PERTH, WESTERN AUSTRALIA--(Marketwire - May 6, 2010) - Troy Resources NL ("Troy") (TSX:TRY)(ASX:TRY) (All currency is in United States Dollars unless stated.)
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
* 19% INCREASE IN PLANNED GOLD PRODUCTION TO 320,800 OUNCES
* 67% INCREASE IN PLANNED SILVER PRODUCTION TO 9 MILLION OUNCES
* AVERAGE CASH COSTS US$120/OZ AFTER SILVER CREDITS
* NPV AFTER TAX OF US$76.4M
* PROJECT WITHIN BUDGET AND ON SCHEDULE TO PRODUCE FIRST GOLD IN SEPTEMBER QUARTER 2010
* ARGENTINE TAX STABILITY AGREEMENT IN PLACE
* SIGNIFICANT EXPLORATION UPSIDE
Troy Resources NL has completed a review of the Mineral Reserve and key production parameters of its 100% owned, low-cost, high-grade Casposo gold and silver project in San Juan Province, Argentina.
The updated mine plan will see 320,800 ounces of gold and 9,000,000 ounces of silver produced over the six year mine life, representing 19% more gold and 67% more silver than assumed in the previous 2008 study.
Commenting on the new Reserve, Troy CEO Paul Benson said, "We are very pleased to release the updated Casposo Reserve and the key production parameters. In July 2009 we updated the Mineral Resource which saw a 32% increase in contained equivalent gold. This latest review presents similarly impressive increases in the Mineral Reserve and in planned metal production.
"Because the silver to gold ratio increases significantly with depth, the mine moves from a gold mine with a small silver credit in year one, to the final year where silver is essentially a co-product. Because of this we will report unit cash costs using by-product and co-product costing.
"Whichever way you look at it, Casposo is going to be a low cost mine, with average cash costs of $120/oz after silver credits are factored.
When combined with the reduction in the pre-production capital we announced last year, it is clear to see the Casposo project is significantly value accretive for Troy shareholders, offering an internal rate of return of approximately 75%, and this is before any further exploration success.
"We are very confident that we will continue to add ounces to the Reserves and Resources over the coming years as we test the known targets on the Casposo leases and the Castano Nuevo property.
"We will start to commission parts of the plant in May and still expect first gold to be poured in the September quarter," Mr Benson said.
The Mineral Reserve update was completed based on the Mineral Resource which was announced to the market in July, 2009. Key project parameters are summarized below in Table 1. A supporting technical report (NI 43-101) will be completed and filed with securities regulatory authorities within 45 days.
Highlights of the Updated Mineral Reserve and Revised Production Schedule include:
* Probable Mineral Reserve of 2.03mt at 5.2g/t gold and 171.5g/t silver. This represents an increase in contained gold of 19% and silver of 67% compared to the previously published Probable Mineral Reserve.
* Increased Mill throughput of 400,000tpa.
* Production to commence in September 2010 quarter, construction on schedule and within budget.
* Peak production in year 2 of 90,000oz gold and 1.27m ounces silver or 110,700oz of gold equivalent.
* Average Life Of Mine (LOM) unit cash costs of US$120 per ounce of gold after netting by-product silver credits (by-product costing) or US$382 dollars an ounce of equivalent gold (co-product costing).
* Robust Internal Rate of Return ("IRR") of 74.8% on the initial capital investment.
* Project NPV (8% Real after tax) of US$76.4m.
* First 3 years of net free cash flow (after tax and capital) of US$124.5m.
* Significant upside remains:
o High grade Kamila ore body remains open at depth;
o The soon to be released Julieta Resource has not been included in the current project's Mining Resource and Reserve;
o A number of vein targets will be drilled over the next two years including – Julieta, Mercado, Cerro Norte, Panzon, Maya, and Castano Nuevo project.
PROJECT OVERVIEW
The processing facility is based on the relocation of the majority of the McKinnons plant Troy held in storage in Australia. This plant has been relocated to the project site and reassembled. The remainder of the flowsheet includes plant acquired, new and second hand, from Australia, Europe and North America. Gold and silver will be recovered using a conventional Merrill Crowe circuit. The use of pre-owned equipment and in-house project management has allowed Troy to significantly reduce the capital construction cost from US$86m; the last reported estimate before Troy acquired the project, to US$41.5m.
The mill will be fed initially from an open cut mine on the Kamila deposit. This will later be supplemented by ore sourced from two smaller open cuts, B-Vein and Mercado. An underground mine will be developed beneath the Kamila open cut. The silver to gold ratio increases with depth in the orebody and thus the mine changes from a predominantly gold mine with a small silver credit in year one, to the final year where silver is a true co-product of gold.
Due to the initial tight layout of the open cut, pre-strip and initial forming of the pit has commenced well ahead of first production with the aim of having at least one month of mill feed on the ROM pad before commissioning. This pre-strip and mining, costing of around US$2.9m will be capitalized and amortised on a units of production basis.
The underground mine will be developed with two access declines, one from within the Kamila pit and the other from further down the slope, independent of any planned pits. The mining method is predominantly uphole retreat stoping, with some stopes at depth being more conducive to cut and fill mining. Underground development, other than used for immediate ore access, is capitalized and amortised on a units of production basis.
The majority of the increase in the Reserves and Resources has been at depth and this additional material will be mined from underground. Because of this, the new mine plan sees significantly more tunnel development and ore mined from underground compared to that assumed in the 2008 AMEC study.
All mining is assumed to be undertaken by a contractor, with the contractor providing capital equipment and charging on a relevant per tonne or per metre basis. Open cut mining costs have been factored from the costs currently being achieved. The underground mining and development costs were estimated by Redpath (Chile) who completed a detailed review of the project. Processing costs were estimated by Mets Consulting (Perth).
As part of the permitting process the previous owner agreed to make a contribution of US$14.5m to the development of the regional electrical power infrastructure. Troy renegotiated the timing of this commitment such that of the remaining $13.8m at acquisition, US$7.3m is to be paid before June 30, 2010, with the remaining US$6.5m to be paid over the following 5 years.
TAXES AND ROYALTIES
Argentina has a value added tax termed an IVA which is charged at the rate of 21% of goods and services. This is refunded through tax offsets in future periods. Other taxes include provincial and export taxes. The corporate tax rate is 35%.
Royalties are calculated at 3% on cash margins to the provincial authorities and a payment of US$5 per ounce on gold produced to the previous owners.
Appendix 1 shows the project's key physical and financial parameters.
UNIT COSTS
Because the ratio of silver to gold increases with depth; the relative importance of the value of the silver stream increases over the life of the mine. In the early years it is appropriate to consider the silver as a byproduct and report gold production with unit costs calculated by netting the silver revenue off total cash costs. In the later years however silver is a true co-product so it is more appropriate to consider "equivalent gold" where silver is converted using assumptions of economic recovered value into equivalent gold. The different costing methods are shown over the page in Table 1.
Table 2 shows key project financial sensitivities.
Table 3 shows annual gold and "equivalent gold" production.
Table 4 shows the split between open cut and underground ore and tonnes processed on an annual basis.
Table 5 shows cumulative after tax and capex cashflows.
To view the Appendix accompanying this press release, please click on the following link: http://media3.marketwire.com/docs/troy55.pdf.
To view the Tables and Charts accompanying this press release, please click on the following link: http://media3.marketwire.com/docs/troy56.pdf
To view the photos associated with this press release, please click on the following link: http://media3.marketwire.com/docs/2troy55.pdf
Geological information in this Report has been compiled by Troy's Vice President Exploration & Business Development, Peter Doyle, who:
* Is a full time employee of Troy Resources NL
* Has sufficient experience which is relevant to the type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'
* Is a Fellow of the Australasian Institute of Mining and Metallurgy
* Has consented in writing to the inclusion of this data
Information of a scientific or technical nature in this report was prepared under the supervision of Peter J. Doyle, Vice President Exploration and Business Development of Troy, a "qualified person" under National Instrument 43-101 – "Standards of Disclosure for Mineral Projects", a Fellow of the Australasian Institute of Mining and Metallurgy. Mr. Doyle has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a "competent person" as defined in the 2004 edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Doyle has reviewed and approved the information contained in this report. For further information regarding the Company's Casposo Project in Argentina, including a description of Troy's quality assurance program, quality control measures, the geology, samples collection and testing procedures in respect of the Casposo project please refer to the technical reports filed Casposo Project, San Juan Province Argentina dated August 1st, 2009 which is available under the Company's profile at www.sedar.com or on the company's website.
This report contains forward-looking statements, including statements with respect to expected completion of construction, capital costs, operating costs, production schedules and expected returns. These forward-looking statements reflect management's current beliefs based on information currently available to management and are based on what management believes to be reasonable assumptions. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in the forward looking statements. Such factors include, among others, future prices of gold, the actual results of current production, development and/or exploration activities, changes in project parameters as plans continue to be refined, variations in ore grade or recovery rates, plant and/or equipment failure, delays in obtaining governmental approvals or in the commencement of operations.
For purposes of Clause 3.4(e) in Canadian Instrument 43-101, the company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
* 19% INCREASE IN PLANNED GOLD PRODUCTION TO 320,800 OUNCES
* 67% INCREASE IN PLANNED SILVER PRODUCTION TO 9 MILLION OUNCES
* AVERAGE CASH COSTS US$120/OZ AFTER SILVER CREDITS
* NPV AFTER TAX OF US$76.4M
* PROJECT WITHIN BUDGET AND ON SCHEDULE TO PRODUCE FIRST GOLD IN SEPTEMBER QUARTER 2010
* ARGENTINE TAX STABILITY AGREEMENT IN PLACE
* SIGNIFICANT EXPLORATION UPSIDE
Troy Resources NL has completed a review of the Mineral Reserve and key production parameters of its 100% owned, low-cost, high-grade Casposo gold and silver project in San Juan Province, Argentina.
The updated mine plan will see 320,800 ounces of gold and 9,000,000 ounces of silver produced over the six year mine life, representing 19% more gold and 67% more silver than assumed in the previous 2008 study.
Commenting on the new Reserve, Troy CEO Paul Benson said, "We are very pleased to release the updated Casposo Reserve and the key production parameters. In July 2009 we updated the Mineral Resource which saw a 32% increase in contained equivalent gold. This latest review presents similarly impressive increases in the Mineral Reserve and in planned metal production.
"Because the silver to gold ratio increases significantly with depth, the mine moves from a gold mine with a small silver credit in year one, to the final year where silver is essentially a co-product. Because of this we will report unit cash costs using by-product and co-product costing.
"Whichever way you look at it, Casposo is going to be a low cost mine, with average cash costs of $120/oz after silver credits are factored.
When combined with the reduction in the pre-production capital we announced last year, it is clear to see the Casposo project is significantly value accretive for Troy shareholders, offering an internal rate of return of approximately 75%, and this is before any further exploration success.
"We are very confident that we will continue to add ounces to the Reserves and Resources over the coming years as we test the known targets on the Casposo leases and the Castano Nuevo property.
"We will start to commission parts of the plant in May and still expect first gold to be poured in the September quarter," Mr Benson said.
The Mineral Reserve update was completed based on the Mineral Resource which was announced to the market in July, 2009. Key project parameters are summarized below in Table 1. A supporting technical report (NI 43-101) will be completed and filed with securities regulatory authorities within 45 days.
Highlights of the Updated Mineral Reserve and Revised Production Schedule include:
* Probable Mineral Reserve of 2.03mt at 5.2g/t gold and 171.5g/t silver. This represents an increase in contained gold of 19% and silver of 67% compared to the previously published Probable Mineral Reserve.
* Increased Mill throughput of 400,000tpa.
* Production to commence in September 2010 quarter, construction on schedule and within budget.
* Peak production in year 2 of 90,000oz gold and 1.27m ounces silver or 110,700oz of gold equivalent.
* Average Life Of Mine (LOM) unit cash costs of US$120 per ounce of gold after netting by-product silver credits (by-product costing) or US$382 dollars an ounce of equivalent gold (co-product costing).
* Robust Internal Rate of Return ("IRR") of 74.8% on the initial capital investment.
* Project NPV (8% Real after tax) of US$76.4m.
* First 3 years of net free cash flow (after tax and capital) of US$124.5m.
* Significant upside remains:
o High grade Kamila ore body remains open at depth;
o The soon to be released Julieta Resource has not been included in the current project's Mining Resource and Reserve;
o A number of vein targets will be drilled over the next two years including – Julieta, Mercado, Cerro Norte, Panzon, Maya, and Castano Nuevo project.
PROJECT OVERVIEW
The processing facility is based on the relocation of the majority of the McKinnons plant Troy held in storage in Australia. This plant has been relocated to the project site and reassembled. The remainder of the flowsheet includes plant acquired, new and second hand, from Australia, Europe and North America. Gold and silver will be recovered using a conventional Merrill Crowe circuit. The use of pre-owned equipment and in-house project management has allowed Troy to significantly reduce the capital construction cost from US$86m; the last reported estimate before Troy acquired the project, to US$41.5m.
The mill will be fed initially from an open cut mine on the Kamila deposit. This will later be supplemented by ore sourced from two smaller open cuts, B-Vein and Mercado. An underground mine will be developed beneath the Kamila open cut. The silver to gold ratio increases with depth in the orebody and thus the mine changes from a predominantly gold mine with a small silver credit in year one, to the final year where silver is a true co-product of gold.
Due to the initial tight layout of the open cut, pre-strip and initial forming of the pit has commenced well ahead of first production with the aim of having at least one month of mill feed on the ROM pad before commissioning. This pre-strip and mining, costing of around US$2.9m will be capitalized and amortised on a units of production basis.
The underground mine will be developed with two access declines, one from within the Kamila pit and the other from further down the slope, independent of any planned pits. The mining method is predominantly uphole retreat stoping, with some stopes at depth being more conducive to cut and fill mining. Underground development, other than used for immediate ore access, is capitalized and amortised on a units of production basis.
The majority of the increase in the Reserves and Resources has been at depth and this additional material will be mined from underground. Because of this, the new mine plan sees significantly more tunnel development and ore mined from underground compared to that assumed in the 2008 AMEC study.
All mining is assumed to be undertaken by a contractor, with the contractor providing capital equipment and charging on a relevant per tonne or per metre basis. Open cut mining costs have been factored from the costs currently being achieved. The underground mining and development costs were estimated by Redpath (Chile) who completed a detailed review of the project. Processing costs were estimated by Mets Consulting (Perth).
As part of the permitting process the previous owner agreed to make a contribution of US$14.5m to the development of the regional electrical power infrastructure. Troy renegotiated the timing of this commitment such that of the remaining $13.8m at acquisition, US$7.3m is to be paid before June 30, 2010, with the remaining US$6.5m to be paid over the following 5 years.
TAXES AND ROYALTIES
Argentina has a value added tax termed an IVA which is charged at the rate of 21% of goods and services. This is refunded through tax offsets in future periods. Other taxes include provincial and export taxes. The corporate tax rate is 35%.
Royalties are calculated at 3% on cash margins to the provincial authorities and a payment of US$5 per ounce on gold produced to the previous owners.
Appendix 1 shows the project's key physical and financial parameters.
UNIT COSTS
Because the ratio of silver to gold increases with depth; the relative importance of the value of the silver stream increases over the life of the mine. In the early years it is appropriate to consider the silver as a byproduct and report gold production with unit costs calculated by netting the silver revenue off total cash costs. In the later years however silver is a true co-product so it is more appropriate to consider "equivalent gold" where silver is converted using assumptions of economic recovered value into equivalent gold. The different costing methods are shown over the page in Table 1.
Table 2 shows key project financial sensitivities.
Table 3 shows annual gold and "equivalent gold" production.
Table 4 shows the split between open cut and underground ore and tonnes processed on an annual basis.
Table 5 shows cumulative after tax and capex cashflows.
To view the Appendix accompanying this press release, please click on the following link: http://media3.marketwire.com/docs/troy55.pdf.
To view the Tables and Charts accompanying this press release, please click on the following link: http://media3.marketwire.com/docs/troy56.pdf
To view the photos associated with this press release, please click on the following link: http://media3.marketwire.com/docs/2troy55.pdf
Geological information in this Report has been compiled by Troy's Vice President Exploration & Business Development, Peter Doyle, who:
* Is a full time employee of Troy Resources NL
* Has sufficient experience which is relevant to the type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'
* Is a Fellow of the Australasian Institute of Mining and Metallurgy
* Has consented in writing to the inclusion of this data
Information of a scientific or technical nature in this report was prepared under the supervision of Peter J. Doyle, Vice President Exploration and Business Development of Troy, a "qualified person" under National Instrument 43-101 – "Standards of Disclosure for Mineral Projects", a Fellow of the Australasian Institute of Mining and Metallurgy. Mr. Doyle has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a "competent person" as defined in the 2004 edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Doyle has reviewed and approved the information contained in this report. For further information regarding the Company's Casposo Project in Argentina, including a description of Troy's quality assurance program, quality control measures, the geology, samples collection and testing procedures in respect of the Casposo project please refer to the technical reports filed Casposo Project, San Juan Province Argentina dated August 1st, 2009 which is available under the Company's profile at www.sedar.com or on the company's website.
This report contains forward-looking statements, including statements with respect to expected completion of construction, capital costs, operating costs, production schedules and expected returns. These forward-looking statements reflect management's current beliefs based on information currently available to management and are based on what management believes to be reasonable assumptions. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in the forward looking statements. Such factors include, among others, future prices of gold, the actual results of current production, development and/or exploration activities, changes in project parameters as plans continue to be refined, variations in ore grade or recovery rates, plant and/or equipment failure, delays in obtaining governmental approvals or in the commencement of operations.
For purposes of Clause 3.4(e) in Canadian Instrument 43-101, the company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
ABN 33 006 243 750
For more information, please contact
Troy Resources NL
Mr Paul Benson
Chief Executive Officer
(61 8) 9481 1277
(61 8) 9321 8237 (FAX)
troy@troyres.com.au
www.try.com.au
or
Purple Communications
Annette Ellis / Warrick Hazeldine
Media Relations
(61 8) 6314 6300
aellis@purplecom.com.au
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