In a July 29 research note, Stifel analyst Tyron Breytenbach reported that Troilus Gold Corp.'s (TLG:TSX; CHXMF:OTCQB) recent resource update on its Troilus project in Quebec "sets the stage for a preliminary economic assessment (PEA) catalyst."
"This project wants to be a big mine, and the capex bill will be mitigated by the inherited infrastructure," Breytenbach added. "We believe a PEA that addresses metallurgical, geotechnical and dilution concerns and shows a robust return will drive a better multiple on the ounces."
After incorporating the updated resource estimate into its model on Troilus Gold, Stifel raised its target price on the Toronto mining firm to CA$4 per share from CA$3.50. The current share price is about CA$1.37.
Breytenbach reviewed the highlights of the updated Troilus resource.
He relayed that the new overall resource amounts to 8.11 million ounces of gold equivalent (8.11 Moz Au eq), up from 6.47 Moz previously. It consists of an Indicated resource of 4.96 Moz Au eq with an 0.87 grams per ton (0.87 g/t) Au eq average grade and an Inferred resource of 3.15 Moz Au eq with an 0.84 g/t Au eq average grade.
The open pit mineable resources versus the underground ones increased the most in the update. In the open pit category, the new Indicated resource is 4.21 Moz with a 0.8 g/t Au eq average grade, which reflects a 601,000 ounce Au eq increase. The new Inferred resource is 2.27 Moz with a 0.7 g/t Au eq average grade, which is up by 1.49 Moz Au eq.
Noteworthy, too, according to Breytenbach, is the addition of the Southwest zone ounces to the resource update. In only five weeks of drilling, Troilus Gold was able to add 580 Koz Au eq to the resource. Whereas the ounces from Southwest are of a lower average grade, which is 0.80 g/t Au eq, the grade is likely to change as Troilus Gold advances the project. "In general, the project is constrained by drilling, not geology," wrote the analyst.
In his report, Breytenbach also listed what he believes were the takeaways from Troilus Gold's recent technical call. One is that Troilus Gold really understands the structural controls on the gold mineralization at Troilus.
Two, "the geometry of the deposit is really attractive, and the variability of grade is quite low," he indicated. "This will make selective cutoff grades a useful approach and allow more 'margin engineering,' which is important at low grade deposits (at 0.6 g/t cutoff, there are greater than 3 Moz at 1.13 g/t Au eq)."
Three, management is targeting a throughput of 25,000 tons per day, and this is consistent with Stifel's model and is at the high end of the Street's estimates.
Breytenbach pointed out that the imminent PEA, expected in late August, will be a key catalyst for Troilus Gold.
Stifel has a Buy rating on Troilus Gold.
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