This is an interesting stock because its producing gold, yet we need to be mindful of its resource outlook. It produced 32,450 ounces of gold in the last year, however the annualised production is 60,000 oz since it produced 15,233oz in the quarter. There was however some treatment of low grade stockpiles which elevated output. They are making an average cash profit of $US400 per ounce. The company has liquid (cash, gold) reserves of $60mil, so it has considerable capacity to finance further capacity acquisition or development.
You can essentially write off any possibility of the Andorinhas iron ore project being mined. At $1.35 the company is worth $94mil, which seems a reasonable valuation given the cash reserves. The problem for Troy Resources is the lack of measured + indicated resources - at least gauged from their recent reports. The other problem is the company's lack of disclosure about its gold resources at Andorinhas - I just don't know where I stand as an investor. The poor quality of disclosure is the biggest obstacle for investors. The company claims to have 5 years resources, but there is no inventory of gold in its reports. Perhaps the company needs to invest some of its $60mil in an advanced gold project to give a kickstart to earnings because its Brazilian gold interests, whilst offering some promise, at this point lack tangibility. At least until they disclose more. I would add however - if there is something substantial at Andorinhas, they will spend the $60mil developing the project in no time. For this reason, I don't see Troy breaking above $1.50 in the short term, but rather probably drifting back to $1.00.
Andrew Sheldon www.sheldonthinks.com