Troilus Gold Corp. (TLG-V, C$1.96)

Transcription

1 Member of the Canadian Investor Protection Fund February 20, 2018 Troilus Gold Corp. (TLG-V, C$1.96) Rating BUY Target Price C$3.25 Return 66% Overall Risk Rating Very High Pierre Vaillancourt Douglas Ibbitson, CFA Company Profile Industry Mining CEO Justin Reid Website Troilus Gold is a Toronto-based developmentstage mining company focused on the re-start of the past producing gold and copper Troilus Mine. The Troilus property is located north of Chibougamau, within the Frotêt-Evans Greenstone Belt in Québec. From 1996 to 2010, Inmet Mining Corporation operated the Troilus deposit as an open pit mine, producing more than 2 Moz of gold and nearly 70 kt of copper. 52-Week High/Low C$2.25 / C$0.60 YTD Performance 20% Dividend Yield Nil Shares O/S 41.5M (basic)/ 59.6M (F/D) Market Capitalization C$81M Cash C$22M Debt - Enterprise Value C$60M Daily Volume (3-month avg.) 55,570 Currency US$ unless noted Haywood Estimates December Year End 2021E 2022E Revenue C$M EBITDA C$M (13) 139 EPS C$ (0.23) 0.61 CFPS C$ (0.10) 1.11 FCFPS C$ (1.73) 1.01 Price Performance Taking Troilus Underground Source: Company Reports Investment Brief We are initiating coverage of Troilus Gold Corp with a BUY recommendation and a target price of C$3.25. The Company, which was formed in 2017 and publicly listed in January 2018, is developing the 100%-owned Troilus gold copper deposit in northwestern Québec as an underground mine. Troilus produced 2M ounces of gold and 70kt of copper between 1996 and 2009 as an open pit mine. The Troilus deposit is part of a regional land package that covers 4,719 Ha. Attractive resource base. Troilus Gold Corp. is inheriting a deposit with a total underground resource of 1.8M oz grading 1.5g/t Au. Management is planning on developing this resource as a low grade, high volume underground mine, similar to Agnico Eagle s Goldex mine (AEM-T, Not Rated). Expansion opportunities. Management believes that exploring down dip from existing mineralization could result in an increase of 30-50% in resources. In addition, the Company will explore regional targets along a 3.5km trend to identify near surface resources to complement production from underground. Economics are attractive. Based on capex of C$400M, for an 8,500tpd mine producing an average of 119k oz at all-in sustaining costs of $817/oz, over a mine life of 13 years, we estimate the project generates an after-tax NPV 8% of $151M, with an IRR of 17.3%, at our long-term gold price of $1,400/oz. Valuation Reasonable valuation. Based on our estimate of the economics for the Troilus mine and balance sheet items, our diluted NAV 5% for TLG is C$4.28/sh, for a P/NAV of 0.46x, compared with peers at 0.50x. The stock trades at a market cap per oz of resource of $33/oz, compared to peers at $62/oz. Catalysts 1) Exploration and infill drill program in H1/18; 2) Updated resource in Q3/18; 3) Preliminary Economic Assessment in Q4/18; 4) Pre-feasibility study in Q2/20. Risks Single-asset company with low grade underground resource. Given the scale and grade of the project, the mine has more risk relative to higher grade, lower volume underground operations, and could take longer to reach full capacity. The Company also has a number of development hurdles ahead in order to reach production. Recommendation We are initiating coverage with a BUY rating and a target price of C$3.25 per share. Our target price is 0.6x NAV 5%, or 0.9x NAV 8%. We recognize that Troilus has a long way to go, which will require significant financing, but the development plan has potential and the Company has strong sponsorship. Source: Capital IQ and Haywood Securities Please see page 32 for Analyst Certification, Pages for Important Information, Legal Disclaimers, Rating Structure, and Notes.

2 Troilus Gold Corp. (TLG-V) Target Price, C$ $3.25 Shares O/S, million Current Price, C$ $1.96 Shares F/D, million Rating: BUY Risk: Very High Return, % 66% Market Capitalization, US$M Target Price: C$ Week High / Low, C$ $2.25 / $0.60 Company CEO Metric: 0.6x After-Tax Corporate NAV 5% Daily Volume (100-day avg) 55,570 Company Web Site $64.0 Justin Reid Balance Sheet and Capitalization As of: Q4/17E Share Capital Dilution US$M US$ / Sh C$M C$ / Sh As of Number Avg. Price Proceeds ITM Expiry Market Capitalization $64 $1.54 $81 $1.96 Shares Outstanding Nov M Current Cash $17 $0.41 $22 $0.52 Options Nov M C$2.04 C$8.3M C$0.2M Nov/20 - Apr/22 Working Capital $16 $0.39 $20 $0.49 Warrants Nov M C$2.50 C$35.1M C$0.0M Nov/20 - Nov/20 Total Debt $0 $0.00 $0 $0.00 Total Dilutive Nov M C$43.4M C$0.2M Nov/20 - Apr/22 Book Value $16 $0.39 $20 $0.49 Fully Diluted OS 59.6M Enterprise Value (EV) $47 $1.13 $60 $1.44 *Balance sheet figures reflect last reported period C$/US$ FX Rate: $1.25 Corporate NAV Summary and Sensitivity Spot Forecast Gold Price, US$/lb Haywood $1,100 $1,200 $1,300 $1,400 $1,355 Financial Forecast Forecast C$/US$ FX Rate Model $1.20 $1.25 $1.30 $1.35 $ E 2020E 2021E 2022E Corporate Adjustments, US$M $271 $270 $271 $272 $273 $271 Realized Au Price $1,400 $1,400 $1,400 $1,400 Troilus Gold-Copper Mine After-Tax NPV 5.0%, US$M $321 $73 $175 $266 $374 $292 Realized Ag Price $20.00 $20.00 $20.00 $20.00 Resource Valuation, US$M $20 $20 $20 $20 $20 $20 Realized Cu Price $3.20 $3.25 $3.15 $3.15 Corporate NAV, US$M $612 $363 $466 $558 $667 $583 C$/US$ FX Rate $1.26 $1.26 $1.23 $1.21 Corporate NAV, C$ / F/D share $4.28 $2.54 $3.26 $3.90 $4.66 $4.08 Shares O/S, millions Target Price / Corporate NAV 0.8x 1.3x 1.0x 0.8x 0.7x 0.8x Revenue, C$M $0 $0 $0 $ E Operating Cash Flow Sensitivity (C$/Share) $1.11 $0.80 $0.94 $1.07 $1.23 $1.10 Operating Income, C$M $0 $0 $0 $ E Operating Cash Flow Sensitivity (C$/Share) $1.11 $0.80 $0.94 $1.07 $1.23 $1.10 EBITDA, C$M ($12) ($13) ($13) $139 Earnings, C$M ($17) ($26) ($28) $76 Major Shareholders EPS, C$ ($0.21) ($0.21) ($0.23) $0.61 O/S (millions) O/S (%) Operating Cash Flow, C$M ($12) ($13) ($13) $ Ontario Inc % CFPS, C$ ($0.14) ($0.10) ($0.10) $1.11 M&G Investment Management Limited 0.8 2% Free Cash Flow, C$M ($12) ($221) ($216) $127 Scotiabank Global Banking and Markets, Asset Management Division 0.3 1% FCFPS, C$ ($0.14) ($1.77) ($1.73) $1.01 Aberdeen International Inc % Capex, C$M $0 $208 $203 $12 Forbes & Manhattan Inc., Asset Management Arm Landmark Partners, Inc % 0% Valuation Ratios Pinetree Capital Ltd % 2019E 2020E 2021E 2022E Duras, Gregory 0.0 0% EV / Revenue x Total 3.0 7% EV / EBITDA x EV / Operating Cash Flow x Corporate Metal Inventory - Open Pit & Underground Resources EV / Free Cash Flow x Cut-off grades of 0.3 g/t Au and were constrained by a Whittle pit shell P / Earnings x Tonnes Grade Grade Au AuEq EV/AuEq P / Operating Cash Flow x (Mt) (g/t Au) (g/t AuEq) (koz) (koz) (US$/oz) P / NAV 0.46x Indicated Resources (100% ) ,789 2,054 $23 Inferred Resources (100% ) Production Profile 2020E 2021E 2022E RLOM Peer-Group Comparables Material Milled Price/ Share Price Corp NAV Tonnes milled, (kt) - - 3,060 39,780 Nav tonnes per day, (t) - - 8,500 8,500 Belo Sun Mining Corp (TSX:BSX) C$0.35 US$ x Grade and Recoveries Continental Gold Inc. (TSX:CNL) C$3.88 US$ x Cu Grade, (% ) % 0.157% Dalradian Resources Inc. (TSX:DNA) C$1.08 US$ x Au Grade, (g/t) Eastmain Resources Inc. (TSX:ER) C$0.27 US$ x Ag Grade, (g/t) Equinox Gold Corp. (TSXV:EQX) C$1.21 US$ x Cu Recovery, (% ) % 90% Falco Resources Ltd. (TSXV:FPC) C$0.92 US$ x Au Recovery, (% ) % 87% Golden Reign Resources Ltd. (TSXV:GRR) C$0.22 US$ x Ag Recovery, (% ) % 80% Goldquest Mining Corp. (TSXV:GQC) C$0.32 US$ x Production and Sales IDM Mining Ltd. (TSXV:IDM) C$0.10 US$ x Au produced, (000's oz) ,525 Lundin Gold Inc. (TSX:LUG) C$5.11 US$ x AuEq produced, (000's oz) ,821 Midas Gold Corp. (TSX:MAX) C$0.94 US$ x Au sold, (000's oz) ,525 Orezone Gold Corporation (TSXV:ORE) C$0.86 US$ x AuEq sold, (000's oz) ,821 Osisko Mining Inc. (TSX:OSK) C$3.04 US$ x Unit Operating Costs Sabina Gold & Silver Corp. (TSX:SBB) C$1.84 US$ x Total cash costs, (US$/oz) $ - $ - $ 724 $ 724 Victoria Gold Corp. (TSXV:VIT) C$0.42 US$ x All-in sustaining costs, (US$/oz) $ - $ - $ 795 $ 817 Peer-Group Average (all) 0.50x Total Mining Operations Costs, US$/t milled - - $ $ Troilus Gold Corp. (Haywood) (TSXV:TLG) C$1.96 US$ x Recent Financings Nov 21, C$23M (14.03M subscription C$1.64/sh, including on share and one w arrant) Source: Company Reports, Capital IQ, and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 2

3 Investment Thesis We are initiating coverage of Troilus Gold Corp. with a BUY rating and a target price of C$3.25 per share. Troilus Gold is a Toronto-based gold development company that owns the past-producing Troilus gold-copper mine in northern Québec, with a 2.1 million ounce gold equivalent indicated resource, based on a deposit with 44 million tonnes grading 1.27 grams per tonne gold and 0.12% copper. Our target price is based on a 0.6x net asset value (discounted at 5%) of C$4.28 per share, derived from our DCF model using operating and cost parameters comparable to similar deposits. Our valuation does not consider the potential for additional production from Troilus or new satellite deposits. The Company s 47km 2 land position in the surrounding Lac Frotêt belt provides attractive targets to develop new resources. Key Points: Past producing mine with a new plan. Based on the success of Agnico Eagle s high volume, low grade Goldex mine, Troilus management is planning a similar development plan for its deposit. Following production of 2M ounces of gold and 70kt of copper, there remains an Indicated resource of 1.4M oz, which Troilus believes can be developed as a bulk underground mine. The existence of road and power infrastructure will facilitate development milestones. Expansion opportunities. Drilling success will be key to the long-term success of Troilus. Management believes that exploring down dip from existing mineralization could result in an increase of 30-50% in reserves. In addition, the Company will explore regional targets along a 3.5km trend with the objective of identifying satellite deposits. The Company s 30km Phase 1 drill program is expected to lead to a resource increase in Q3/18. Good cash position. Troilus has approximately $20M in cash resulting from its pre-ipo November 2017 equity financing. The Company has no debt. Approximately $10M of the cash will be drawn down in 2018 to pay for this year s development program; the exercise of 14M warrants at $2.50/sh over the next three years would bring in another C$35M to the Company, enough to fund the Company to construction. Shareholder support. The stock is dominantly held by Sulliden Mining (SMC-T, Not Rated), and Institutional investors, who took down over 90% of the recent equity offering. Management and private investors hold approximately 15% of shares. We expect that Québec investment institutions will become significant shareholders in future financings. Reasonable valuation. Based on our estimate of the economics for the Troilus mine and the balance sheet, our diluted NAV 5% for TLG is C$4.28/sh, for a P/NAV of 0.46x, compared with peers at 0.50x. The stock trades at a market cap per oz of resource of $33/oz, compared to peers at $62/oz. Pierre Vaillancourt pvaillancourt@haywood.com Page 3

4 Risks Significant Investment Risks The investment to which this report relates carries various risks which are reflected in our Overall Risk Rating. We consider the following to be the most significant of these investment risks: Single-asset company with untested underground mine concept. Management is planning a low grade-high volume underground mine, which will be driven by operating efficiencies. The operating plan and execution of the plan will be critical in determining the viability of the mine. Long time and key milestones ahead to reach commercial production. While the mine has the benefit of past production, an established resource, and good infrastructure, we do not expect production until In the meantime, there remain significant permitting and development milestones ahead, as Troilus completes an updated resource and reserve, PEA, PFS, IBA and permitting. Given the scale and grade of the project being contemplated, we believe the mine could take longer to reach full capacity, just as Agnico Eagle experienced for its Goldex mine. Commodity and currency risk. We estimate The Troilus mine is sensitive to the gold price: a 10% change in the price of gold results in a 20% change in the NAV. The mine s capital and operating costs are in Canadian dollars, and are therefore sensitive to a currency appreciation, particularly with respect to US dollars. Permitting risk and Cree agreement. Québec is ranked as one of the best jurisdictions for mining investment, so we believe there is limited permitting risk, particularly in light of the project s history as an operating mine. Relations with the Cree are good, and they are supportive of the project. Nevertheless, the process will take time and will need to address local concerns in order to reach permitting milestones. Financing ahead. We estimate the Troilus mine will cost approximately C$400M to build, a significant amount in light of the Company s current market capitalization of C$80M. Financing construction could result in material dilution to the shares, a large debt, and hedging of gold sales. For further information on our Risk Rating please visit: Pierre Vaillancourt pvaillancourt@haywood.com Page 4

5 Valuation and Target Price NAV reflects interest in the Troilus gold mine based on DCF. Our valuation for Troilus Gold is based predominantly on the Company s 100% interest in the discounted cash flow of the Troilus gold mine. Our model of the Troilus gold mine is derived from average annual production of 119k oz gold and 9M lbs of copper, or 142 koz gold equivalent per year, at an AISC of $817/oz, starting in 2022 and extending for 13 years of production (for details on operating and cost parameters, see Figure 21). In the expectation of resource expansion, we have accorded C$20 million of value to the Inferred resource of 0.62 Moz, based on a value of US$25/oz. Longer term, we believe the mine life could eventually extend beyond 13 years as a result of successful drill programs and resource additions. Our NAV considers dilution to finance the mine construction. Currently, Troilus has 41.5 million basic shares outstanding and 59.6 million fully diluted shares, which includes the exercise of 18.1 million warrants and options at $2.39/sh for C$43.9M. We are assuming an equity issue of $250M (83M shares at $3.00/sh) and a debt issue for $200M to fund the construction of the mine. Target price driven by attractive P/NAV. At our long-term gold price of $1,400/oz, the undiluted NAV 5% is C$8.62/sh and the undiluted NAV 8% is $5.52/sh. The diluted fully financed NAV 5% is C$4.28 per share, and our diluted NAV 8% is C$3.37 per share. This valuation is strongly leveraged to the price of gold, varying by ~20% for every 10% move in commodity prices. Based on our estimate, the diluted P/NAV 5% of 0.46x is attractive compared to the peer group average of 0.50x. Our target price of C$3.25 per share is based on a 0.6x diluted NAV 5% of C$4.28 per share, or 0.9x NAV 8% of C$3.37 per share. Trades favourably compared to peers. Troilus trades at a comparable P/NAV multiple of 0.46x relative to its pre-development gold company peers, at 0.50x. We expect that as the resource grows, milestones are achieved, and the project is de-risked, the valuation should appreciate. Key catalysts include the resource update in Q3/18, the PEA in Q4/18, the PFS in 2019, and a construction decision in Troilus trades at a market cap per oz of resource of $33/oz, compared to peers at $62/oz. Pierre Vaillancourt pvaillancourt@haywood.com Page 5

6 Discount Rate C$/US$ Rate Trolius Gold Corp. (TLG-V) 2/20/18 Figure 1: Haywood Estimate for Net Asset Value of Troilus Gold Undiluted NAV NAV5% (C$M) per share (C$) NAV8% (C$M) per share (C$) NAV10% (C$M) per share (C$) Troilus Gold-Copper Mine $324 $7.65 $192 $4.54 $130 $3.06 Resource Valuation $20 $0.46 $20 $0.46 $20 $0.46 Cash & Equivalents (Q4/17E) $22 $0.51 $22 $0.51 $22 $0.51 Debt (Q4/17E) $0 $0.00 $0 $0.00 $0 $0.00 ITM Options & Warrants $0 $0.00 $0 $0.00 $0 $0.00 Total Net Asset Value $365 $8.62 $234 $5.52 $171 $4.04 Shares O/S (M) ITM Options (M) ITM Warrants (M) Total FD ITM Shares O/S (M) Undiluted NAV/sh US$ $6.79 $4.34 $3.18 Undiluted NAV/sh C$ $8.62 $5.52 $4.04 C$/US$ FX Rate: $1.27 Diluted NAV NAV5% (C$M) per share (C$) NAV8% (C$M) per share (C$) NAV10% (C$M) per share (C$) Troilus Gold-Copper Mine $321 $2.25 $191 $1.34 $129 $0.90 Resource Valuation $20 $0.14 $20 $0.14 $20 $0.14 Cash & Equivalents (2019E) $178 $1.24 $178 $1.24 $178 $1.24 Cash from Assumed Equity Issue (C$3.00/sh) $250 $1.75 $250 $1.75 $250 $1.75 Debt (2019E) ($200) ($1.40) ($200) ($1.40) ($200) ($1.40) Options & Warrants $43 $0.30 $43 $0.30 $43 $0.30 Total Diluted Net Asset Value $612 $4.28 $482 $3.37 $420 $2.94 Shares o/s (M) Assumed Shares from Option Exercise (M) Assumed Shares from Warrant Exercise (M) Shares from Assumed Equity Issue (C$3.00/sh) Total FD Shares o/s (M) Fully Financed Fully Diluted NAV/sh US$ $3.39 $2.67 $2.33 Fully Financed Fully Diluted NAV/sh C$ $4.28 $3.37 $2.94 Assumed issue price (C$) Diluted NAV/sh (C$) $2.50 $3.82 $3.00 $2.61 $3.00 $4.28 $3.37 $2.94 $3.50 $4.66 $3.66 $3.18 C$/US$ FX Rate: $1.26 Source: Capital IQ, Company Reports, and Haywood Securities Figure 2: Troilus Gold Net Asset Value Commodity and Discount Rate Sensitivity (C$ per share) Au (US$/oz) $ 3 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500 - $ 4.16 $ 5.19 $ 6.03 $ 6.94 $ % $ 2.58 $ 3.21 $ 3.73 $ 4.28 $ % $ 2.07 $ 2.55 $ 2.95 $ 3.37 $ % $ 1.83 $ 2.24 $ 2.58 $ 2.94 $ % $ 1.66 $ 2.01 $ 2.29 $ 2.60 $ 2.91 Source: Company Reports and Haywood Securities Au (US$/oz) $ 3 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500 $ 1.15 $ 2.42 $ 3.01 $ 3.47 $ 3.98 $ 4.52 $ 1.20 $ 2.54 $ 3.14 $ 3.63 $ 4.16 $ 4.70 $ 1.25 $ 2.65 $ 3.26 $ 3.77 $ 4.34 $ 4.87 $ 1.30 $ 2.75 $ 3.39 $ 3.90 $ 4.51 $ 5.04 $ 1.35 $ 2.87 $ 3.53 $ 4.04 $ 4.66 $ 5.23 Figure 3: Troilus Gold Net Asset Value Capex and Opex Sensitivity (C$ per share) CAPEX (% Δ) Au (US$/oz) $ 3 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1, % $ (0.52) $ 0.26 $ 0.92 $ 1.69 $ % $ 1.06 $ 1.84 $ 2.47 $ 3.12 $ $ 2.58 $ 3.21 $ 3.73 $ 4.28 $ 4.85 (50% ) $ 3.71 $ 4.26 $ 4.69 $ 5.25 $ 5.76 (100% ) $ 4.51 $ 5.03 $ 5.46 $ 5.97 $ 6.48 OPEX (% Δ) Source: Company Reports and Haywood Securities Au (US$/oz) $ 3 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500 50% $ (0.59) $ 0.19 $ 0.85 $ 1.62 $ % $ 1.02 $ 1.80 $ 2.42 $ 3.07 $ $ 2.58 $ 3.21 $ 3.73 $ 4.28 $ 4.85 (25% ) $ 3.85 $ 4.43 $ 4.89 $ 5.43 $ 6.00 (50% ) $ 5.01 $ 5.57 $ 6.05 $ 6.56 $ 7.08 Pierre Vaillancourt pvaillancourt@haywood.com Page 6

7 P/NAV Trolius Gold Corp. (TLG-V) 2/20/18 Figure 4: Troilus Gold 2018 P/NAV Target-Price Calculation (C$) Discount C$ Million C$/Share Troilus Gold-Copper Mine 5.0% $321 $2.25 Resource Valuation $20 $0.14 Target Multiple 1.00x Implied Enterprise Value $341 $2.39 Cash & Equivalents (2019E) $178 $1.24 Cash from Assumed Equity Issue (C$3.00/sh) $250 $1.75 Debt (2019E) ($200) ($1.40) Options & Warrants $43 $0.30 Implied Market Capitalization $612 $4.28 Current Share Price $ Month Target $3.25 P/Adjusted Valuation 0.46x Implied Return 66% Source: Capital IQ, Company Reports, and Haywood Securities Figure 5: Peer Comparison of P/NAV Multiples 0.80x 0.70x 0.60x 0.50x 0.40x 0.30x 0.20x 0.10x x 0.27x 0.30x 0.35x 0.40x 0.46x 0.47x 0.47x 0.50x 0.54x 0.55x 0.57x 0.59x 0.71x 0.74x 0.74x P/NAV Average 0.50x Source: Capital IQ, Company Reports, and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 7

8 Figure 6: Peer Comparison of valuations based on resource multiples Peer-Group Comparables Market Enterprise Price/ EV/Reserves EV/Resources Share Price Capitalization (US$M) Value (US$M) Corp NAV Nav (US$/oz) (US$/oz) Belo Sun Mining Corp (TSX:BSX) C$0.35 US$ US$ 73.7 US$ x US$ 19 US$ 25 Continental Gold Inc. (TSX:CNL) C$3.88 US$ US$ US$ x US$ 135 US$ 93 Dalradian Resources Inc. (TSX:DNA) C$1.08 US$ US$ US$ x US$ 186 US$ 90 Eastmain Resources Inc. (TSX:ER) C$0.27 US$ 42.1 US$ 36.5 US$ x nr US$ 22 Equinox Gold Corp. (TSXV:EQX) C$1.21 US$ US$ US$ x US$ 409 US$ 53 Falco Resources Ltd. (TSXV:FPC) C$0.92 US$ US$ US$ x US$ 33 US$ 67 Golden Reign Resources Ltd. (TSXV:GRR) C$0.22 US$ 33.7 US$ 31.3 US$ x nr US$ 33 Goldquest Mining Corp. (TSXV:GQC) C$0.32 US$ 64.0 US$ 44.9 US$ x US$ 53 US$ 33 IDM Mining Ltd. (TSXV:IDM) C$0.10 US$ 30.1 US$ 21.8 US$ x US$ 46 US$ 124 Lundin Gold Inc. (TSX:LUG) C$5.11 US$ US$ US$ x US$ 136 US$ 148 Midas Gold Corp. (TSX:MAX) C$0.94 US$ US$ US$ x US$ 30 US$ 70 Orezone Gold Corporation (TSXV:ORE) C$0.86 US$ US$ 92.5 US$ x nr US$ 18 Osisko Mining Inc. (TSX:OSK) C$3.04 US$ US$ US$ x nr US$ 57 Sabina Gold & Silver Corp. (TSX:SBB) C$1.84 US$ US$ US$ x US$ 135 US$ 72 Victoria Gold Corp. (TSXV:VIT) C$0.42 US$ US$ US$ x US$ 58 US$ 83 Group Average 0.50x US$ 118 US$ 65 Group Average (excluding high/low) 0.50x US$ 94 US$ 62 Troilus Gold Corp. (Haywood) (TSXV:TLG) C$1.96 US$ 64.0 US$ 47.0 US$ x nr US$ 33 Source: Capital IQ, Company Reports, and Haywood Securities C$/US$ FX Rate: $1.25 Company Profile New company, formed in 2017, listed in Troilus Gold Corp. is a new, Toronto-based company which was formed in 2017 and began trading on the TSX Venture exchange in January Troilus Gold is advancing its 100%-owned Troilus gold copper project in northwestern Québec, north of Chibougamau. Troilus was an open pit mine operated by Inmet Mining, which was in production from 1996 to 2009, producing 2M oz of gold and 70kt of copper. Troilus Gold is planning to restart the mine as an underground operation, and is undertaking exploration and development activities to confirm an economic reserve. Reasonable acquisition cost. Troilus Gold was formed through the amalgamation of a subsidiary of Sulliden Mining Capital Inc. (SMC-T, Not Rated), Pitchblack Resources Ltd. and a private company (251 Ontario). In May 2016, the Sulliden subsidiary entered into an option agreement with First Quantum Minerals (FM-T, Not Rated), the owner of the Troilus property, to acquire a 100% interest in the project. First Quantum would retain a sliding 1.5% to 2.5% net smelter return royalty (NSR) on the property, depending on the gold price. Under the option agreement, Sulliden must spend a minimum of $1.0 million on the engineering and technical studies and make three cash payments of $100k to First Quantum, which are complete. Sulliden entered into an option agreement with 251 Ontario Ltd., under which 251 Ontario could acquire a 40% interest in the Troilus project by spending 40% of the required $1.0 million expenditures, as a cash payment to the Sulliden subsidiary, plus another 5% cash payment, and also receive a 1% NSR on the property. On October 31, 2017, Sulliden, 251 Ontario, and Pitchblack entered into an amalgamation agreement which closed on December 20, 2017, and renamed the new company Troilus Gold Corp. Sulliden Mining Capital agreed to fund certain working capital requirements of Troilus up to a maximum of $3 million for a period of 18 months following the transaction close date. As a result, Sulliden owns 38% of Troilus Gold Corp. Pierre Vaillancourt pvaillancourt@haywood.com Page 8

9 Figure 7: Location of Troilus project and nearby cities and properties in Québec Source: Company Reports Pierre Vaillancourt Page 9

10 Figure 8: Troilus Mine historical production Source: Company Reports, and Haywood Securities Figure 9: Troilus Z87 Pit in June 2016 Source: Company Reports Pierre Vaillancourt Page 10

11 Project Description Project and mine history. The Troilus project s history began with exploration work in 1958 following the discovery of erratic blocks containing copper and nickel anomalies. The Troilus property was initially staked by Kerr Addison and Minova in ; the project was then acquired by Inmet (formerly known as Metall) in 1993, and has been owned by First Quantum since 2014, when it acquired Inmet. Drilling began in 1986 (24 drill holes, totalling 3,590m), which led to the discovery of zone 86 (Z86). More claims were added to the property in 1987, where the Troilus mine would eventually be located. A large gold float dispersion train was found by prospecting and drilling (26 drill holes, totalling 4,413m), leading to the discovery of the main mineral body on the property, zone 87 (Z87), named after the year of its discovery. In 1991, anomalous gold-copper mineralization was confirmed in what is now known to be Zone J4. After Metall Mining Corporation acquired a 100% interest in Troilus, a positive feasibility study was completed based on a 10ktpd open-pit operation. Construction of the Troilus mine began in In 1995, the 44km access road from Route du Nord, and a 137km power line and two substations were completed. The Troilus mine began producing gold and copper in 1996 as a conventional open-pit operation; commercial production was achieved in 1997 at 10,000tpd. Two open pits, J4 and Z87, operated from 1996 to Between , Inmet completed two mill expansions, increasing throughput from 10,000tpd to 18,000tpd by The mill stopped in June 2010, was sold in September, and was subsequently dismantled. Over the life of the Troilus mine, 2 million ounces of gold and almost 70,000 tonnes of copper were produced. Environmental remediation is mostly complete and monitoring work is ongoing. Access and infrastructure. The Troilus mine is located approximately 650km north of Montreal and 175km by road north of Chibougamau in northwestern Québec, within lands administered by the Municipalite de la Baie James. The Troilus property consists of one surveyed mining lease covering 840ha and designated claims covering 3,879ha for a total of 4,719ha. The Troilus site can be reached by road from the town of Chibougamau, via a paved highway and mine access roads. Chibougamau is serviced by daily flights from Montreal. The key components of infrastructure remain on the property, including: Operating power line (161kV) to site, maintained by Hydro-Québec High voltage sub-station, with all equipment in place Emergency generators Operating water treatment facility Extensive network of roads Office building, gatehouse and gate Plan Nord. The Troilus project is situated northwest of the Val-d Or district, near Chibougamau, within Québec s Plan Nord territory. In May 2011, the Government of Québec unveiled its Plan Nord, a 25- year, $80 billion development project focused on Québec s territory located north of the 49th parallel. The Plan Nord proposes to establish partnerships between various governmental and municipal bodies, the private sector and Aboriginal communities for the development of various sectors in northern Québec, including mining. The Plan Nord provides for a four-fold funding strategy where private sector partners participate in the funding of infrastructure development. Government revenues resulting from economic development initiatives, along with direct and indirect tax spinoffs from public infrastructure projects, will be reinvested in the Plan Nord. Investissement Québec, the investment arm of the Government of Québec, will take equity stakes in mining companies and other businesses as part of Plan Nord. Hydro-Québec will also contribute annually to development projects in the region. For Troilus Gold Corp., the immediate benefit of being part of Plan Nord is a 25% rebate on exploration expenditures. Pierre Vaillancourt pvaillancourt@haywood.com Page 11

12 Figure 10: Location of the Troilus deposit in Québec and the area covered by the Plan Nord Source: Company Reports, and Haywood Securities Pierre Vaillancourt Page 12

13 Figure 11: Surrounding projects and access infrastructure near Troilus project Source: Company Reports, and Haywood Securities Pierre Vaillancourt Page 13

14 Geology and Mineralization Regional geology. The Troilus gold and copper deposits lie within the eastern segment of the Frotêt- Evans Greenstone Belt, in the Opatica Subprovince of the Superior Province in Québec, Canada. This greenstone belt extends for more than 300 kilometres and varies from a few kilometres up to 45 kilometres in width. It is divided into two similar volcano-sedimentary domains, the west domain and the east domain, which is known as the Frotêt-Troilus Domain. The Frotet-Troilus Domain is underlain by a supracrustal sequence of submarine mafic volcanic rocks with intercalated cogenetic mafic intrusions. The rocks are variably deformed and are affected by a strong regional foliation. Subhorizontal mesoscopic to megascopic folds are common, affecting both regional foliation and primary layering. The metamorphic grade in the North Troilus area ranges from greenschist to lower amphibolite facies, the higher grades appearing around the borders of certain intrusions and towards the margins of the greenstone belt. The Troilus region contains many occurrences of gold, base metals, and molybdenite mineralization; Troilus being the largest gold deposit found to date. The property geology consists of a sequence of intermediate to mafic flows and breccia, locally with felsic volcanic rocks, and comagmatic gabbro and ultramafic sills. The gold mineralization at Troilus is hosted in a multiphase gabbro to diorite intrusion, the Troilus Diorite; the deposit is also hosted in porphyritic felsic intrusions. The two main zones of Au-Cu sulphide mineralization are the Z87 and J4 (Chalcopyrite, pyrite, pyrrhotite). Mineralization is focused on the margins of Troilus diorite (metadiorite) in breccias, amphibolite, and quartz-chlorite (±tourmaline) vein swarms. The deposit had two phases of mineralization. Phase I introduced disseminated Au-Cu, mainly hosted in amphibolite and breccia matrix. Phase II introduced gold-bearing quartz veins crosscutting the main foliation. Disseminated mineralization accounts for ~90% of the Troilus ore zone. Quartz veining is related to a possible source of higher grade material (+50 g/t Au). Mineralization. Two styles of mineralization, disseminated and vein-hosted, are recognized at Troilus. Disseminated mineralization contributed greater than 90% of the ore, particularly in Z87. This mineralization style consists of disseminated fine-grained chalcopyrite, pyrite, and pyrrhotite, and streaks and stringers of these minerals along the foliation and fractures. Copper values are consistently greater than 0.07% Cu. Gold occurs as native gold and electrum grains up to 20 μm in size with up to 15% Ag. Several generations of gold-bearing veins have been identified, the most significant being quartz-chlorite (±tourmaline) veins. These veins occur in silicified wall rocks to sericitized high strain zones which cut the main foliation and in the margins of felsic dikes. The veinlets can contain grades of greater than 50 g/t Au over a one metre interval. Pierre Vaillancourt pvaillancourt@haywood.com Page 14

15 Figure 12: Geology around the Troilus property Source: Company Reports Figure 13. Simplified mineralized section through Zone Z87 Source: Company Reports, and Haywood Securities Pierre Vaillancourt Page 15

16 Reserves and Resources A technical report on the estimated mineral open pit and underground resources hosted at Troilus was completed by Roscoe Postle Associates Inc. (RPA) in November RPA estimated Mineral Resources for the Troilus Project and reported underground resources at a cut-off grade of 0.8 g/t Au and open pit resources at a cut-off grade of 0.3 g/t Au. The open pit resources, which are not part of the current development plan, are located at the J4 and J5 Zones and are constrained by a Whittle pit shell. The Mineral Resource estimate is summarized in Figures 14 & 15. The drill hole database contains 645 drill holes totalling 127,454 m and 70,435 assays. RPA estimates underground Indicated resources of 29.6Mt grading 1.48g/t Au and 0.157% Cu (1.72g/t AuEq) for contained gold of 1.4Moz and contained copper of 102.2M lb. Underground Inferred resources contain 12.6Mt grading 1.18g/t Au and 0.102% Cu, for 478koz of contained gold and 28.4M lb of contained copper. The Inferred and Indicated mineral resources remain open at depth. Management at Troilus believes that drilling success at depth to 800m could potentially add 30-50% more mineral resources. Figure 14: Indicated and Inferred open pit and underground resources at the Z87, J4 and J5 zones at the Troilus deposit Source: Company Reports and Haywood Securities Contained Tonnes Au Cu AuEq Au Cu AuEq (Mt) (g/t) (%) (g/t) (000 oz) (Mlb) (000 oz) Indicated % , ,054 Inferred % Figure 15: Indicated and Inferred underground resources at the Z87, J4 and J5 zones at the Troilus deposit Source: Company Reports and Haywood Securities Contained Zone Au Cu AuEq Au Cu AuEq (Mt) (g/t) (%) (g/t) (000 oz) (Mlb) (000 oz) Indicated % , ,635 J J Total Indicated % , ,635 Inferred % J % J % Total Inferred % Pierre Vaillancourt pvaillancourt@haywood.com Page 16

17 Figure 16: Location of resources in former opens pits (Z87, J4, J5) of the Troilus mine Source: Company Reports and Haywood Securities Figure 17: Three-dimensional view of Troilus zones looking north, with below pit resources Source: Company Reports and Haywood Securities Pierre Vaillancourt Page 17

18 Figure 18: Current mineral resources Source: Company Reports and Haywood Securities Troilus Mine Plan Management plans to develop the Troilus deposit as an underground mine operating at a rate of 8,500tpd, to produce 119koz of gold and 9Mlbs of copper annually, from 3.1Mt of concentrate. We estimate a reserve of 1.75M oz, assuming partial conversion of inferred resources or extension of reserves at depth. Troilus plans to develop an underground mining operation with shaft and ramp access, and a CIL mill, at a capital cost of approximately C$400M. The low grade underground mine would be similar to Agnico Eagle s Goldex mine, currently producing 113k oz annually at a rate of 6,800 tpd. The mine would utilize cut and fill mining methods with cemented paste backfill. The mined mineralized rock would be skipped to surface and fed to a conventional milling and flotation plant with a gravity circuit, capable of producing gold dore and a copper concentrate containing gold. We estimate the total planned mine life would be 13 years based on the current resource and our expectations for high probability additions from Inferred resources. Mining Troilus plans to undertake cut and fill mining of stopes 60m high and 30-40m wide, dipping 60 degrees, which is similar to stope dimensions at Agnico Eagle s Goldex mine. The plan allows for development of up to 15 stopes per year in order to maintain the mining rate of 8,500tpd or more (3.1M tpa). Troilus has a shallower dip than Goldex, which is at 75 degrees, but country rock is competent, so dilution is expected to be contained to approximately 10%. Ore will be crushed through a primary circuit prior to skipping to surface via a shaft. Processing The Troilus mill generated a gold concentrate from a gravity circuit and a copper-gold concentrate. Troilus intends to have similar metallurgy and flowsheet, with shipping of concentrate to a rail hub in Chibougamau. Compared to when Inmet operated the mine, Troilus would build a new, smaller mill, suitable for capacity of up to 10,000tpd. Based on historical recoveries and preliminary metallurgical work, Troilus expects gold recoveries in excess of 90% for gold and 95% for copper. We have assumed lower throughput and recoveries relative to Troilus assumptions. Assuming throughput of 8,500tpd, we expect Troilus to produce an average of 119koz of gold and 9M lbs of copper annually, or 142koz AuEq. It is estimated that up to 30% of the gold could be recovered via gravity. Although the site has been reclaimed, there remains approximately three years of tailings capacity, which would have to be supplemented early in the mine life. Pierre Vaillancourt pvaillancourt@haywood.com Page 18

19 Operating and capital cost estimates We estimate capital costs of approximately C$400M. Most of the spending would be on the construction of a processing plant and underground mine development, and the sinking of the shaft for C$125M. We estimate sustaining capex at $10M per year, based on the development of stopes annually. We estimate total operating costs of C$38-40/t, which is comparable to Goldex. Including operating costs of C$22.53/t for mining, C$10.60/t for processing, and C$5.72/t for off-site and G&A costs. This cost profile results in total cash costs of $724/oz, or all-in sustaining costs of $817/oz, including top line royalties of 3.5%. We expect that costs could be higher in the first year or two, as the mine ramps up to full capacity. Figure 19: Initial Capital Costs of Approximately C$400M Infrastructure, C$41.6M Construction Indirects, C$101.0M Contingency, C$57.5M Mill, C$80.4M Exploration Drilling, C$4.1M Mine, C$115.3M Source: Company Reports and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 19

20 Figure 20: Conceptual underground development model for Troilus mine Source: Company Reports and Haywood Securities Pierre Vaillancourt Page 20

21 Figure 21: Production and cost parameters for Troilus Gold, Haywood estimates Unit Haywood Au Price (Haywood) US$/oz 1,400 Cu Price (Haywood) US$/lb $3.15 US$/C$ Exchange (Haywood) US$/C$ $1.21 Share Issuance Price $CAD/sh $3.00 Production Construction year 2020 Production year 2022 Life of Mine years 13 Years Tonnes Processed Mtpa 3.10 Average Mill Throughput tpd 8,500 Cu Recovery % 90% Au Recovery % 87% Average Annual Cu Production Mlbs 9.2 Average Annual Au Production 000's oz Average Annual AuEq Production 000's oz LOM Cu payable in concentrate Mlbs LOM Au payable 000's oz 1,525 LOM Au EQ payable 000's oz 1,821 Capital Costs Pre Production Capex C$M $400M Total Sustaining Capex C$M $157M Total Capex C$M $557M Unit Operating Costs Mining Cost C$/t milled $22.53 Milling Cost C$/t milled $10.60 TC/RC C$/t milled $1.61 G&A C$/t milled $4.11 Total Operating Cost C$/t milled $38.86 Unit Operating Costs Operating Cash Costs US$/oz $675 Total Cash Costs US$/oz $724 AISC US$/oz $817 Total Cost of Production US$/oz $1,000 Source: Company Reports and Haywood Securities Figure 22: Comparison of operating and cost parameters for Troilus, Goldex and Young Davidson mines Troilus* Young Davidson* Goldex Mine Tonnes Processed, Mtpa TPD 8,500 7,700 6,800 Processed Gold Grade, g/t Average Gold Recovery 87.0% 91.0% 93.5% Annual Gold Production, koz Mining costs (C$/t mined) $ $ nr Processing costs (C$/t) $ $ nr G&A costs (C$/t) $ 4.11 $ 3.91 nr Total operating costs (C$/t) $ $ $ Total Cash Cost, US$/oz $ 724 $ 640 $ 587 AISC, US$/oz $ 817 $ 855 nr *Haywood estimates Source: Company Reports and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 21

22 Economics Positive returns, with room to improve. The economics for our model of the Troilus underground project are shown below in Figure 23. At our base case, using our long-term gold price of $1,400/oz and copper price at $3.15/lb, we estimate the project generates an after-tax NPV 8% of $151M and an IRR of 17.3%, based on a tax rate of 34%. The economics are sensitive to the price of gold, a 10% increase in the price of gold results in a 20% increase in the NPV. Management is investigating several ways to enhance the project: Recoveries. although historic recoveries are 85% for gold, metallurgical testing suggests that they can improve to 90%. Grade. Management believes it could improve on grade with better definition of resources from drilling and conversion of Inferred to Indicated resources. Ore movement. Troilus is investigating alternative methods of moving ore in the mine, including a railveyor system, similar to the one used at Goldex, where trucks are replaced by a rail system resulting in more efficient ore movement and requiring less ventilation, at substantial savings. This system could possibly eliminate the need for a shaft. Open pit resources. The addition of resources at J4 and J5 pits could defer underground development and lead to cheaper costs in the early years of mine life. Both zones are defined to shallow depths and remain open along strike. Deeper resources. The discovery of mineralization down dip could add up to 50% increase of resources, and an extension of mine life. Figure 23: Economics of the Troilus project, based on Haywood estimates Economic Metrics Gold Price $1,200 $1,300 $1,400 Pre-tax NPV5% $156.5M $230.6M $318.1M Post-tax NPV5% $133.5M $191.8M $254.7M Pre-tax NPV8% $74.3M $130.1M $195.8M Post-tax NPV8% $58.6M $103.2M $151.3M Pre-tax NPV10% $35.9M $82.5M $137.4M Post-tax NPV10% $23.6M $61.4M $102.0M Pre-tax IRR 12.6% 15.7% 19.1% Post-tax IRR 11.8% 14.5% 17.3% Undiscounted Payback Period 5.92 years 5.03 years 4.35 years Source: Company Reports and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 22

23 Exploration and Work Program 30,000m of drilling planned. In H1/18, Troilus plans to undertake a Phase 1, 30,000m exploration and development drilling program, to be followed by later phases of definition and exploration drilling. Management believes that exploration and drilling success down dip from existing mineralization, to approximately 800m vertical depth, could potentially add 30-50% more mineral resources. In 1999 and 2000, drilling confirmed that the gold mineralization extended down plunge, where a hole intersected a 24 m wide gold-enriched zone averaging 4.95 g/t Au and included a higher grade section that assayed 34.7 g/t Au over 3m. Targets for regional mineralization. Compilation of drill hole data for holes drilled on other areas of the property has shown that there are a number of intersections with gold values greater than 200 ppb over 10 m. A 500m long anomalous gold envelope, the Southwest Zone, with similar characteristics to Z87 was discovered in 2000, at the southwest end of the Troilus Diorite. Several holes were drilled in early 2005 to investigate the potential of having near surface mineralized material that could be mined and trucked to the Troilus mill. The thick overburden prevented testing of the full extent of the zone. In the J4 zone, gold grade contouring suggests that the mineralization is thickening down plunge and there is good potential for finding higher grade gold mineralization below 200 m vertical depth. Regionally, the Troilus diorite remains open for 3.5km to the SW of Z87. Historic drilling was very wide and focused on the southeast contact of the diorite with volcanics. Following Phase 1, the J5 pit will be one of the primary targets of the company s second phase of drilling. Drilling for J5 will be initially exploratory to test down dip and along strike, but it is a much shallower target, so will be easier to follow up on drilling success. Pierre Vaillancourt pvaillancourt@haywood.com Page 23

24 Figure 24: Potential upgrade of deep Inferred resources. The dark green represents potential for 10-20% resource growth, the light green represents potential for an additional 20-30% resource growth Source: Company Reports and Haywood Securities Figure 25: Potential upside at the J4 Pit Source: Company Reports and Haywood Securities Pierre Vaillancourt Page 24

25 Outlook Key Catalysts for 2018 We expect 2018 to be a transformative year for Troilus Gold, culminating in a PEA which is expected to put the deposit on a path to production. The key milestones include: 1. Undertake a 30,000m drilling program as part of Phase 1 in resource exploration and development. In addition to testing and confirming additional mineralization down dip, the drill program will also test for satellite, open-pittable targets within driving distance of the mill. 2. Follow Phase 1 with infill and further exploration drilling in Phases 2 and 3, which will be ongoing through Deliver an updated resource estimate in Q3/18 which will form the basis for a PEA. 4. Complete a Preliminary Economic Assessment in Q4/ Complete permitting in Q4/ Complete a Pre-Feasibility Study in Q2/20, and a bankable feasibility study in Q4/ Close on financing for construction in Q1/ Begin construction of the Troilus underground mine in Q2/ Start production by 2022, achieving commercial production by mid Figure 26: Troilus Gold, key milestones leading to production Jan-18 Jul-18 Dec-18 Jul-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 30,000m Drill Program (Phase 1) Infill & Exploration Drilling (Phase 2/3) Updated Resource Preliminary Economic Assessment (PEA) Pre-Feasibility Study/Bankable Permitting Construction Production Source: Company Reports and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 25

26 Financial In good shape for spending programs in Following the November financing at C$1.64/sh, Troilus has cash of $20M, and 14M exercisable options at C$2.50/sh, expiring in three years, for future financing of C$35M. The company has no debt. The present and future cash is expected to be largely sufficient to cover exploration and development programs, including the PEA, PFS and BFS, up to a construction decision in However, we believe flow-through financing is a distinct possibility in the future, especially if the drill program is successful. Figure 27: Troilus Gold financial position Balance Sheet and Capitalization As of: Q4/17E US$M US$ / Sh C$M C$ / Sh Market Capitalization $64 $1.54 $81 $1.96 Current Cash $17 $0.41 $22 $0.52 Working Capital $16 $0.39 $20 $0.49 Total Debt $0 $0.00 $0 $0.00 Book Value $16 $0.39 $20 $0.49 Enterprise Value (EV) $47 $1.13 $60 $1.44 *Balance sheet figures reflect last reported period C$/US$ FX Rate: $1.25 Source: Company Reports and Haywood Securities Capital Structure Sulliden Mining is main shareholder. Following the IPO of 14.03M units (1 share + 1 share warrant exercisable at C$2.50) at $1.64/sh, which closed in November 2017, Troilus Gold has 41.5 million shares outstanding, and 59.6 million shares fully diluted, with million warrants exercisable at $2.50/sh up to November Troilus Gold closed its initial public offering in November 21, 2017, and listed on the TSX Venture Exchange on January 3, Key shareholders include Forbes & Manhattan affiliated company Sulliden Mining (38%), institutional investors (31%), management and insiders hold 4%. While we believe they will reduce their stake, Sulliden shareholders have committed to not disrupt the market for the stock. As the project advances toward construction, we expect Québec investment institutions such as Investissement Québec, and the Caisse de Dépôt et Placement du Québec, to take a prominent role in construction financing. Figure 28: Summary of Troilus Gold Capital Structure Share Capital Dilution Shares Outstanding Nov M As of Number Avg. Price Proceeds ITM Expiry Options Nov M C$2.04 C$8.3M C$0.2M Nov/20 - Apr/22 Warrants Nov M C$2.50 C$35.1M C$0.0M Nov/20 - Nov/20 Total Dilutive Nov M C$43.4M C$0.2M Nov/20 - Apr/22 Fully Diluted OS 59.6M Source: Capital IQ, Company Reports, and Haywood Securities Pierre Vaillancourt pvaillancourt@haywood.com Page 26

27 Management and Strategy Affiliation with F&M. Troilus is among a number of companies which are related to the Forbes & Manhattan Group (F&M), a Toronto-based private merchant bank with a focus on the resource sector, but also with interests in technology, telecommunications, and online gaming. F&M acts as an incubator for junior resource companies, and helped with the formation of Troilus Gold Corp. The company is led by Justin Reid, CEO, a geologist who was formerly president of Sulliden Mining, and is a director at Aguia Mining, which are also related to F&M. Other key executives include Ian Pritchard, SVP of Technical Services, who has held senior positions in project management with SNC and De Beers, Joe Milbourne, a metallurgist with 40 years experience in the design of mineral processing projects, and Blake Hylands, who will take the lead in developing the resource base. As most of Troilus directors have an affiliation with F&M, including Peter Tagliamonte, CEO of Belo Sun Mining, and Scott Moore, CEO of Euro Sun Mining, we believe the addition of more independent directors would be beneficial to the company. Management s strategy is focused on getting Troilus back into production as a low grade high volume underground mine and developing the resource, including satellite deposits that could provide accessible, lower cost, open pittable ore to lower initial production costs, or extend the mine life. Pierre Vaillancourt pvaillancourt@haywood.com Page 27