Troilus Gold Corp. [TLG-TSX, CHXMF-OTCQB] said Monday November 9 that it has struck a deal with First Quantum Minerals Ltd. [FM-TSX] to buy back a 2.5% net smelter royalty on its Troilus gold property near Chibougamau, Quebec for $20 million cash. As a result of a transaction that will close in the next 24 hours, the royalty will effectively be cancelled.
The company also said Monday it is raising $20.5 million from two bought-deal share offerings. They include an offering of 5.47 million common shares that qualify as flow-through shares at $1.92 per share, generating gross proceeds of $10.5 million.
The underwriters have the option to buy up to an additional 820,500 flow-through shares at the offering price after the date of closing, potentially adding another $1.57 million to the proceeds.
As well, the underwriters have pledged to purchase on a bought-deal basis an additional 9.1 million common shares at $1.10 per share for gross proceeds of just over $10 million.
On Monday, the shares eased 10.5% or 13 cents to $1.10 on volume of 546,415. The shares are currently trading in a 52-week range of $1.82 and 41 cents.
“When presented with the chance to repurchase and cancel a 2.5% NSR on the Troilus Project, we were eager to take advantage of this opportunity to further improve the economics and value of the project,’’ said Troilus CEO Justin Reid. “Subject to completion, the proceeds of the offerings will replenish our balance sheet and enable us to accomplish our exploration and development objectives,” he said.
Troilus recently launched a new 20,000-metre drill program at the 100%-owned Troilus property after announcing the results of a PEA which indicates the project could produce 246,000 ounces of gold annually for the first 14 years of operations, and 98,000 ounces annually from year 15 onwards. Projected payable metal includes 3.8 million ounces of gold, 265 million pounds of copper and 1.5 million ounces of silver over a 22-year mine life.
The PEA envisages an initial capital expenditure of US$333 million. Sustaining CAPEX over the life of the mine is estimated to be an additional US$506 million. The all-in-sustaining cost is estimated at US$1,051/oz.