Troilus Gold (TLG) - High-Grade Drill Results Further Improve Economics

Troilus Gold Corp. is a Canadian-based junior mining company focused on the systematic advancement and de-risking of the past-producing Troilus gold and copper mine, moving into production. The company was founded in 2017 and is headquartered in Toronto, Canada.

Matt Gordon caught up with Justin Reid, President, CEO, and Director, Troilus Gold. Justin is a geologist and a capital market executive with over 2 decades of experience with an exclusive focus on the mineral resource space. Justin started his career as a geologist with Saskatchewan Geological Survey and Cominco Global Exploration after which he became a partner and Senior Mining Analyst at Sprott/Cormark Securities, Toronto. He previously served as the Executive General Manager at Paladin Energy and Managing Director at Global Mining Sales at National Bank Financial. He also served as the President and Director of Sulliden Gold Corp. and Managing Director at Aguia Resources Ltd. His educational credentials include a B.Sc. degree from the University of Regina, an M.Sc. from the University of Toronto, and an MBA from the Kellogg School of Management at Northwestern University.

Company Overview

Troilus Gold is a Canadian-based development-stage resource company focused on the mineral expansion and potential mine restart of the formerly producing Troilus gold and copper mine, located within the Frotêt-Evans Greenstone Belt in Quebec. The company is listed on the Toronto Stock Exchange (TSX-V: TLG), the OTC Markets (OTCQX: CHXMF), and the Frankfurt Stock Exchange (FRA: CM5R).

Troilus Gold has a $175M market cap and is currently developing the Troilus gold mine in Quebec. Here, the company has an 8.1Moz gold equivalent resource, where it has completed 250,000m drilling. The company has a new resource, a pre-feasibility study, and a large 1,400 square kilometre exploration program planned for the summer. It has $30M in current cash flow.

The Market Landscape

The market is currently in a highly volatile state due to inflationary pressures and gold macros. One of the reasons for this is the lack of new capital inflow.

According to the company, the funds used to be mining-focused and well-capitalised. During this time, the funds saw extensive inflow but fairly limited outflow. Presently, the market has lost almost half the active fund managers. Notably, the majority of new capital is going into ETF (Exchange Traded Funds) and passive statements. Even within the domain, the size of investments is shrinking. There’s increased competition, as there are now over 400 gold companies as compared to 10 years ago. New buyers are limited while existing institutions continue to provide support.

For instance: Great Bear Resources Ltd. had great drill results and a lot of momentum. The company has a significant retail following. However, there isn’t an immediate rush in the market to own these projects. Evaluations are highly attractive and often end up bringing in long-term investors. On the other end, there are some really good projects that are building mines at the moment. However, the market situation isn’t conducive to project funding. One such example is the Sabina Gold & Silver's project. The company did a great job on the project, however, in order to raise $800M, alternative financing mechanisms were needed. There seems to be a lot of existing money re-invested, and not a lot of new money is coming to the space. This makes it difficult as mining companies are highly capital intensive.

Troilus Gold has strong balance sheets with a $1,950 gold price and $4.50 copper pricing. The company anticipates that a lot of majors will be financing in the near future as the market is currently waiting for the US generalists to jump back in.

Cash is currently observing various cycles in the market due to the inflationary environment and a potential North American housing bubble. At this point, it is a good strategy for investors to move cash around and be conservative. The shift from passive investments into ETFs (Exchange Traded Funds) gives the same exposure while providing instantaneous liquidity for the company. Investors can simply buy a gold ETF and play the trend. This is a good strategy in situations where there isn’t a lot of capital inflow. Active management appears to be shrinking with time.

The Australian market is significantly more insular than its US counterparts and doesn’t need to leverage ETFs. The funds in Australia are actively managed, while in the US, the companies are shifting to ETFs. Notably, the valuations and multiples of the Australian peer group and producers are trading at 2x of their North American counterparts. This shows that there’s a lot of headroom for growth.

Ongoing Operations

This year, Troilus Gold drilled 30,000m between January and mid-March. The program lasted for 2.5 months and the company deployed 5-7 drill rigs. The company is currently awaiting assay results from the labs. It is looking to publish the resource along with a Preliminary Feasibility Study. It is anticipating a significant growth from the existing 8.1Moz equivalent resource that was defined 2 years ago. Notably, the company completed 10,000kg of bulk samples which was carried out by way of a full pilot plant test, incorporating the 3 deposits along with all the zones present within these deposits.

The company is aiming at a bulletproof feasibility network that can go all the way through. In the PEA (Preliminary Economic Assessment), the company published historical numbers from the mine. It has 93% gold, 91% copper, and 88% silver which is accretive to the model.

Since the projects are at the Feasibility stage, the company is confident going into project financing. While awaiting the Feasibility Study results, the company has relocated the drills to the Gap zone for the next 3 months. The Gap Zone is a 3.5km stretch between the Southwest and the 87 zones. Although the area is untested, it shares the exact same stratigraphy. The company has already completed geophysics and geochemistry at the Gap zone. It anticipates that the ore bodies are either continuous or have the potential to be. The company is focused on better quality ounces rather than additional ones. The exploration potential of Troilus is exceptional, and a large portion still remains unexplored.

Troilus Gold is looking to build out the mine over the next 2 years. The company has a great shareholder base in Quebec that is dedicated to moving the company forward. In fact, Investissement Quebec made a strategic placement with the company last year. The company is also working with Caisse Populaire.

The investments in the company go beyond the equity interest of the shareholders, it is also a provincial interest to the government for jobs, taxation, social responsibility, and more.

The company is working with major stakeholders to put together a project financing package. The Feasibility Study is expected to complete by Q1 2023, while the permits are expected by late 2023 or early 2024. The company is looking to fund the mine now so that it does not lose a year due to the long permitting process. The company’s shareholders and stakeholders in Quebec provide the lowest cost of capital in the industry and likely the highest level of de-risking of any projects within the Quebec province.

The project’s PEA is now 2 years old. The operation was a 14-year old open pit, that transitioned into an 8-year underground operation. It had a 20-year mine life. In the first 14 years of operations, the asset produced between 220,000oz-275,000oz gold, 17Mlb-20Mlb copper, and some silver on an annual basis.

The company has been successful in expanding its drill program. One instance is the discovery of the Southwest zone. In the company’s PEA, the Southwest zone had only 8,000m of drilling over a course of a month. Since then, the company has managed to drill 150,000m over a one-and-a-half-year period. It has extended the 400m zone to a 1.8km length.

As per the company, the PFS will be simple, featuring a 25-year open-pit with a 35,000t/day operation, that is expected to produce between 222,000oz-300,000oz copper and silver, without underground operations. Notably, the production metrics are expected to be similar to the previous 14 years.

In order to develop a 43-101 compliant resource, the company is looking to decouple the underground portion of the deposit and include it in the resource. The underground is a low-grade, bulk tonnage operation. However, the company isn’t focusing on the underground part of the deposit, and as a result, it does not need to worry about sourcing the $245M underground development capital and the cost of underground mining. It is solely focused on open-pit mining for now.

Project History

When the company started 4 years back, it had a 50-kilometre square area over the old mine. It had significant exploration successes that helped evolve the geological model. The company bought the ground from O3 Mining and staked a large portion of the ground. In addition, the company also made several purchases from different companies. As a result, Troilus gold now has a 1,400 square kilometre land package, making it one of the largest ground holders in Quebec, which covers the majority of the Frotêt-Evans Greenstone Belt.

Troilus Gold has taken the model from the mine and applied it to the Frotêt-Evans Greenstone Belt on a regional scale. The company has carried out the surveys on a massive scale. It has conducted about $2.5M of airborne geophysics, a massive ground geophysical program, soil sampling, geochemistry, and a host of other background work, which has resulted in several new discoveries. One of the most exciting discoveries was Testard, which is located in close proximity to the infrastructure.

The company found that all the discoveries go back to the main mine, making a hub and spoke arrangement a possibility in the future. This arrangement is speculation at this point. The Testard discovery is located 10km from the mine and 1km from the power line.

Through extensive exploration, the company found an intrusive called tonalite, which was eventually cleared. This region features a little outcrop. The company had a lot of stuff at the mine that was cleared. It featured a few hundred square metres of pervasively flooded quartz vein and sulphide mineralization. The company priced these and put them on the market. The company has found really high grades of 6oz gold, and 5.5% copper in narrow veins based in a highly confined area. These veins haven’t been seen in the belt before.

Due to the harsh winter season in Quebec, the company had to wait for the snow to clear out, which is usually by the month of June. In the summer, the company got back to work and carried out extensive mapping along with a lot of early preparatory work for the drill operations. Right before the winter season, the company started drilling and interpreted a major structure running parallel to the Troilus trend, located about 10km to the south. This trend extended for 40km. The company decided to test the shear zone, one of its major targets from a structural perspective. It was located about 400m away from the showing. The company anticipated a major pathway for gold and fluids.

The company drilled multiple holes here which returned grades of 8m of 4.5g, 1.2m of 20g, and 1.5m of 7g. Interestingly, this drill operation wasn’t focused on finding gold but was inclined on testing the structure. The company wanted to verify whether it was in a large alteration system, which would explain the high grades and confirm that the right area was being drilled.

The structure spans kilometres. The company only drilled 3 holes in order to test it, and hit significant gold fairly close to the surface and right at the showings.

Targets 2022 and Beyond

Troilus Gold now has a 5km x 5km package which is going to be a major focal point for exploration. It already has an 8.5Moz resource in the north. The company is looking to apply the same proof of concept to the whole belt. In a case where the company can successfully define a higher-grade zone, it could simply truck the material to the mine and blend it with the lower-grade ore.

The company anticipates that there could potentially be a number of standalone or satellite assets located proximal to the influence of the main mine, making it a great exploration target. The company is confident that it will be able to keep the shareholders interested and deliver results. It is looking to demonstrate that Troilus isn’t just a deposit or an asset, but an entire belt.

Troilus Gold has allocated a $5M budget for the exploration program. The province of Quebec is known to provide highly-desirable incentives to companies by way of flow-through. As a result, the company is now using flow-through funds which were raised at a 70% premium to the market. Interestingly, on every dollar spent, the company will get $0.38c back from the Quebec government.

The company has a highly-focused exploration team. The geology team has been broken up into the mine team and the regional team. The latter will start working on the deposit shortly. The company is looking forward to an exciting summer.

To find out more, go to the Troilus Gold website