In an Aug. 6 research note, analyst Jacques Wortman reported that Laurentian Securities revised its model on Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) in anticipation of the preliminary economic assessment (PEA) on the Troilus project expected in September and to reflect a higher gold price assumption.
Consequently, Laurentian increased its target price on Buy-rated Troilus to CA$4.70 per share from CA$2.85. The current share price is about CA$1.39.
Wortman outlined the changes Laurentian made to its Troilus model and their effects. As far as PEA-related revisions, Laurentian removed its prior assumptions about potential underground operations, expanded the scope of the mill and open-pit operations to 10,000,000 tons (10 Mt) per year from 7.2 Mt, increased initial capex for the open pit-only scenario to CA$450 million (CA$450M) from CA$350M, raised open pit, per ton mining costs and lowered per ton milling and general and administrative costs, decreased gold recovery to 85% from 86%, and shortened the mine life assumption to 13 years from 16.
The net results of these changes indicate that the "project economics could potentially still be robust despite delivering a lower gold head grade to the mill (0.89 g/t life of mine versus our prior blended underground/open-pit head grade of 1.1 g/t life of mine)," commented Wortman.
Regarding the gold price, Laurentian raised the estimate it is using in its Troilus model to US$1,850/oz from US$1,600/oz. This increased the net present value of Troilus Gold to US$354.8 million from US$200.3 million and boosted the net asset value of the Troilus project to $4.72/share from $2.88.
"As expected, lower grade projects generally demonstrate higher leverage to changes in commodity price," Wortman commented.
He noted that upcoming catalysts for Troilus Gold regarding its Troilus project include results from metallurgical tests late this month and a maiden PEA in late September. "On the broader property, significant exploration drilling is planned with a focus on the area between the past-producing pits and the new Southwest Zone, as well as the Allonge Zone to the NE."
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Disclosures from Laurentian Bank Securities, Troilus Gold Corp., August 6, 2020
Laurentian Bank Securities Inc. and/or its officers, directors, representatives, traders, analysts and members of their families may hold positions in the stocks mentioned in this document and may buy and/or sell these stocks on the market or otherwise.
The Research Analyst's compensation is based on various performance and market criteria and is charged as an expense to certain departments of Laurentian Bank Securities (LBS), including investment banking.
Laurentian Bank Securities Inc. may, in exchange for remuneration, act as a financial advisor or tax consultant for, or participate in the financing of companies mentioned in this document.
The analyst(s) certify that (1) the views expressed in this report in connection with securities or issuers they analyze accurately reflect their personal views and (2) no part of their compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by them in this report. The Research Analyst's compensation is based on various performance and market criteria and is charged as an expense to certain departments of Laurentian Bank Securities (LBS), including investment banking.
Within the last 24 months, LBS has undertaken an underwriting liability with respect to equity securities of, or has provided advice for a fee with respect to, this issuer.
The Analyst has visited material operations of this issuer.
This issuer paid a portion of the travel-related expenses incurred by the Analyst to visit material operations of this issuer.
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