In a July 7 research report, Stifel GMP stated that Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) is one of its "best ideas that offer exceptional torque to a rising gold price," and the "asset offers one of the best potential replacement vehicles for gold torque since Kirkland Lake Gold's acquisition of Detour Gold."
Stifel noted that whereas a $2,000 per ounce ($2K/oz) gold price seemed implausible a year ago, now it is possible. Already gold futures broke through $1,800, and the COVID-19-caused backdrop that is supporting gold, cheap money and extreme liquidity, is expected to remain constant for some time. One of the companies that Stifel believes is "primed to execute on $2,000/oz Au" is Troilus Gold.
When Stifel revised the assumed gold price in its Troilus Gold model to $2K/oz from $1,600/oz, it boosted the Toronto-based mining company's net asset value (NAV) "by a whopping 49%." Stifel's NAV at "$2,000/oz is C$5.78 on a fully funded and diluted basis (conservatively assumes capex is 50% equity funded at C$1.00/sh)."
Currently, Troilus Gold is trading at a significant discount to its peers in Stifel's coverage universe. This, however, is a gap that Stifel believes will shrink as the development-stage firm "tackles technical questions around geotech, metallurgy, etc.," the investment banking company wrote.
It pointed out that the similarities between Troilus Gold and Detour Gold include a past producing deposit, a large underexplored existing resource base and a management team that has a fresh exploration plan. Further, just like the design rate for Detour Gold increased to about 55,000 tons per day (50 Ktpd) from 30 Ktpd, Stifel is bumping up Troilus Gold's projected milling rate to 25 Ktpd from consensus' estimated 20 Ktpd.
Stifel's noted that "as a single asset, multimillion ounce Canadian operation with a low permitting hurdle, Troilus Gold is a favorite under $2,000 Au."
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Disclosures from Stifel GMP, Precious Metals, July 7, 2020
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