Trolius following Detour, Malartic playbook

While the market did not warm to the feasibility study Troilus Gold put out for its Troilus gold project in Quebec, Canada to the tune of an 18% fall in the company's share price, chief executive Justin Reid was upbeat during the conference call, commenting that its large institutional shareholder base is in for the long run and the future strong cash flow.

"I have many more positive calls than negative today. … We have had a similar market reaction to other feasibilities that have come out recently, but this is just a short-term reaction," said Reid.

The market was underwhelmed by the feasibility of a 50,000tpd open-pit mining operation that will produce more than 300,000ozpa of gold equivalent for 22 years and yield a base case net present value of $884.5 million at a 5% discount rate and internal rate of return (IRR) of 14% following a $1.1 billion initial capital expenditure.

Taking this in his stride, Reid pointed out that Troilus would become the sixth-largest mine in Canada with a relatively low all-in-sustaining cost of US$1109/oz. Reid said many people were fixating on the 14% base case after-tax IRR rather than the real magic of low-grade bulk tonnage deposits, as seen by the Detour and Canadian Malartic mines in Ontario and Quebec.

"The most profitable mines in Canada are Detour and Malartic. Detour's feasibility came in at [12.4%]. Cote was [13.5%] and Malartic was [17.5%]. These are low IRRs, but they generate incredibly strong free cash flow. That is what the majors and mid-tiers are looking for. Greenstone, Cote and Troilus will become some of the biggest cash flow generators," said Reid.

Of Canada's emerging producers, Troilus will be one of the highest cost, with Calibre Mining's Valentine estimated to have an AISC of $1046/oz, Equinox Gold's Greenstone $890/oz, IAMGOLD's Cote $854/oz, Artemis Gold's Blackwater $781/oz and B2Gold's Back River $775/oz.

Reid said investor interest in financing the $1 billion development is strong. He hopes to have a funding solution in place by year-end, with a partner being the preferred option.

"Across the mining space, we are seeing partnerships for development. Osisko Mining partnered with Goldfields at Windfall, Equinox partnered with Orion at Greenstone, Sumitomo and IAMGOLD partnered at Cote. By bringing in a strong partner, we could raise capital to fund our pro rata equity portion and use their balance sheet to lower the cost of capital and reduce technical risk," said Reid.

Reid said that the project is strong enough for the company to undertake the development on its own if it has to, although he did not mention the almost catastrophic issues that solo development had for Marathon Gold at Valentine [acquired by Calibre], Argonaut Gold at Magino [being acquired by Alamos Gold] or New Gold at Rainy River.

"The free cash flow profile of this deposit is incredible and can cover up to 70% leverage. … In Quebec, where large pension funds are among our largest shareholders, they can provide suedo sovereign debt at incredible rates. The 75,000tpa of [copper] concentrate will make us the largest concentrate producer in Eastern Canada. There is high demand as the concentrate market moves into deficit and traders and off-takers have approached us."

"The copper concentrate gives us several options as purchasers are willing to play across the balance sheet with mezzanine financing, offtake agreements, and royalties and streams. We are confident we can fund this ourselves, but there are always the risks of cost overrun, working capital miscalculations and technical issues," said Reid.

Troilus thinks it will take until the end of 2025 to obtain its permits, and with an 18-month build time, first production would come in 2028.