Trelawney Mining and Exploration Inc TWNNF

RBC Capital Markets

[Rocck]

March 08, 2011

This report was prepared by a credible institution, new target price of $6 based upon the inferred resource and they're adding a $1 per share for every additional 1.0 million oz's found. If someone can tell me how to publish a .pdf I will post the entire report

Rocck

Trelawney Mining & Exploration Inc. (TSXV: TRR)
Upgrading to Outperform - Additional Resource Upside
at Cote Lake
Outperform (prev: Sector Perform)
Speculative Risk
Price: 4.80
Shares O/S (MM): 121.0
Dividend: 0.00
NAVPS: 5.18
Price Target: 6.00 ­ 4.00
Implied All-In Return: 25%
Market Cap (MM): 581
Yield: 0.0%
P/NAVPS: 0.9x
Strategic Ownership: Management and Board - 6%
Event
Trelawney reported a 4.22MMoz NI 43-101 compliant initial resource estimate
for its 92.5%-owned Cote Lake gold deposit in Ontario.
Investment Highlights
Cote Lake Delivers - We were conservatively expecting 3.0 - 4.0MMoz from the
initial resource and were pleased to see the actual estimate reconcile higher. The
estimated grade of the deposit of 1.0 g/t gold (at 0.3 g/t cut-off) was in line with
our estimate. The resource was based upon 47 diamond core holes drilled on the
property up until 31 December 2010, which included the final assays reported on
8 February 2011. The resource outlined 131 million tonnes averaging 1.00 g/t
gold for 4.22MMoz using a cut-off grade of 0.30 g/t gold. The estimate also
capped high-grade assays at 25.0 g/t gold.
Additional Upside Remains - Drilling results continue to highlight the continued
exploration potential of a deposit that remains open along strike and to depth on
all sections (Exhibit 3). The company has a $15.4MM budget in 2011 for 75,000
meters of drilling, with 5 drill rigs defining the Cote Lake deposit and a 6th rig
exploring other targets on the property. We expect results from 2011 drilling
will continue to expand the boundaries of the deposit and have based our
valuation on an additional 1.5MMoz to be added on top of the existing Cote
Lake resource.
Exploration The Key Catalyst - With the Cote Lake deposit remaining open and
2011 exploration drilling potentially expanding the boundaries of the deposit, we
expect exploration results to be the primary driver for TRR shares as the deposit
grows and infill drilling confirms gold grades and continuity. We note that each
additional 1.0MMoz discovered would add ~$1.00 to our target price.
Near Term Potential Catalysts:
• Ongoing - Exploration drill results
• Q2/2011 - Winter drilling program results at Cote Lake testing Sections 87 - 92
• Late 2011 - Potential production from Chester Underground
Investment Thesis - Shares Upgraded to Outperform
As an early-stage explorer continuing to define resources, we employ both NAV
and AMC/oz valuations based upon our estimates of a potential ~6.0MMoz gold
resource to get our $6.00/sh target price. We believe that the 2011 drill program
on the Cote Lake gold deposit will extend the boundaries of the deposit, which
we believe is the key share price catalyst.
Priced as of prior trading day's market close, EST (unless otherwise noted).