RAMcap Ltd letter, page-96

Maybe not so much hoping needed. Costs are 23-25m per quarter for mining/treatment. December qt. saw 14227 ounces and ore mined 240k tonnes while only 210k tonnes were treated.

One of the reasons the production is now so low is that Troy will be already treating stockpiles. 13333 ounces suggest 10% of ore is coming from stockpiles IF Troy uses the average stockpile grade. If they treat the higher grade stuff first then more than 10% will be from stockpiles.

I expect Troy to have only mined 180-190k tonnes in the March quarter. That means 55k tonnes of less ore mined. At the ratio of 1:6.3 ore to material moved it means 345k tonnes of material moved besides ore production already included in the costs.

What does this mean? It means mining is cashflow neutral, exploration and OC development costs will eat into cash (likely 4.7m after all debt payments so far) but on the plus side Troy is getting 285k tonnes of movement for the cutback already included in the costs. That is a huge part of the cutback.

I expect the same to continue in the current quarter. Again, doing the cutback via existing costs while treatment is supported by the stockpiles.

Once the cutback is ready Troy will be producing 13500 ounces per quarter per guidance which seems conservative. They may need lead time to get higher grades and refilling stockpiles, so I would not bet on higher production than guidance. But we all have been missing is that the guidance for September and December quarter is based on ore from Smarts 3 and that pit has a completely different waste to ore ratio, maybe 4.6 : 1 vs 6.2 in the December quarter. Maybe even more difference as September quarter was not purely from Smarts.

13500 ounces in September quarter will mean 208k tonnes of ore and 957k tonnes of material moved. A huge difference to the 1475k tonnes moved in the December quarter 2018. At US$4/t it means the costs will decline from 25m to 22m per quarter and operations will yield a couple of millions again per quarter despite no higher production.

So the quarterly will be very interesting indeed.