In a July 29 research note, analyst Tom Gallo reported that Canaccord Genuity raised its target price on Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) after the explorer released an updated Troilus project resource and after the financial services firm applied a revised gold price of CA$2,015 per ounce to its model.
Canaccord Genuity's new target price on Speculative Buy-rated Troilus Gold is CA$3.10 per share, up from CA$2.10 previously, and compares to the current share price of CA$1.42.
Gallo presented the main takeaways from the resource update that encompasses the Southwest zone. The total resource of the Troilus gold project in Quebec now amounts to 4,960,000 ounces of gold equivalent (4.96 Moz Au eq) at 0.87 grams per ton (0.87 g/t) Au eq in the Indicated category and 3.15 Moz Au eq at 0.84 g/t Au eq in the Inferred category. The open pit part of the resource increased by 601,000 ounces (601 Koz) of Au eq.
The analyst highlighted that the Southwest zone added 375 Koz of gold (Au) at 0.97 g/t Au (at a 0.6 g/t cutoff) to the resource, increasing it by 25%. Were Southwest excluded, the resource would have increased 16%. In addition, Gallo pointed out, the Southwest area offers exploration upside as minimal drilling has been done there.
"The company has re-focused its efforts on defining the open-pit resource rather than a combined open-pit and underground operation. Troilus does believe, however, that depending on the gold price environment the current underground resource adds future optionality to a mine plan," Gallo noted.
"This resource update continues to demonstrate open-pit growth potential and highlights the exploration potential that remains on the large land package with the addition of the recently discovered Southwest zone," Gallo commented.
He indicated that Canaccord Genuity's base case resource for the Troilus project is 130 million tons at 0.95 g/t Au. Its total estimated resource of 4.4 Moz Au at 0.95 g/t Au is comprised of 4 Moz Au plus the roughly 400 Koz of exploration potential from the Southwest zone. This is using a cutoff grade of 0.6 g/t Au, which is higher than the 0.3 g/t Au used in the resource update.
"This is due to our belief that the gold-only grade represented at 0.3 g/t Au cutoff of about 0.65 g/t is simply too low for real world operating parameters at the scale modeled," Gallo explained.
He concluded his report by noting that among all of the companies in its coverage universe, Troilus Gold has the greatest leverage to the gold price. Thus, as the gold price rises, the Troilus project becomes more attractive. Further, "with a growing resource base, the company could climb toward the top of the mergers and acquisitions pipeline, should it continue to derisk through further drilling and technical study," Gallo wrote.
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Disclosures from Canaccord Genuity, Troilus Gold Corp., Raising Target Price, July 29, 2020
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analyst's knowledge, she/he is not in receipt of material non-public information about the issuer.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication)
Troilus Gold Corp. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Troilus Gold Corp.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Troilus Gold Corp.
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or comanager of a public offering of securities of Troilus Gold Corp. or any publicly disclosed offer of securities of Troilus Gold Corp. or in any related derivatives.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Troilus Gold Corp. in the next three months.
