Home' Australian Resources and Investment : March 2010 Contents 100 • MARCH 2010 • AUSTRALIAN RESOURCES & INVESTMENT
TROY FINANCING UPDATE
Troy Resources NL has confirmed its agreement with Investec
Bank (Australia) Limited (Investec) to provide a A$25m
Revolving Corporate Debt Facility. The Facility is provided in
two tranches. Tranche A for the amount of A$15m has already
received Investec Credit Approval and will be available for drawing
when the loan documentation is finalised, currently expected in
March 2010. Tranche A is intended to provide the balance of funding
to finalise construction of the Casposo gold and silver mine in
Tranche B for the amount of A$10m is subject to Investec's due
diligence review and final credit approval which is expected in May
2010. For clarity, the availability of Tranche A is not impacted by the
availability of Tranche B. Although the funding from Tranche B is
intended for general corporate purposes it is expected that it will
primarily be directed to funding an accelerated exploration program
of the Casposo and Castaño Nuevo leases to build the Company's gold
and silver Reserves and Resources, with a view to extending the
Casposo mine life.
Part of the cost of the loan facility includes the granting of call
options over Troy ordinary shares to Investec (subject to the
standard approval of the Toronto Stock Exchange). The volume of the
shares will be equivalent to A$3m for Tranche A and A$2m for
Tranche B. The exercise price for these options will be a 30%
premium over the relevant 90 day VWAP (volume weighted average
3 Tranche A exercise price -- $3.15/share
3 Tranche B exercise price -- to be calculated on the date Investec
advises Troy that Tranche B is credit approved.
The term of the loan is 3 years and no mandatory gold or silver
price hedging is involved. Finalisation of the loan is subject to
standard conditions precedent and completion of documentation.
The acceptance of Investec's offer followed a rigorous and
competitive selection process undertaken with the assistance of
Commenting on the announcement, Troy's CEO Paul Benson said:
"Casposo plays a significant role in Troy's strategy to become a
profitable mid-tier gold company. In this context, securing the debt
facility to finalise construction funding is a very important company
milestone. With full funding in place, Ken Nilsson, Troy's Executive
Director Operations, can focus on bringing Casposo into production.
We remain on track to pour first gold in the September quarter of
"Importantly the facility includes a second Tranche of A$10m
(Tranche B) that puts Troy in the position to continue to look at and
evaluate new gold projects. With the additional funding in
place, acquisitions are very much on the agenda along
with accelerated exploration programmes testing the potential of the
Casposo leases and the nearby Castaño Nuevo Joint Venture. We are
very excited by the geological prospectivity of the leases and are
confident that we will be able to add significantly to the existing
gold and silver Reserves and Resources over the coming twenty four
months, with a view to extending the Casposo mine life.
"Based on the significant free cashflow forecast from Casposo,
our expectation is that any debt drawn-down will be repaid
expeditiously. Any repayments ahead of schedule can be redrawn for
corporate acquisitions or project developments.
"We reached agreement with Investec following an exhaustive
and rigorous competitive process. Of importance for Troy
shareholders, the facility does not require mandatory gold or silver
price hedging. Also, part of the fees payable is in the form of call
options over Troy stock. The exercise price of these options is at a
30% premium to the relevant Troy share price; and a significant
appreciation in the Troy share price would presumably be necessary
before these options are exercised."
comfortable in the province with Barricks' Veladero and Yamana's
Gualcamayo operating mines and Barrick's $3 billion Pascua Lama
Casposo was discovered by Battle Mountain. When Newmont took
over that company the project was deemed too small and was sold to
Intrepid Mines. Troy acquired the project in May of last year paying
US$20m out of our cash reserves with a further US$2m due on the 6
month anniversary of first production.
Importantly the discovery team and the team that had moved the
project through permitting and built up a high level of goodwill
amongst the local community and authorities, stayed with the project
each time it was sold and thus are now Troy employees.
The Troy Board approved the new mine development in August 2009
and construction commenced immediately.
All major permits are in place and site earthworks have commenced.
Once again Troy will be using a second-hand gold processing plant
acquired from the Burdekin McKinnons operation near Cobar when that
company went into administration in 2001 and since held in storage.
We have now relocated this processing plant to Casposo where we have
been able to reduce the estimated capital expenditure to first
production by 51% to just US$41.5 million.
[Slides 17 and 18]
The next couple of slides show the transport of parts of the plant
from Cobar in Australia to the Casposo site in Argentina in December
2009.[Slides 19 and 20]
These slides show early general site development and the
commencement of erection of tankage and the processing plant as of
late January 2010.
We remain on track to meet our forecast first gold pour by the
September quarter of 2010.
So, where does Troy stand in the evolving gold industry as we start
the second decade of the twenty first century?
3 We recognised early the need to move to where the gold is to
acquire projects of the right grade and scale that matched our skill
sets and that could create value for our shareholders
3 We focus on regions that are geologically prospective within
jurisdictions we are comfortable we can work without undue risk or
compromising our high standards
3 We do what we say, we build mines quickly, efficiently and at low
cost and already have a decade's track record of paying fully franked
cash dividends to our shareholders.
3 We have two operating mines and an exciting growth project that
will form the foundation for future growth.
3 We have successfully built our workforce by employing locally.
3 With just 84 million shares on issue we have not diluted our
shareholders but similarly we haven't introduced financial risk
through over leveraging of the balance sheet. This has also enabled
us to avoid mandatory hedging often required by banks and thus
our shareholders have retained full exposure to the gold price.
3 With Spanish and Portuguese speaking professionals we are
perfectly positioned to expand our exploration activities further
across the South American continent.
Going forward the gold industry will continue to evolve but we are
of the view some key trends will continue for some time. Value will be
created for shareholders by those companies that move to where
attractive deposits can be found and efficiently developed and have the
skills and capabilities to do so. Troy has those skills and is already in
the right locations. We are confident we will continue to deliver wealth
creation for our shareholders in the year ahead.
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