Comments on the DFS Unfortunate that the SP took such a big hit today on release of the DFS.
During one of his presentations earlier this year, JR mentioned he expected the initial capex to be between $800M and $1B, so I took it to mean $1B+. No surprise there.
The longer the LOM, the less reliable the NPV estimates are as the farther out you are making predictions and discounting it back to the present to calculate the NPV of he project and thus the more risk the comany is taking that those estimates will be off. I think the 22 year LOM is the result of the upgrading from 35,000 tpd to 50,000 tpd among other nearer-term adjustments in the plan. This is actually a plus because you mine more metals / minerals faster and can thus pay off debt sooner and reduce the timeline for extracting and selling the metals, so I don't have an problem with this. JR mentioned he wanted to go bigger, and I guess this is what he meant (pay more in initial capex up front to increase daily production once the mine is up and running) as they didn't seem to add any ounces to their tally between the MRE in October to now even though JR stated they would continue drilling throughout this time period looking for more 1+ g/t discoveries to generate news and buzz during this lull period. Since no new assay results were released, I assume they didn't come up with any.
The one thing I was looking for was the announcement of a JV partner along with the DFS combined with the revelation that the partner will be taking the lead on the financing and contracting portions of the pre mine build process, perhaps leaving the permitting to JR and his team. Instead, TLG (a microcap company who will come nowhere close to being able to fund this project on their own) simply produced the DFS with a $1B price tag and no de-risking components to accompany it.
Instead, JR stated the following:
With the FS now complete, Troilus is focused on next steps, namely the finalization of the Environmental & Social Impact Assessment and ongoing exploration of the geological potential of the 435 km² Troilus property. We look forward to working with our partners in the Eeyou Istchee James Bay region, including the Cree Nation of Mistissini, the Cree Nation Government and Grand Council of the Crees, the local communities of Chibougamau and Chapais, as well as the governments of the Province of Quebec and Canada, to advance the Troilus Project.”
I suspect this paragraph was one of the key disappointments among members of the investment community as they expect TLG (like any other first mine build microcap company) to be able to walk and chew gum at the same time. Moving forward with the permitting process and trying to reach an agreement with the first nations in the area (translation: they'll want some cash plus the promise of jobs and maybe even a cut of the proceeds to give the project their blessing) is of course part of that process. However, spending time and money on "ongoing exploration" is not a wise move. TLG has apparently not found holes of significant grade since the MRE was released, so how bout focusing on the project at hand as their cash position isn't exactly overflowing with dollars. Conversely, no mention of how the company plans to finance the $1B initial capex and thus begin the process of de-risking the project suggests they are indecisive of how they are going to move forward in this critical area. JR could've said they are examining proposals from interested parties to partner with in financing the mine build and they hope to issue a PR outling the terms of that agreement along with examining and finalizing additional financing options to fund the remaining portion ofthe project.
To make the ARTG comparison JR is so fond of, here are the steps taken by ARTG after their FS to de-risk their project both in terms of financing and contracting the equipment rentals, consultants, securing material purchases, etc. as they simultaneously worked toward obtaining all needed government permitting / approvals:
- Delivered 2021 Definitive Feasibility Study (Q3 2021)
- Secured US$141M WPM silver stream financing (Q4 2021)
- Signed $385M PLF Commitment Letter with additional $40m standby COF (Q1 2022)
- Ordered long-lead crushing & grinding equipment (Q2 2022)
- Signed Caterpillar Financial $140M Master Lease Agreement (Q3 2022)
- Awarded $318M final process plant EPC contract to Sedgman (Q3 2022)
- Completed $175M equity financing (Q4 2022)
- Ordered construction and mining fleet (Q1 2023)
- Completed construction camp (>550 beds)
- Initiated process plant site preparations
- Selected construction explosives/drill & blast contractors
- Finalized $385M project loan facility (Q1 2023)
- Received final BC Mines Act permit (Q1 2023)
- Commenced construction (Q1 2023)
- Received Schedule 2 amendment approval (Q2 2023)
- Secured additional US$40M gold stream funding (Q2 2023)
- Received Fisheries Act Authorization (Q3 2023)
Also key to note that when ARTG purchased the Blackwater project from New Gold, New Gold received cash plus shares in ARTG of 9.9% of total shares outstanding in return. Thus, ARTG owned 100% of the project with NGD simply being a significant shareholder just like any other institutional investor, not a JV partner / owner of a % of the entire company, and didn't have close to enough shares to influence how ARTG's management conducted business re. the project.
I'm still going to keep and eye on TLG and see how things progress from here re. the terms of a JV agreement and moving toward financing the remainder of the project plus the mind build contracts they sign and their progress on the Federal permitting process (Quebec should be easy) along with how involved JR and his team are in advancing this project. I really think they should let their JV partner take the reigns as it appears this would be JR's first mine build as CEO of a mining company, and the financing / contracting / permitting process will be much harder to navigate than producing an MRE or DFS. If I see good progress at an attractive share price, I may still invest a sizeable chunk of money in this thing, but not until early 2025 as this is a "show me' story IMO.
Should be interesting. We shall see.