Troy Resources NL (TSX:TRY)(ASX:TRY) -
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THE UNITED STATES
SEPTEMBER QUARTER HIGHLIGHTS
KEY POINTS
-- Commenced ore processing at Casposo
-- Continued strong improvement at Andorinhas
-- Sandstone treated last ore and moved to care and maintenance
-- 14,784oz Au produced at US$567/oz compared to 12,644oz at US$820/oz in
the previous quarter
-- Aggressive A$7m exploration program commencing at Casposo and Castano
Nuevo, Argentina
OPERATIONS
Argentina, Casposo
-- Commenced processing ore
-- Expected to pour first gold early November
-- The project remains on budget
-- Mined ore stockpiles of 52,372t at 10.78g/t Au_eq
Brazil, Andorinhas
-- 25% increase in gold production to 9,799oz
-- 28% decrease in unit cash costs to US$470/oz
-- Ore grades increasing with depth as forecast
Australia, Sandstone
-- 2% increase in gold production to 4,945oz
-- 21% decrease in unit cash costs to A$846/oz
-- Treated last ore and moved to care and maintenance
-- Ongoing exposure to nickel exploration JV with Western Areas
EXPLORATION
Argentina, Casposo and Castano Nuevo
-- Focus to date has been on surface mapping, sampling and shallow RC
drilling
-- Diamond drilling and geophysical surveys commencing in the December
quarter
Brazil, Andorinhas
-- Ongoing near surface exploration to identify additional open cut
reserves
-- Will commence diamond drilling this financial year from underground to
determine if the main Melechete structure extends past current reserves
CORPORATE
-- Intensified marketing efforts in Australia and UK, Europe and North
America
-- Continue to review M&A opportunities.
COMMENTARY
Commenting on the quarter, Troy CEO Paul Benson said, "It was another
significant quarter for the Company with the highlight being Casposo treating
first ore at the end of September. There were a couple of startup issues with
the power transformer and gearbox for the mill which impacted commissioning on
and off for about two weeks. These have now been resolved and all tanks are now
full of ore but the delays will mean the first gold pour will probably occur in
early November.
"We have an impressive stockpile of over 50,000t at more than 10 g/t Au_eq so
when the plant does get up to speed we expect to be able to catch up any lost
ground.
"The progress at Andorinhas has also been particularly pleasing with a 25%
increase in gold production and a 28% decrease in unit cash costs. When you
consider this was on the back of a 17% increase in production and a 15% decrease
in cash costs in the previous quarter, this is an excellent trend.
"We expect performance to continue to improve as we get deeper as the grades are
forecast to improve and the ore body widen with depth. In addition to the
improving ore geometry, the team on site has modified mining methods and made
significant progress in reducing ore dilution.
"Sandstone treated its last ore in September and has moved to care and
maintenance. The mine has been a great asset for the Company producing over
500,000oz of gold over its life which allowed Troy to expand overseas while
continuing to pay dividends to shareholders. Sandstone is now on care and
maintenance, however the Company still benefits from its exposure to an ongoing
nickel exploration joint venture with Western Areas on the site.
"On the exploration front, the quarter was relatively quiet. Overall, our
strategy has been to focus on mapping and surface sampling at Casposo and
Castano until we commenced commissioning of the plant. We are now embarking on
an aggressive $7m exploration program that includes diamond drilling of known
targets, and geophysical surveys to help identify deeper, covered targets.
"Finally, as mentioned in our release of September 29, we expect to pay a
dividend, with a final decision to be made in this regard following the
successful commissioning of Casposo."
OPERATIONS
CASPOSO, ARGENTINA (Troy 100% through Troy Resources Argentina Ltd)
------------------------------------------ ------------
September
2010 Year To
Quarter Date
------------------------------------------ ------------
Total BCM's mined 284,311 442,801
------------------------------------------ ------------
Ore mined (t) 34,110 52,372
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Equivalent gold grade (g/t) 11.44 10.78
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Gold grade (g/t) 10.25 9.50
------------------------------------------ ------------
Silver grade (g/t) 83.04 89.37
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Note: Au_eq grade calculated using gold to silver ration 1:70
Occupation, Health and Safety
There were no lost time injuries recorded during the quarter. The Safety
Department was strengthened with the appointment of an additional
technician/engineer, and the introduction of a new set of safety procedures and
induction program. The First Aid facility continues to operate 24 hours per day
under the control of the Superintendent of the local hospital in Calingasta.
Environment
The Environmental Department has been reorganised by the appointment of a
specialist environmental technician plus a junior technician to take charge of
both mine and regional monitoring and procedures. There were no environmental
issues raised by the Government inspectors during the quarter, as Troy continues
to comply with all applicable regulations.
Mining
Mining moved from pre-strip to production mining and at the end of the quarter
52,372t, at an equivalent gold grade of 10.78g/t Au_eq, was stockpiled at the
crusher. All ore mined was from the Kamila Deposit, with most ore from the Aztec
Vein system. The mining department was strengthened by the addition of an
additional grade control geologist.
Construction
By the end of September 2010, construction activities in the crushing, milling
and leaching areas were completed. The crusher was commissioned and had crushed
an estimated 8,000t of ore. The milling circuit was brought to a manual
operating status and the first ore was fed into the system at the end of
September. The bore field system with automated control was brought on line with
water delivery on demand.
All service buildings were completed and all essential equipment had arrived on
site, with the exception of the processing plant's automated control system and
some chemicals. The site laboratory was completed, staffed and commissioned.
As noted in the June quarterly report a delay in construction of the
Government's 500kV power line required Troy to acquire and rent additional
diesel power generators. At the end of the quarter the power station was
functioning well and is configured with 100% back-up capacity.
The tailings dam construction was completed with the first cell clay-lined and
fitted with a geo-membrane.
Administration
Contract negotiations for refining and sale of product were close to completion,
and fuel, power and lime supply contracts were signed. Site administration was
functioning well at the end of the quarter and the construction camp was fully
utilised. It is expected that camp occupancy will be reduced to low levels at
the end of October as the project transitions from the commissioning to
operating phase.
Permitting
By the end of September, the permitting process was on track for final approval
by the Secretary for Mines in San Juan. All lower level permits and
certifications have been completed.
Community
Community work through our social office in Calingasta is ongoing, and provides
the contact point for all parties interested in obtaining information on the
operation.
The Company arranged a series of public meetings and site visits to the project
by interested local residents which proved very successful. Separate meetings
were held with local business operators to advice businesses of potential
service opportunities. Importantly over 90% of the permanent workforce comes
from the local town of Calingasta.
All senior staff and plant operating personnel have been appointed, with
specialist technicians from Australia and Brazil being used in commissioning
roles. Training for staff and labour is ongoing.
ANDORINHAS, BRAZIL (Troy 100% through Reinarda Mineracao Ltda)
------------------------------------------------------------ ------------
September September
2010 2009 June 2010
Quarter Quarter Quarter
------------------------------------------------------------ ------------
Tonnes Milled 61,421 58,691 59,750
------------------------------------------------------------ ------------
Head Grade (g/t gold) 5.30 5.81 4.43
------------------------------------------------------------ ------------
Recovery (%) 93.1 92.9 90.9
------------------------------------------------------------ ------------
Gold Produced (oz) 9,799 10,171 7,808
------------------------------------------------------------ ------------
A$521 A$620 A$740
Cash cost per oz US$470 US$508 US$655
------------------------------------------------------------ ------------
Occupation, Health and Safety
A total of 197,523 personnel hours were worked during the quarter with no lost
time injuries.
Environment
There were no environmental incidents during the quarter.
Production Results and Summary
The Andorinhas plant treated 41,289t of underground Mamao ore for July and
September. In August the plant treated 20,131t of low grade Lagoa Seca
stockpiled ore. In total, some 61,421t of ore was treated, 2.8% more than in the
previous quarter.
Grade of mill feed at 5.3g/t gold was 19.6% higher than the preceding quarter.
The grade improvement is due to both an increase in the insitu grade and also a
reduction in ore dilution. Changes to the ground support regime in the Melechete
stopes and the mining method used in the M2 stopes not only helped reduce
dilution but also increased productivity and significantly improved safety
performance.
Metallurgical recovery averaged 93.1% which is 2.4% higher than the previous
quarter. The increased throughput, recovery and grade resulted in a 25.5%
increase in gold production to 9,799oz.
With the significant increase in gold production there was a corresponding 28%
reduction in the unit cash cost compared to the June quarter (US$470/oz vs
US$665/oz).
Permitting
With the signed LI (Installation License) in place Andorinhas applied for the LO
(Operation License) at SEMA, Belem.
Community
The Company continues to work with and support the local communities of Rio
Maria and Floresta do Aragua.
SANDSTONE, AUSTRALIA (Troy 100%)
------------------------------------------------------------ ------------
September September
2010 2009 June 2010
Quarter Quarter Quarter
------------------------------------------------------------ ------------
Tonnes Milled 96,992 130,066 116,317
------------------------------------------------------------ ------------
Head Grade 1.72 1.77 1.39
------------------------------------------------------------ ------------
Recovery 92.9 93.7 92.9
------------------------------------------------------------ ------------
Gold Produced oz 4,985 6,943 4,836
------------------------------------------------------------ ------------
A$846 A$946 A$1,227
Cash cost per oz US$758 US$826 US$1,085
------------------------------------------------------------ ------------
Occupation, Health and Safety
There was one lost time injury recorded during the quarter.
Environment
The rehabilitation of the old tailings dams TSF1 and TSF2 was completed with the
dams now capped, top-soiled, ripped and seeded. A meeting was held with the
environmental division of the Department of Mines ("DMP"), to discuss the
closure plan for Sandstone.
A fencing contractor was selected and materials are currently being ordered to
enclose the waste dumps to prevent the destruction of the rehabilitated areas by
feral goats.
Mining
Mining of the Eureka pit was completed on 16 August, 2010. A total of 67,977bcms
of material was mined from this pit during the quarter, including 22,544t of ore
at a grade of 2.25g/t gold. The mining contractor, Hampton Transport, is
currently demobilising its fleet, removing all infrastructure and rehabilitating
hardstand areas.
Processing
96,992t of ore at a grade of 1.72g/t gold was milled during the quarter yielding
4,984oz of fine gold.
Milling recoveries and the purity of the gold bars increased from the last
quarter. The mill recovery averaged 92.9% for the quarter.
General
The majority of the mining workforce and milling & maintenance crew were made
redundant on 20 August, 2010 and 17 September, 2010 respectively. A small
workforce was retained to prepare the plant for a care and maintenance regime.
It is anticipated that the Sandstone operations will be put on care and
maintenance in late October 2010.
Outlook
The Company will keep the site on care and maintenance for the remainder of the
financial year while Western Areas Ltd (WSA) completes Stage One of the nickel
exploration joint venture.
A decision on the future of the property will be made during the 2012 financial
year.
EXPLORATION
ARGENTINA, CASPOSO (Troy 100% through Troy Argentina Ltd)
Troy's exploration strategy at Casposo and Castano Nuevo has been to focus on
mapping and surface sampling until completion of the plant construction. Limited
shallow drilling utilising a Reverse Circulation (RC) drill rig was completed
with diamond drilling planned to commence in the December quarter.
This strategy has ensured a better understanding of the drill targets and
minimised expenditure while the project is in the construction phase and
consuming cash.
The Company is committed to an aggressive exploration program to test the
potential of the leases, with an initial budget of $7m for the first phase of
exploration.
The first diamond drill rig commenced at Castano Nuevo in early October and a
second diamond rig will shortly commence at Casposo, supported by the Company's
RC rig.
Induced Polarization "IP" and ground magnetic geophysical surveys are underway
to better define the structural controls of mineralisation and to identify
targets at depth.
Initial RC drilling has focused on near surface veins. While the drilling has
generally returned anomalous gold assays; vein composition, textures and
mineralogy indicate we are near the top of the epithermal system, and higher
grades, if present, are likely to be found at greater depths.
Figure 1 shows detailed geological mapping and sampling in the Casposo Norte
area. Recent work has identified a new sub-parallel northeast-southwest striking
vein east of the main Casposo Norte Vein. The new vein is up to 1.0m wide,
strikes north-south and dips at -40 degrees to the west. The vein is hosted in
andesite and consists mainly of calcite (85%) with minor silica along the vein
margins. Assay results (see Tables 1 & 2) from this recent work in the Casposo
Norte area include:
-- TRCAN-10-56: 0.90m at 3.12 g/t Au_eq
-- TRCAN-10-76: 0.30m at 3.90 g/t Au_eq
The Aurora Vein is located west-southwest of the Casposo Norte Main Vein,
strikes north to south and is exposed over a strike length of 380m. The maximum
surface vein width is 1.80m and the vein dips at about -50 degrees to the west.
Vein composition is predominantly calcite (80%) with silica dominant sections.
The best assay values include (see Table 2):
-- TRCAN-10-38: 1.80m at 3.67 g/t Au_eq
-- TRCAN-10-39: 1.60m at 3.78 g/t Au_eq
-- TRCAN-10-46: 0.90m at 9.72 g/t Au_eq
Another calcite dominant vein system known as Aurora North was mapped 580m north
of the Aurora Vein. This vein has variable strikes that include; north-south,
northwest-southeast and east-west. The veins are hosted within a
rhyolite-rhyodacite sequence. Calcite dominant vein stockworks were noted along
the vein margins. The main veins strike north-south, and dips at -55 degrees to
the west with widths up to 1.4m. Weakly anomalous gold values from channel
samples were detected with an average reported assay grade of 0.50m at 1.21
Au_eq.
Along the Mercado NW Trend, assay results from the reverse circulation chips and
rock chip sampling of the surface outcrops yielded slightly anomalous gold
values (see Table 3) with a peak value of 2m grading 3.02g/t Au_eq.
The vein mineralogy and textures indicate we are high in the system and selected
deeper diamond drilling will be considered possibly following an Induced
Polarization geophysical survey.
At the Cerro Norte Target, four "preliminary" shallow RC holes were drilled and
each hole intercepted a vein zone.
The best value reported included (see Table 4):
-- South Vein RC-10-42; 4.0m at 4.10g/t gold and 25.25g/t silver from 87m.
These veins and veinlets are hosted in the andesitic and rhyolitic rocks and dip
steeply to the north-northwest.
Quantec Geoscience Argentina S.A. commenced work on a geophysical program that
will include ground magnetics, and Induced Polarization "IP" (Gradient Array and
Pole-Dipole Sectional surveys). The program will include Ground Magnetics over
the main northwest-southeast Structural corridor between the Mercado Northwest
Prospect and the Julieta Target 4km along strike in an area of shallow, younger
volcanic cover.
An Infill IP Pole-Dipole over the SE Extension Zone is an attempt to better
define existing IP anomalies under debris flow "gravel cover" within the main
structural corridor south-east of the Kamila Pit. Additional IP work is planned
for the Casposo Norte Target to better define extensions of the 400m long
outcropping zone under shallow cover along strike to the east and west.
ARGENTINA, CASTANO NUEVO (Troy earning 100%)
About 3km of new roads and drill pads were constructed and completed prior to
Diamond Core drilling commencing in late September. The first hole was collared
to test the Dios Protege Vein, the easternmost of the outcropping veins at
Castano Nuevo that outcrops for more than 350m.
Detailed mapping and sampling of the three main veins was completed in August
and the focus shifted to earthworks for drill access and drill hole planning.
Channel sampling was completed at 25m intervals over 1.5km long San Agustin
Vein. Results from rock chip channel sampling produced anomalous gold and silver
values over the entire strike length with the best values as follows (see Table
5):
-- TRC-16: 0.95m at 4.49g/t Au_eq
-- TRC-05: 9.30m at 3.26g/t Au_eq
During August mapping and reconnaissance of old underground workings mapping was
conducted over the Dios Protege and San Pedro Veins. A series of rock chip
channels were collected along strike of the veins. A 3D model of the old working
was compiled to assist in drill program design. The Dios Protege Vein strikes
north-northeast to south-southwest and dips at -80 degrees to the west. The vein
is characterized by strong banded colloform texture with amethyst/adularia and
crystalline quartz (see Table 6). Results from 12 rock chip channels collected
include:
-- TRC-10-17: 3.6m at 3.94 g/t Au_eq,
-- TRC-10-22: 1.1m at 4.94 g/t Au_eq
Underground sampling was completed along the San Pedro Vein at 5m intervals.
Assay results from 12 rock chip channels collected from over 54m along the
strike of the vein and 50m in vertical depth, included three levels (RL 1810, RL
1785, RL 1760) of old workings.
The veins mapped were banded textures with adularia. Best values obtained
included (see Table 6):
-- TRC-10-28: 0.6m at 8.15 g/t Au_eq
-- TRC-10-29: 0.6m at 12.94 g/t Au_eq
-- TRC-10-37: 0.6m at 14.50 g/t Au_eq
BRAZIL, ANDORINHAS (Troy 100% through Reinarda Mineracao Ltda)
At Andorinhas the exploration group focused on the review of drilling carried
out at Mamao - Babacu Corridor targets including Coruja NE, Piaui, Luiza,
Jaboti, CV5 and Furo 8 Targets as possible shallow resource drill targets. RC
drilling commenced in September.
Four additional RC drill holes (285m) were drilled at Coruja NE, (BBC263 to
BBC266) with the aim to define the mineralisation to drive the pit deeper and
potentially add gold resources. A further three RC holes (153m) (BBC270 to
BBC272) targeted the high-grade western pod. These holes successfully
intersected the lode and returned encouraging results of 4m at 10.83g/t gold
from 73m in the deep hole; and 2m at 30.40g/t gold from 12m in the westernmost
shallow hole (see Table 7).
Further east the 2007 RAB drilling under the Piaui Garimpeiro Pit was
reassessed. This earlier drilling identified two sub parallel lodes with an
east-west strike of about 75m dipping to north. An RC drill program (8 holes)
started late in September
Seven new targets were generated by the UWA CET and UNB studies in the West Rio
Maria area with geological mapping and rock grab sampling underway at the
Rezende Pit area located at 5km south-west of the Manuel Pit. This garimpo is
100m long with an east-west trend and is located on the edge of the contact
between quartz-diorite and intensively sheared mafic rocks. The quartz veins dip
at about 53 degrees to the north and are hosted by silicified and sericite
altered rocks.
Rock grab sampling of float material was taken from within the pit and along
strike to the east yielded peak assays of 74g/t gold and 30g/t gold, rock chip
sampling of the narrow (less than 1m wide) pyritic quartz veins returned peak
assays of 16.87g/t gold and 3.22g/t gold. Field work is ongoing.
FINANCE REPORT
CASH POSITION
As at 30 September 2010, Troy within Australia held A$8.4m in available cash
with major Australian banks. In addition, Troy held A$2.7m in cash deposits as
security for various environmental bonds.
Troy's wholly-owned Brazilian and Argentinean subsidiaries held cash deposits of
A$0.2m. At quarter end, Reinarda Mineracao Ltda ("RML") in Brazil held 2,846
ounces of gold awaiting sale (A$3.8m at A$1,347 per ounce).
The Troy group's available cash and gold bullion approximated A$12.4m as at 30
September 2010. Troy also holds an investment in listed securities. The market
value of this investment was A$3.4m as at 30 September 2010.
DEBT FACILITY
Troy has a debt facility with Investec Bank (Australia) Limited, totaling
A$25.0m. The facility has a three-year term and the first 25% is repayable by 30
September 2011. As part of the facility the Troy group is required to maintain a
minimum available cash balance of A$5.0m.
As at 30 September 2010 Troy had drawn A$13.0m against this facility. Troy
withdrew a further A$7.0m against the facility on 1st October 2010.
NET DEBT & LIQUID ASSETS
Net debt and liquid assets including listed securities approximated A$2.8m at 30
September 2010.
GOLD SALES
Gold sales from the Sandstone operation for the quarter were 5,988 ounces at an
average price of A$1,361 per ounce. The average Cash Cost was A$846 per ounce
netting a Cash Margin of $497 per ounce for the quarter.
During the quarter, RML sold 7,999 ounces of gold at an average price of
US$1,222 per ounce. The average Cash Cost was US$470 per ounce, which gives a
Cash Margin of US$752 per ounce for the quarter. Decline development capital
expenditure was approximately US$220 per ounce produced for the quarter.
HEDGING
The Troy group is totally unhedged.
EXPLORATION EXPENDITURE
During the quarter, exploration expenditure incurred was A$0.9m of which A$0.4m
related to Brazil, A$0.4m to Argentina and the balance for rates on Sandstone
tenements within Australia.
CAPITAL EXPENDITURE
Capital and development expenditure during the quarter was $A18.3m. This was
made up of development expenditure of $A17.3m in Argentina on the Casposo
Project and A$1.0m at the Andorinhas Project in Brazil for ongoing underground
development.
CORPORATE INFORMATION
Directors
John Dow, Non-Executive Chairman
Paul Benson, CEO, Managing Director
Ken Nilsson, Executive Director
Gordon Chambers, Non-Executive Director
David Dix, Non-Executive Director
John Jones, Non-Executive Director
Robin Parish, Non-Executive Director
Stock Exchange Listings
Australian Stock Exchange, ASX code: TRY
Toronto Stock Exchange, TSX code: TRY
Issued Capital
---------------------------------------------
Ordinary Shares 87,474,323
---------------------------------------------
Unlisted
---------------------------------------------
Partly Paid Ordinary Shares 350,000
---------------------------------------------
Employee Options 3,136,000
---------------------------------------------
Employee Performance Rights 70,000
---------------------------------------------
Investec (Australia) Bank Options 1,585,293
---------------------------------------------
To view the tables associated with this release, please visit:
http://media3.marketwire.com/docs/try-tbls.pdf.
To view the maps associated with this release, please visit:
http://media3.marketwire.com/docs/try-maps.pdf.
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