Company overview - Troy Resources Limited is engaged in gold and silver production. The Company is engaged in exploration activities principally for gold, at Karouni gold project in Guyana. The Company at its Karouni Block has outlined an inferred resources of approximately 1.6 million ounces (Moz) at the smarts deposit and hicks deposits. The Andorinhas Mine is located in the state of Para in northern Brazil approximately 45 kilometers from the town of Rio Maria, approximately 17 kilometers from the town of Floresta do Araguaia and approximately 310 kilometers from the town of Maraba. The Karouni gold project produced approximately 34,740 ounces of gold and approximately 356,770 tons of ore. The Andorinhas mine produced approximately 8,789 ounces of gold. The Casposo mine operation comprises an open pit, underground mine and a processing plant. The Casposo mine produced approximately 17,210 ounces of gold.

TRY Details
Open Pit Mining in the December Quarter: Troy Resources Ltd (ASX: TRY) had posted for a strong mining performance at the start in October 2016 but in December there was a failure at South wall of the Smarts Stage 3 Pit, restricting access to one of the higher-grade sections of the mine throughout December and most of January 2017. As a result of the failure, TRY has rapidly revised both the short and medium term mining schedules to be in order to maintain a sufficient flow of ore to the mill. The majority of the fleet was deployed in Smarts 4 and Smarts 1 at the South-East end of the Pit where the mining team faced much higher stripping ratios and lower grade ore blocks due to the sub-cropping nature of the orebody in this area. Despite this challenging situation, TRY still recorded the second highest production quarter for the calendar year with 1.94Mt of total material movements compared to 2.04Mt in Q3 CY16, representing just 4% fall from the September quarter. Moreover, at this time TRY decided to use the opportunity (of reduced activity in Smarts 3) to start an RC grade control program in the Pit to better define the orebody geometry. The program would also assist with better mining and blasting operations over the next 3 to 6 months. In order to prepare a stable platform in the Pit for the RC rigs to operate effectively, the sections of the waste rock were removed from the Smarts 3 floor and used to sheet the ramps and haul-roads in the broader operation which had noticeably improved the operating performance of the mining fleet in the rainy conditions. Meanwhile, in January 2017, Mr Peter O'Bryan, a leading International Consultant in Geomechanics, arrived on site to conduct a week-long inspection and overview of how best to manage and remediate the wall failure in Smarts 3. The remediation measures were said to start straight away and immediately post the completion of the RC grade control program, and normal mining operations would be restarted in this Pit. The work would start on a revised production plan for the balance of FY17 that will take into account the impact of restrictions caused by the wall failure and whether or not increased production rates can be achieved (particularly in Smarts 4) in order to make up for some of these factors.

Open Pit Mining Operations (Source: Company Reports)
 
Record Production in the December quarter: TRY has processed in the December quarter a total of 222,281 tonnes @ 2.25g/t with an average recovery of 92.5%, which resulted in 14,839oz being recovered as compared to 13,329oz in the September Quarter. This was a record quarterly throughput with the plant processing in excess of 80,000 tonnes in both October and November. However, in December the throughput was restricted by the lack of availability of the secondary cone crusher which warranted the selected treatment of a softer blend of feed material. The problems with the crusher became apparent when flakes of metal were found in the oil filter at which time the secondary cone crusher was bypassed and stripped down for inspection. Moreover, once the cone and mantle were removed it was found that the upper bronze bush had sheared off all of it mounting bolts and had cracked in multiple locations. TRY has resolved this issue with the support from the manufacturer and the secondary cone crusher is now back on line. The renewed focus by the company is being applied to training and development of the operators working in the plant. Additionally, the total production for the first calendar year of the operation was 62,908oz at a cash cost of US$705/oz and AISC of US$1,048/oz.
 
Capital Management: TRY in the December quarter had a total liquidity of $27.0 million, including the available cash of $20.1 million and gold inventories at market value of $6.9 million. Moreover, TRY has finalized its $40.7 million equity raising after the successful completion of its Retail Entitlement Offer which closed in October. Through the Retail Offer, the company has raised a total of $12.8 million (before costs) which was received during the Quarter. The balance sheet strength created through the raising has provided the company with the financial support necessary to combat the operational challenges faced during December and January. Additionally, TRY’s original US$71.6 million debt Facility with Investec currently stands at US$29.2 million (A$40.4 million) after the repayment of US$10.0 million ($13.4 million) during the December Quarter.
 

December Quarter Cash Movements (Source: Company Reports)
 
Exploration Activities: TRY has recommenced the exploration activities around Casposo with a detailed ground mag survey at Julieta covering a total area of 66.4 linear km. The data from the survey is currently being processed and is expected to be available shortly. Further, the consultants have also been engaged to undertake a review of the mineralization events relating to Julieta, Casposo Norte, Cerro Norte, Aurora, Lucía, Mercado, Inca, B Vein and Aztec targets, including detailed mapping of these areas. Moreover, during the December quarter, TRY’s key focus was on framework testing of the Mirror and Goldstar targets and testing of the Smarts Shear Zone south-east of the Hicks 3 Pit. At the end of the December quarter, the work completed so far has identified 11 gold targets near the Karouni mine area, and of particular interest is the El Dorado prospect and an interpreted IP (Induced Polarisation) target. The detailed review of previous, IP and geological data shows that IP does assist in the mapping basement geological features providing an additional tool to support the development of gold targets at Karouni. Furthermore, one key target identifies a chargeable zone approximately 1200m long and up to 150 metres wide. The drilling in one section of this target area near old, alluvial gold workings, is shown to contain gold.
 

Cross section at El Dorado (Source: Company Reports)
 
FY 16 has been the year of transformation: TRY had posted the $100 million repayment in 18 months and the repayment in 30 months with approximately US$11 million “bullet” in June 2018. TRY had reduced 40% of the liabilities in FY 16. In January 16, the commercial production at Karouni had started.On the other side, the group reported the loss per share on a fully diluted basis from continuing and discontinued operations is 29.6 cents in FY16, as compared to the loss of 49.4 cents in 2015. The consolidated loss from continuing operations after tax in FY 16 was $13.4 million as compared to the loss after tax of $8.7 million in FY 15. Additionally, TRYhas been expecting 85,000- 95,000oz at an AISC of US$750- 850/oz from the open pit operation in FY2017. 

FY 16 Consolidated Financial Performance (Source: Company Reports)
 
Stock Performance: TRY stock has fallen 64.35% in the last six months (as of February 21, 2017). The group reported that there has been rise in unstable ground conditions around the Southern wall, within the Smarts pit, where the sand cover is at its thickest at Karouni operations. Moreover, the group’s non-executive director, Mr David Southam resigned. On the other hand, TRY stock recovered over 29.6% in the last four weeks (as of February 21, 2017) given their positive December quarter updates and new targets at Karouni. Moreover, the group’s gold hedging program would position them to survive the gold prices volatility. The average monthly hedge commitment is 4,600 ounces through to October 2017. Operational performance, particularly in the wet season, and rapid resolution to ground issues at Smarts have helped in maintaining the outlook to a substantial extent. With the stock trading at reasonable levels, we give a “Buy” recommendation on the stock at the current price of – $ 0.17

 
TRY Daily Chart (Source: Thomson Reuters)

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