TROY RESOURCES (TRY AU) – MARKET CAP A$94M @ 0.325CPS / NET CASH...

TROY RESOURCES (TRY AU) – MARKET CAP A$94M @ 0.325CPS / NET CASH $-10.6M / 12-MONTH ADV 1.2MSH

Karouni imminent: The high grade, low cost (AISC ~US$630/oz) Karouni project remains on budget. Commissioning is expected by the end of June / early July, and commercial production is anticipated by September. At steady state, the open pit project will become one of the lowest cost operations on the ASX, given robust grades of 3.8g/t, generating ~A$60m FCF. Due to the high margins and exploration upside, Karouni remains the key valuation driver (see breakdown on page 2).

Modest commissioning risks: Whilst typical commissioning risks are acknowledged, Karouni is significantly de-risked on several fronts:

1) A high grade 3.8g/t Au Reserve, with 82% inventory in the Proven Category
2) A proven track record at constructing and commissioning plants
3) Low technical complexity, with the Karouni plant being a conventional CIL

Balance sheet strengthened: The Company’s balance sheet was strengthened with a A$35m capital raising, removing pressure on working capital requirements. The recent re-alignment of the repayment schedule of the Investec facility (at no additional cost), further enhances the Company’s financial position.

Reinvigorated exploration program to commence: A strengthened balance sheet and improved repayment schedule will allow the Company to undertake a high impact, A$12m exploration program. Effort to date has focused on the infill drilling of Smarts and Hicks open pits, with little work completed on regional targets. This program will likely demonstrate upside, therefore enhancing the stock’s appeal to a wider investment community. Each additional year of mine life extension adds ~20c to our valuation.
Recommendation: BUY recommendation and A$0.70 valuation maintained