In a July 29 research note, analyst Jacob Willoughby reported that Red Cloud increased its target price on Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) to CA$2 per share from CA$1.50 to reflect the updated Troilus project resource estimate. The company is currently trading at about CA$1.25 per share.
Willoughby discussed the updated resource estimate, which, he noted, "increased materially" from the last one in 2019. The new total Troilus resource is 8.11 million ounces of gold equivalent (8.11 Moz Au eq), which reflects 26% growth. The Indicated resource today amounts to 4.96 Moz Au eq, and the Inferred resource is 3.15 Moz Au eq.
Since 2016 when it acquired the Troilus project, Troilus Gold increased the total Indicated resources by about 142%, and the total Inferred resources by about 350%.
Contained ounces jumped up substantially since 2019, the date of the prior resource estimate update, due to the large, roughly 39% tonnage increase. Grades, on the other hand, decreased moderately, by about 9%.
Today, the open pit ounces comprise 80% of the overall resource whereas in 2019 they accounted for about 68%. "We view this positively as the previous grade in the underground resource was less than optimal," wrote Willoughby.
The analyst highlighted that the Southwest zone contributed to the overall resources 583,000 Inferred ounces of Au eq, or 22.6 million tons, with an average grade of 0.8 grams per ton Au eq. "We still believe the company can grow the Southwest zone to a total of about 1 Moz Au eq," Willoughby commented.
The new Troilus resource provides the basis for a preliminary economic assessment (PEA), for which Troilus Gold is continuing the necessary technical work. Release of the PEA is a near-term catalyst, as it is expected in Q3/20.
Exploration updates is another potential stock-moving event, as the company intends to drill 20,000 meters later this year. That campaign will include drilling the Southwest zone for ounces to add to the resource and finishing infill drilling around the main ore bodies in the Z87 and J zones.
"We expect ongoing exploration updates in a strengthening gold market to drive positive momentum and a rerating of the stock," Willoughby wrote.
Red Cloud has a Buy rating on Troilus Gold.
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Disclosures from Red Cloud Securities, Troilus Gold Corp., Exploration Update, July 29, 2020
Part of Red Cloud Securities Inc.'s business is to connect mining companies with suitable investors. Red Cloud Securities Inc., its affiliates and their respective officers, directors, representatives, researchers and members of their families may hold positions in the companies mentioned in this document and may buy and/or sell their securities. Additionally, Red Cloud Securities Inc. may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
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