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
Debt Restructuring: Troy Resources Ltd (ASX: TRY) has announced the restructuring of and extension to its Revolving Debt Facility with Investec Bank. TRY had to channel the additional working capital into Karouni in order to make safe and remediate the wall failure in Smarts 3. This event also had an impact on the cash flow timing of gold sales from the operation during December 2016 and January this year. The key changes include an extension of the maturity date by six months to 31^st December 2018 and the reduction in the March and June quarter repayments. Further, there is a reduction in the mandatory hedging requirements to 40,000oz over a 12-month period and a reduction in the minimum liquidity requirement to A$7.5 million until 31^st July 2017 after which it will be restored to A$10.0 million, unless otherwise agreed. Moreover, TRY has agreed to the granting of approximately 28.5 million options over TRY ordinary shares to Investec with an exercise price of A$0.18 and a two-year term. The 10.0 million options previously granted to Investec in June 2014 will be cancelled.  

Half year Results (Source: Company Reports)
 
Half year results were impacted by operational issues: TRY reported that its revenue from operating activities for the half-year totaled $44.2 million against 2015 corresponding figure of $65.9 million. This was at the back of production from the Karouni gold mine only while Casposo operation had ceased in February 2016 and the Andorinhas mine was closed in May 2016. The expensed exploration expenditure of $3.4 million (2015: $2.6 million) was reported and underlying EBITDA was $3.9 million (2015: $4.4 million). Net loss after tax (including the impairment charge) was $76.7 million (2015: $6.7 million). However, the group reported for improved conditions for the second half of the year.
 
Capital Management: Troy Resources had also finalized its $40.7 million equity raising last year after the successful completion of its Retail Entitlement Offer which closed in October. Through the Retail Offer, the company raised a total of $12.8 million (before costs).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.   

December Quarter Cash Movements (Source: Company Reports)
 
Open Pit Mining in the December Quarter: TRY had posted the strong mining performance at the start in October but in December there was a failure that occurred in the South wall of the Smarts Stage 3 Pit, restricting access to one of the higher grade sections of the mine throughout in December and most of January 2017. As a result of the failure, TRY 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 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 to assist with improved mining and blasting operations over the next 3 to 6 months. Further, 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 taken will start straight away and as soon as the current RC grade control program is completed (which will not take more than another week), normal mining operations will be restarted in this Pit. The work will also commence 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 (Source: Company Reports)
 
Record Production in the December quarter: TRY 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 during the September Quarter. This was a record quarterly throughput with the plant processing in excess of 80,000 ton 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 was said to be back on line. The renewed focus by the company has been 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.
 
Exploration Activities: TRY had recommenced the exploration activities around Casposo with a detailed ground mag survey at Julieta covering a total area of 66.4 linear km. 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 identified 11 gold targets near the Karouni mine area, and of particular interest has been the Eldorado prospect and an interpreted IP target. The detailed review of previous IP and geological data showed 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 identified 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, has shown to contain gold.
 
Transformation phase of FY 16: TRY in FY 16 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 2016, the commercial production at Karouni had started.Moreover, TRY in FY 16 reported the loss per share on a fully diluted basis from continuing and discontinued operations as 29.6 cents, compared with loss of 49.4 cents in 2015. The consolidated loss from continuing operations after tax in FY 16 was $13.4 million compared to the loss after tax of $8.7 million in FY 15. Additionally, TRYexpects FY2017 production to be 85,000- 95,000oz at an AISC of US$750 -  850/oz from the open pit operation.
 
Stock Performance: TRY stock has fallen 59% in the last six months (as of April 11, 2017) placing them at reasonable levels. The stock has received a boost from gold price movement and initially surged 3.45% on April 12, 2017. TRY has appointed senior mining executive, Mr Eric Olson to the role of General Manager, Operations at the Karouni gold mine in Guyana under its management succession plan. Overall, the recovery at the Smarts pit, improved terms for debt restructuring, and other such efforts by the group are expected to alleviate near-term pressure and might bring an operational turnaround in the current year. We give a “Speculative Buy” recommendation on the stock at the current price of – $ 0.145
 
 
TRY Daily Chart (Source: Thomson Reuters)

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