Troilus Gold Corp. (TLG:TSX; CHXMF:OTC; CM5R:FRA) sold 1,824 noncore land claims in Northern Quebec to lithium miner Sayona Mining for about CA$50 million (CA$50M) in Sayona shares, reported Stifel analyst Ian Parkinson in a November 16, 2022 research note. (The transaction closed on November 17.)
"We view the transaction as a strong positive for Troilus [Gold] as it gives them a significant cash injection and significantly reduces share dilution as they continue to explore and work towards a final feasibility study for the Troilus project expected in H2/23," Parkinson commented.
Parkinson also reported that Troilus Gold is still the cheapest company in Stifel's coverage universe, with a spot price:net asset of value (P:NAV) of only 0.8 times, compared to the average 0.18 times spot P:NAV of its explorer peers. Troilus Gold is currently trading at about CA$0.53, multiples lower than Stifel's CA$4 per share target price. This gap represents a significant potential return for investors.
"The stake raises the possibility of collaboration between the two companies for infrastructure synergies as they develop their projects," noted Parkinson.
Also part of the Troilus Gold-Sayona deal, the Canadian gold exploration company retained a 2% net smelter returns royalty on subsequent metals produced on the transferred claims.
The land Troilus Gold divested, amounting to 985 square kilometers, did not include the company's key properties. These are areas incorporated in the company's development plan outlined in the 2020 preliminary economic assessment and areas where Troilus Gold has had recent exploration success.
The property is, however, next to Sayona's Moblan, a lithium project in Northern Quebec on which a preliminary feasibility study is expected in H1/23.
Concurrent to the transaction, Australia-headquartered Sayona subscribed to a private placement of Troilus Gold shares that yielded CA$4.8 million in gross proceeds. The transaction involved about 9.9 million shares at CA$0.49 each. Accordingly, Sayona owns 9.26% of Troilus Gold.
"The stake raises the possibility of collaboration between the two companies for infrastructure synergies as they develop their projects," noted Parkinson.
Stifel rates Troilus Gold Buy.
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Disclosures For Stifel GMP, Troilus Gold, November 16, 2022
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