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TABLE OF CONTENTS Aug 11 - 17, 2014 Volume 100 Number 26 - 0 comments

Troy fast tracks Karouni with open-pit plan

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VANCOUVER — Gold producer Troy Resources (TSX: TRY; US-OTC: TRYRF) acquired the Karouni gold project located 180 km southwest of Georgetown, Guyana, US$200 million just over a year ago, and now anticipates having a mine in operation even earlier than first anticipated. A new prefeasibility study (PFS) on a open-pit operation show Karouni could realistically be in production within the next year.

The company had envisioned a hybrid open-pit, underground mine that would have produced gold by the second half of 2015, but permitting happened so quickly that construction started in June.

Since more geological modelling is needed on the underground components of Karouni’s Smarts and Hicks deposits, Troy is opting to proceed via a two-stage build with its initial development focusing on  open-pit resources. The end result is a mine that will operate at a higher throughput, while processing around half of the mineralized material compared to previous models.

Under a preliminary economic assessment released in January the company suggested it would process 5.2 million tonnes of material grading 4.13 grams gold per tonne, with 42% originating from the Smarts pit, 25% coming from the Hicks pit and 33% from the Smarts underground. At the time around 55% of that material was qualified as inferred resources, while the remaining 45% sat in the indicated category.

Infill drilling over the interim has allowed Troy to bump all of its open-pit material into the measured and indicated category. Karouni could now process 2.6 million tonnes at 3.84 grams gold, with 82% and 18% of those tonnes in the measured and indicated categories.

Initial capital is roughly equal at $85 million, with the operation expected to produce 101,000 oz. gold annually over a three-year mine life. Projected cash costs, however, have dropped from US$805 per oz. to US$602 per oz. Anticipated throughput has been bumped from 750,000 tonnes per year to 1 million tonnes per year, while gold recoveries have risen from 92% to 94%, with cyanide consumption qualified as “relatively low.”

The shift has resulted in a lower payback period and higher internal rate of return (IRR). At US$1,250 per oz. gold Karouni’s new mine plan carries a 50.2% IRR and a 1.2-year payback period, along with a US$72-million net present value at a 6% discount rate. The carbon-in-leach plant and gravity mill will also reportedly allow for “easy low-cost” expansion at a later date.

In terms of Smarts Deep — which was assumed in Karouni’s underground mine plan — Troy has determined that the deposit has “a significantly more complex geological environment than the upper parts of the system.” Drilling has revealed that the deeper mineralization is hosted in high-grade pods that are structurally controlled by a series of sub-vertical shear zones.

Drill results released in March — including 8 metres grading 17.8 grams gold in hole 118 and 19 metres of 5.2 grams gold in hole 128 — indicate that high-grade mineralization exists at depth, though is not yet adequately understood.

“There are enough drill ready targets within trucking distance of the new plant site to keep the drills busy over the next few years and we are confident we will continue to add to the resource ounces,” noted CEO Paul Benson in the release. “The infill drilling of the deeper Smarts zone, which had been assumed to be mined from underground, has proven the mineralization is structurally more complex. Because of this we have reduced the amount of material classified as inferred resources until further infill drilling has been completed.”

Troy mobilized two drill rigs at Karouni for the second half of the year to complete infill programs at Smarts Deep, as well as restart exploration on its extended concessions. The company expects the PFS on the underground part of the development will be complete around year-end.

Troy shares have traded between 68¢ and $1.93 over the past year, and dropped 22%, or 26¢ following the release of Karouni’s updated PFS, en route to a 93¢ close at press time.

The company has 195 million shares outstanding for a $232-million market capitalization, and locked down a US$93-million revolving credit facility with Investec Bank in late April to fund Karouni’s development.

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