Despite palpable doom & gloom in geopolitics, gold, copper & silver are holding up well. Although down moderately from 52-week highs, they’re up +50%, +31% & +140%, respectively, from a year ago.
Not many stock market sectors are better positioned than metals & mining in such a chaotic & uncertain world. Giant tech stocks are feared to be overvalued and are easy to sell to raise cash in a hurry.
Sectors are being hit by higher oil/gas/diesel prices. Yes, metals & mining has fossil fuel inputs, but not nearly as much as airlines, trucking, shipping (ocean freight), or chemicals (especially petrochemicals).
Metals/mining is exposed, but on the order of 10%-15% of operating costs, vs. 25%-40% for the above-mentioned sectors. I strongly believe that metals/mining stocks will outperform for the foreseeable future.
Does that mean readers should buy gold (“Au“) Majors? Mid-tier producers? Developers? Explorers? Each category carries incremental risk, but more commensurate return (potential). The sweet spot might be developers, especially ones with near-term production plans.
Especially developers of large-scale projects in safe, world-class jurisdictions. Developers with strong cash balances and attractive options for construction funding utilizing a prudent combination of debt, streaming, equity, and possibly a few non-equity sources.
Troilus Mining (TSX: TLG) / (OTCQX: CHXMF) is a Au/copper (“Cu“) developer with a 13.0M Au Eq. ounce resource that expects to begin meaningful construction activities in Quebec within a year. Key permitting (federal + provincial) remains largely on track.
This is a company transitioning from development to construction readiness for what will be one of Canada’s largest Au/Cu mines this decade.
Backed by strong exploration results, engineering & permitting milestones, advanced-stage funding negotiations, and an expanded & strengthened leadership team, the Troilus Project is a globally significant asset.
It’s a 435 km² land package in the Frôtet-Evans Greenstone Belt in north-central Québec, encompassing the historic Troilus Mine + adjacent mineralized systems.
An ESIA was submitted in June, and the first round of regulator questions were received and answered quickly. A construction permit is expected by late 2026 or early 2027. In the meantime, management is focusing on first pour by early 2029, within three years.
I believe there are opportunities (but no guarantees) of non-equity dilutive sources such as government grants, and partially pre-paid off-take agreements. Management is advancing Troilus Mining in parallel across technical, regulatory, organizational, and financial realms.
This is a brownfield project that operated for 14 years with existing infrastructure in place reportedly worth > US$500M a few years ago, probably closer to $650M today. Basic engineering is complete with no negative surprises.
Detailed engineering is underway, a major undertaking (US$80M, 400,000 man-hours) that will tighten cost estimates from {+/- 35%} to {+/- 10%}. Importantly, long-lead items are starting to be ordered.
A 100 person camp is being expanded to 250. The team is not waiting for final permits to advance this major Project. It has dozens onsite full-time, including numerous engineers.
The Troilus project will almost certainly become a mine. It was not a no-brainer at the BFS Au price of $1,975/oz, but at today’s ~US$4,740 it would be a cash flow machine, even with industry-wide increases in op-ex & cap-ex.
In a recent CEO interview, Justin Reid pointed out that higher fuel prices will increase cap-ex & op-ex, but that is true for every mine/project on earth. He also noted good progress on mine optimization plans that could offset inflationary pressures.
Two examples are; steeper pit walls — supported by additional geotech drilling — to lower strip ratios. And, the potential for higher grade ounces in years 1-5 from drilling just outside reserve shells.
In both cases, meaningful improvements are possible (subject to ongoing work). CEO Reid reiterates that his team is not afraid to spend a bit of money today to avoid costly and/or time consuming surprises. That’s the very definition of de-risking.
He’s especially focused on mitigating inflationary pressure by locking down select items via cash deposits for things like transformers, mills, and fleet.
The team is pulling work forward –> expanding the camp, road relocations, water diversion prep, new septic system, preliminary earthworks, etc. The Project is transitioning to a “pre-development operating site.”
In the interview, I read the body language as saying that major funding news is likely this quarter. That could be debt package finalization OR a streaming deal, OR both. Completing basic engineering was an important step for lenders/streamers…
While some investors wish final debt & streaming transactions would move faster, the longer the wait, the higher the trailing 3-yr average Au/Cu/Ag price. The 3-yr trailing Au price is $2,865/oz. A year ago it was $2,135.The trailing 3-yr avg. for Cu is $4.48/lb.vs. $4.04 a year ago.
The following table shows Troilus Mining valued at a 54% discount to peer low-grade, bulk tonnage developers C$63 vs. C$138.
More importantly, note the bottom portion of the table. Assuming C$1.4B in debt and an additional C$200M in equity, (but no meaningful equity issuance before 2027), the pro forma valuation is C$186/oz compared to peer fully-funded companies at C$837/oz.
Granted, Skeena Gold & Silver & Perpetua Resources have higher grades, and Skeena will reach production ahead of Troilus, but the substantially discounted valuation of C$186/oz vs. the average of C$837/oz is noteworthy. Notice Montage Gold’s jurisdiction, Quebec is a lot better!
Readers are reminded that when companies like Montage, Perpetua&Skeena announced they were fully-funded, their share prices took off. Those three are up an average of +1,703% from 3-yr lows vs. Troilus +556%.
Speaking of Skeena, it just announced a 5-yr senior secured bond, US$750M, with an attractive 8.5% coupon. That’s a great accomplishment for a single-asset company, before having produced a single ounce.
The bond issue was heavily oversubscribed, going to show the demand by institutions for fixed income investments from commodity producers. Artemis Gold (in production) raised C$450M at 5.625% in February.
I argue that Artemis is four years ahead of Troilus, entering commercial production a year ago. It’s valued at C$9.5B. If one takes C$9.5B and discounts it back 4 years at 10%/yr, that’s C$6.5B. Compare that to Troilus at a pro forma C$2.4B fully-funded).
Assuming 300,000 Au Eq. oz/yr (expected to be higher in the initial years), $4,500/oz Au and an all-in-sustaining-cost of $1,500 (vs. $1,109 in the May-2024 Feasibility Study), EBITDA would be $1.2B.
If a producer is looking to acquire Troilus, it could presumably increase production well above 300,000 oz/yr. As it stands, maximum production in year 7 of the mine plan is 536K Au Eq.
Readers are reminded that the Company expanded its financing mandate with a syndicate led by Société Générale, KfW IPEX-Bank, and Export Development Canada to arrange a project debt of $1.0B.
In addition, Troilus secured preliminary long-term off-take terms with leading European smelters, including Aurubis AG & Boliden Commercial AB.
These arrangements — structured as part of a broader financing framework — validate the anticipated concentrate quality, aligning the Project with global supply chains seeking long-term, sustainably-sourced Au/Cu/Ag.
In my view, the depth of progress in 2025 and 2026 distinguishes Troilus among peers facing greater challenges in terms of jurisdiction, logistics, and earlier-stage profiles.
Readers are encouraged to look at the above peer valuation chart one more time. In my view it’s a question of when, not if, Troilus Mining (TSX: TLG) / (OTCQX: CHXMF) starts to be valued closer to fully-funded players like Montage, Skeena & Perpetua.
Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Troilus Mining, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of Troilus Mining are highly speculative and not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. Readers assume and agree that they will consult with their own licensed or registered financial advisors before making investment decisions.
At the time this article was posted, Troilus Mining was an advertiser on [ER], and Peter Epstein owned shares in the Company bought in the open market.
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