Working like a trojan

High in the Andes an Austra­lian company is becoming a major gold miner. 
In these snow capped mountains, gold miner Troy Resources is working the very prospective, low cost mine dubbed Casposo (which is Spanish for Dandruff, and refers to the snow flecked hills around the project). 
Catching up with Troy's CEO Paul Benson, he explained to Australian Mining what the miner is doing to produce such low cost gold, and where the future lies for Troy. 
Benson said the main focus has been on developing its Casposo project – its crown jewel mine, from which it carried out its first gold pour back in 2010. 
This mine "will be the lowest cost gold mine on the entire ASX," he told Australian Mining
Located in Argentina's San Juan province, the gold and silver mine sits around 2400 metres above sea level and just south of Barrick Gold's massive Pascua Lama mine which has around 18 million ounces of gold, and its Veladero mine which has around 10.6 million ounces of gold. 
The Casposo project is currently made up of the Kamila open pit, and a number of high value targets, in particular the Inca SE Deeps target, which has around 15 grams of gold equivalent per tonne. 
Benson said what separates it from many mines is that fact that it is such as low cost operator, recording operating costs of around US$ 407 per ounce in the March quarter. 
Working in Argentina Troy has faced a number of difficulties that don't plague Australia based operators, however while the high altitudes haven't been an issue, the weather, local communities, and infrastructure pose the same problems as in Australia. Once "the site got down to minus 28 degrees Celsius," Benson said, "and this affected the dry tailings". 
However he added that the site "now has sheds that cover the equipment, we're prepared for another cold winter". 
Unlike many miners in remote or mountainous regions, Casposo is actually located near a sealed highway that connects directly to the city. 
"We have a private road that runs from the site to highway," Benson said. 
This also enables the miner to bus its workers directly to the mine. 
The mine itself is also located "next to a tiny town, so with the community that near we've sought ways to have a positive effect for the town and the mine, so one of the first ways we did this was by bringing grid power to the region, rather than relying on generators for power; we've also provided greater access to water, as well as supplying the local school with the internet." Inflation is also an issue for operators in Argentina, however it hasn't affected the miner too badly.Although Troy is hamstrung to a degree by the fact that its processing is carried out in Canada, so there is a six week lead time on profits due to the minerals transportation and processing times. 
However while it has been ramp­ing up Casposo, the miner expects to drop production in 2013 through to 2014 as "we will be proving up additional higher grade ore through the Kamila pit moving underground and into Inca Deeps," Benson said.  
However this drop is from a high point of more than 90 000 ounces down to only 44 000 ounces of gold, and doesn't take into account silver in gold equivalent which actually pushes Troy upwards from just under 120 000 ounces in 2013 to just short of 140 000 ounces in 2014 and 2015. 
As of 2012 it had gold equivalent reserves of about 574 600 ounces at Casposo. 
As of February it had grades of 4.8 grams of gold per tonne, and 236.1 grams of silver per tonne. 
Benson added that for the future the miner is "more focused on getting the resource out of the pit than extending the exploration area of Inca". 
Its Mercado pit is located just north of the main Kamila pit, while the Julieta target lays north west again of both pits, along the same regional structural corridor. 
Within the same province, it also has the Don David joint venture. 
Troy also operates the Andorinhas gold mine in nearby Brazil, which was its first operation outside of Australia. 
It expects to produce 50 000 ounces this year, with the cost price dropping steeply from just below US$ 600 per ounce to less than US$ 500 in June.  
The miner expects to continue operations at the Brazilian mine until around 2015, although "there is the potential to add to Androhinas," Benson said. 
Operating in South America since 2002 and only closing its Australian Sandstone gold mine in 2010, the miner has been focusing on growing its footprint on the continent.  
Troy is tightly controlled with fewer than 90 million shares floating around the market (with more than 70 per cent Australian owned) despite a market cap of just over $350 million; the miner also recently entered the ASX top 200 and unlike a lot of miners "we have paid 12 fully franked cash dividends to our shareholders over the last 12 years," Benson told Australian Mining.  
However, it did declare that it would not pay a dividend for the first half of 2012. 
Despite this it saw a growth rate of 17 per cent last year, which Benson predicts will double this year, while at the same time it saw a 25 per cent reduction in costs. 
In the December quarter alone it saw a 39 per cent increase in gold production and a 36 per cent reduction in cash costs to around US$ 373 per ounce. 
As of March it had around $15 million net in cash, and $17 million in debt "but we expect to pay this off by next year," Benson said. 
"We've got a big working capital," he added. 
In the mean time it will continue to look at potential mergers or acquisition opportunities, Benson told Australian Mining.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.