. The current reserve is at 2.1Moz and the company has plans to run the operations at 60%-65% as opposed to the previous 40% estimate.

The current drill results won’t be included in the upcoming PFS, however, the resource published in April will be a part of the Study. The company recently published a press release highlighting the exploration upside of the project. In an additional release, the company announced that it has delineated 600m of the strike length.

Over the last 12 months, the market is going through a challenging phase. During this time, drill results haven’t been fully recognized. In 2022, the company’s major point of focus will be on exploration. It is seeking additional high-grade cores, most of which might not make it to the Feasibility Study. Notably, the company has found silver at the Goliath Gold Project and has sent around 25,000 samples from Goldland. Due to long assay turnaround times, the results from these samples are unlikely to be a part of the upcoming PFS. The company is looking to grow the upside of the Feasibility Study as it will help generate an additional revenue stream.

Financing Considerations

Treasury Metals is currently working on project permitting, conducting studies, and community engagement. It has $25M in current cash flow. The company has the required funding to see through to an investment decision. As per current estimations, the company isn’t looking for an additional capital raise as it is fully funded for the remainder of the year. However, if additional drilling is needed, the company would consider a capital raise. The company hasn’t developed a drill program for the next year.

The Goliath Gold Complex has a 65km strike length, out of which, the company has drilled 3.5km so far. The company is working with Mira Geoscience in order to target areas of interest, namely the Interlakes, the Fold Nose, and the Far East.

From a geological perspective, the Far East is less complicated than Fold Nose and Interlakes. The company has carried out limited drilling at Fold Nose, however, the Interlakes region is yet to be drilled.

Treasury Metals is currently in discussions with project financiers. The company is looking to determine its debt and equity capacity in order to align with the market’s evolving landscape. The company is engaged with several different groups and over the course of the next 2 months, it is looking to bring people on board in order to initiate the process earlier than normal. This would help the company incorporate some of the metrics in the PFS and put it on hold as it moves toward a Feasibility Study.

The company is looking for equipment financing along with a range of other things. It is looking for the ideal package that would be suitable for financing the project. The PFS is expected by the second half of 2022. Following this, the company will work on a Feasibility Study which will come out by Q2 2023. A construction decision will be made in Q4 2023. The company’s operations are driven by engineering, permitting, and community engagement.

To find out more, go to the Treasury Metals website