Troy Resources
Troy Resources: A Profitable Gold Producer Trading Near Cash Backing
Troy Resources NL is a dual-listed gold producer on the Australian and Toronto Stock Exchanges (ASX: TRY) (TSX:TRY). Troy owns 100 per cent of the Andorinhas Gold Mine in Para State, Brazil. Troy also owns the Sandstone Gold Mine in Western Australia.
The top management of Troy Resources has a blue chip pedigree, collectively having worked with BHP Billiton, Rio Tinto, Freeport and Goldfields Limited. With it they can lay claim to a proven record of fast-track mine development having brought on-stream five gold mines in less than 10 years. Troy management brought the Andorinhas Gold Mine on-stream in less than 16 months (from acquisition to production) for less than US$20m.
Key facts on Andorinhas Gold Mine:
• Production of 3,565 ounces for the quarter
• JORC Resource 4m tonnes @ 3.4 grams per tonne for 435,000 ounces gold
• Acquisition cost US$20 per tonne
• Production cost at US$300 per ounce
• Production approaching nameplate capacity. Underground development ramping-up
• Production to increase to 50,000 ounces per annum
• 5 year mine life
• Large land positions acquired trucking distance to Andorinhas Gold Mine. Probability to increase gold resource and mine life
• A$7m exploration budget targeting larger mineralization
Sandstone Gold Mine – Western Australia
• Production of 7,372 ounces for the quarter
• Low grade stock-piles trucked from mine to mill. Due to shortage of drilling rigs. Expected to last till early 2009
• Mine will be closed in early 2009 – enabling focus on Andorinhas Gold and Iron Ore Mines
Significant Items – Iron Ore Production
• Iron ore mineralization at Andorinhas indicated strong potential to fast track cash flows from shallow open cut iron ore production
• Initial indicated iron ore resource at Andorinhas is 6.5 million tonnes at 50.8% iron, including a probable resource of 2.8 million tonnes at 63.6% iron
• Off take negotiations for the iron ore are continuing
• Production of iron ore to commence in 2009
• Troy has a complete gold processing plant asset idle in Cobar, New South Wales
Comment by Andrew McCrea
The Troy Resources share price has been hit over the past few months. As a gold producing company and soon-to-be iron ore producer from the same mine, we believe the fall has been way over-done. At a share price of A$1.05, Troy’s cash in the bank is equal to A$0.80 per share. Valuing its two gold mines at Andorinhas and Sandstone, its near term iron assets and cash flows and its gold processing plant in Cobar at only A$0.20 per share. We believe that Troy will vend this plant into a near term producing gold mine for further upside for shareholders.
Most of the infrastructure required for iron ore production at Andorinhas Gold Mine is already in place, allowing Troy to fast-track the iron ore mine. The management of Troy Resources is well-versed at developing overseas producing mines, significantly “de-risking” future prospects.
Current valuation of Troy Resources is likely to be re-priced upward as equity markets recover. With that much cash, takeover prospect must also be a possibility.