company description · ltd. and changed its name to troilus gold corp. in december2017.troilusgold...

of 21 Ryan Walker, MSc | 416.479.8997 | [email protected]

12 February 2018

Precious Metals

Troilus Gold Corp.

An Abitibi Odyssey — Resurrecting the Troilus Au-Cu Mine in Quebec

Projected Return: 80.4%

Discount Rate: 7.0% Market Data

Market Capitalization ($M) 80.53

Net Debt ($M) na

Cash & Equivalents ($M) 21.6

Debt ($M) 0.0

Enterprise Value ($M) 58.9

Basic Shares O/S (M) 41.5

Fully Diluted Shares O/S (M) 120.3

Avg. Daily Volume (M) 61.5

52 Week Range $0.40 - $2.25

Key Asset

Troilus NI43-101 Resource

Category Tonnes M Au g/t Cu % Au-Eqv

Indicated 44.0 1.27 0.12 1.45

Moz Au: 1.80 Mlbs Cu: 116.4

Inferred 18.7 1.03 0.08 1.16

Moz Au: 0.62 Mlbs Cu: 34.6

Valuation

Discount $ (M) $/shr

Troilus U/G 7.0% $175 $1.46

Unmodelled O/P ResourceIn situ $62 $0.52

Project NAV $238 $1.98

Corporate Adjustments ($36) ($0.30)

Cash & Equivalents $22 $0.18

Options & Warrants $42 $0.35

Future Equity Financing Proceeds $147 $1.23

Adjusted NAV $413 $3.43

P/Adjusted NAV 0.57x

Risks Events/Catalysts

Exploration Risk Exploration - 2018

Commodity Price Risk Updated Res. Est - Q218

Development Risk Troilus PEA - H218

Company DescriptionTroilus Gold Corp. acquires, explores for, and evaluates

mineral properties. It holds interests in the uranium, coal,

and gold properties in the Yukon Territory, Canada. The

company was formerly known as Pitchblack Resources

Ltd. and changed its name to Troilus Gold Corp. in

December 2017. Troilus Gold Corp. was founded in 1985

and is headquartered in Toronto, Canada.

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Event: We are initiating coverage on Troilus Gold Corp. with a Speculative Buy rating and $3.50/shr price target. Our target is based on our conceptual DCF model of the Troilus Au-Cu project in Quebec. We adjust our NPV for corporate activities, cash, an in situ valuation of un-modelled potentially open-pittable resources in the J4 and J5 zones at Troilus (US$100/oz for Indicated, US$50/oz for Inferred — both premiums to exploration/development peer averages to reflect proximity to existing and planned infrastructure — and to help reflect the substantial exploration upside at Troilus), options/warrants, and proceeds from future equity financings, at par, providing for an adjusted NAV7.0% of $413M ($3.43/f.d., f.f. share). Ultimately, we arrive at a rounded $3.50/shr price target, based on 1.0x our adjusted NAV subject to corporate adjustments. While our valuation already bakes in exploration success (our conceptual DCF includes 25% resource growth) at the Troilus, we contend that further upside to our target remains in this regard based on the property’s exploration potential, as evidenced by the nearby and little-drilled Southwest and Z86 zones.

Key Asset: TLG’s namesake gold-copper project centres on the formerly producing Troilus mine, which produced more than 2Moz Au and ~70,000 tonnes of Cu from three open pits during continuous operation between 1997 and 2010 (Exhibit 15). While most of the main infrastructure associated with the former operation has since been removed, the site does retain an operational and energized electrical transformer station, and a fully permitted tailings water treatment plant, pump houses and permitted tailings pond (with available excess tailings capacity), and a bunkhouse/office building, among other ancillary items. TLG estimates the infrastructure represents potential savings of about $100M.

Head Start on Permitting: We also contend that as a formerly producing mine site, Troilus provides TLG with a head start on permitting. While pre-existing permits will require updating, the process should be less onerous and not a start from square one. Indeed, TLG has data from 12 years of operation, and a subsequent reclamation track record.

2.4Moz and Counting: In addition to some remaining infrastructure, Troilus is also home to existing resources, including potentially underground mineable Indicated Resources totalling 29.6M tonnes grading 1.48g/t Au and 0.157% Cu (1.4Moz Au and 102.2M lbs Cu), with another 12.6M tonnes of Inferred Resources at 1.18g/t Au and 0.102% Cu (478Koz Au and 28.4M lbs Cu). Potentially open-pittable Indicated Resources stand at 14.4M tonnes at 0.83g/t Au and 0.045% Cu (386Koz Au and 14.3M lbs Cu), with Inferred Resources of 6.1M tonnes at 0.73g/t Au and 0.048% Cu (144Koz Au and 6.4M lbs Cu). Importantly, the resources remain open at depth.

Exploration: Troilus plans 30,000m of drilling in 2018, with the initial aim of infilling and upgrading existing resources (Zone Z87), and exploring down-dip of such mineralization. Subsequent drilling will look to define and expand existing surface mineral resources (Zones J4 and J5), with a later phase III property-wide program to test existing surface targets (Z86, Southwest zone), and include mapping and sampling.

The drilling is in anticipation of an updated NI 43-101 Resource Estimate in Q218, which will form the basis for a Preliminary Economic Assessment (PEA) in H218.

TLG-TSXV: $1.94

Speculative Buy

$3.50 Target

mailto:[email protected]

Troilus Gold Corp. (TLG-TSXV) | 12 February 2018


Troilus Gold Corp. (TSXV:TLG, $1.94) - Data Sheet SPEC BUY | PT: $3.50Key Project Description Recommendation

Name: Troilus Au-Cu Project Troilus Global Resources Close Price $1.94Location: Quebec Tonnes Au Cu Au-Eqv Target: $3.50Stage: Past Producer, Explor'n/Expansion M g/t % g/t Return: 80.4%Initial Production- EWP est. 2022 Ind. 44.0 1.27 0.12 1.45 Consensus 3 Mo. Ago Current Return

Mine Life: 11 yrs Inf. 18.7 1.03 0.08 1.16 Rating: - Outperform

Avg. Annual Production: 128,500 Global 62.7 1.20 0.11 1.37 Target: $0.00 $3.77 94%

LOM AISC (US$/oz): 835 Ind. 1.80 Moz 116 Mlbs Median: $0.00 $3.75 93%

Geography Inf. 0.62 Moz 35 Mlbs High: $0.00 $4.10 111%

Low: NA $3.50 80%

Consensus Distribution 5

Sector Outperform/Buy 5

Sector Perform/Hold 0

Sector UnderPerform/Sell 0

Stock Price / Volume Chart

Key Statistics

Current Price $1.94

52-Week Range $0.40 - $2.25

Project NAV Sensitivity Avg. Vol. (3-Mo, k) 61.5

Shares Outstanding (M) 41.5

Shares Outstanding (M, diluted) 120.3

Cash ($M) $21.6

Market Cap ($M) $80.5

Net Debt ($M) $0.0

Net Debt / Total Capital $0.0

Enterprise Value ($M) $58.9

Enterprise Value/oz $24.4

FYE Dec 31

CEO Justin Reid

Employees 12

Website www.troilusgold.com

Comparables Ticker Share Mkt Cap. EV M&I&I EV/oz EWP Modelling Assumptions

Atacama Pacific Gold Corporation TSXV:ATM $0.62 $51.2 $48.5 5.9 $8 Mine Life years 11.25 LOM Avg. TCC

Auryn Resources Inc. TSX:AUG $1.80 $148.8 $133.2 2.7 $50 Start 2022 US$/oz $695

Barkerville Gold Mines Ltd. TSXV:BGM $0.64 $278.4 $214.5 5.0 $43 Mineable Resource 34 LOM Avg. AISC

Bonterra Resources Inc. TSXV:BTR $0.50 $98.5 $80.1 1.2 $65 Gold g/t 1.57 US$/oz $835

Continental Gold Inc. TSX:CNL $3.65 $717.1 $613.4 9.0 $68 Copper % 0%

Dalradian Resources Inc. TSX:DNA $0.93 $337.7 $288.9 4.4 $66 Recovery Rate Init. Capex $350

Eastmain Resources Inc. TSX:ER $0.27 $53.8 $46.8 1.3 $36 Gold % 85% Sust. Capex $205

Gowest Gold Ltd TSXV:GWA $0.14 $47.9 $51.2 1.2 $44 Copper % 90% LT Au (US$/oz)

First Mining Gold Corp. TSX:FF $0.51 $288.3 $265.2 12.0 $22 Avg. Ann. Payable Production (LOM) $1,400

Filo Mining Corp. TSXV:FIL $2.60 $162.0 $156.4 4.0 $39 Gold oz 128,500 LT Cu (US$/lb)

IDM Mining Ltd. TSXV:IDM $0.09 $37.8 $27.4 0.6 $42 Copper lbs 9,459,000 $3.10

INV Metals Inc. TSX:INV $0.69 $64.8 $42.0 3.1 $14

Lion One Metals Limited TSXV:LIO $0.51 $55.0 $29.2 0.8 $38 Top Ownership Shares % Held

Lundin Gold Inc. TSX:LUG $5.01 $600.7 $726.5 9.5 $77 M&G Investment Management Limited 0.8 1.8%

Maple Gold Mines Ltd. TSXV:MGM $0.26 $50.2 $42.6 2.8 $15 Scotiabank Global Banking And Markets, Asset Management Division0.3 0.6%

Maritime Resources Corp. TSXV:MAE $0.09 $6.9 $6.7 1.1 $6 Forbes & Manhattan Inc., Asset Management Arm 0.2 0.4%

Nighthawk Gold Corp. TSX:NHK $0.61 $116.9 $89.1 2.1 $42 Landmark Partners, Inc. 0.1 0.2%

Osisko Mining Inc.* TSX:OSK $3.08 $654.7 $555.8 5.4 $103 Pinetree Capital Ltd. 0.1 0.2%

Pure Gold Mining Inc. TSXV:PGM $0.53 $122.8 $119.8 1.2 $98 Cqi Capital Management L.P. 0.0 0.1%

Probe Metals Inc. TSXV:PRB $1.37 $133.4 $101.5 0.8 $132 Company Description

Rubicon Minerals Corporation TSX:RMX $1.28 $77.9 $63.5 0.4 $154

Sabina Gold & Silver Corp. TSX:SBB $1.68 $420.5 $382.2 7.2 $53

Treasury Metals Inc. TSX:TML $0.55 $67.7 $69.5 1.4 $48

Victoria Gold Corp. TSXV:VIT $0.41 $219.8 $194.9 4.4 $44

Troilus Gold Corp. TSXV:TLG $1.94 $80.5 $58.9 2.4 $24

Average $55 Date Last Financing Price Value

Bold - EWP Coverage names Nov.1/17 Bought Deal PP $1.64 $23.01

Source: Consensus data - CapitalIQ, Historical Data – Company Fil ings , Forecasts/estimates – Echelon Wealth Partners

Troilus Gold Corp. acquires, explores for, and evaluates mineral properties. It

holds interests in the uranium, coal, and gold properties in the Yukon

Territory, Canada. The company was formerly known as Pitchblack Resources

Ltd. and changed its name to Troilus Gold Corp. in December 2017. Troilus

Gold Corp. was founded in 1985 and is headquartered in Toronto, Canada.

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Table of Contents

Investment Thesis ................................................................................................................................................................................... 4

Potential Share Price Catalysts ............................................................................................................................................................... 4

Ongoing Work ......................................................................................................................................................................................... 5

Troilus Gold Corp. ................................................................................................................................................................................... 9

Company Overview ................................................................................................................................................................................ 9

Key Project: Troilus Gold-Copper Project ............................................................................................................................................... 9

Balance Sheet & Capital Requirements ................................................................................................................................................ 13

Valuation .............................................................................................................................................................................................. 13

Risks ...................................................................................................................................................................................................... 17

Management & Board of Directors ...................................................................................................................................................... 18




Investment Thesis

We are Initiating Coverage on Troilus Gold Corp. with a Speculative Buy rating and $3.50/shr Price Target. An investment in TLG affords investors exposure to a large (2.4Moz and 151.3M lbs Cu) resource in the prolific Abitibi gold mining region in Quebec. That resource is poised to grow with a recently launched 30,000m drill program. Having raised $23M via a bought-deal private placement at $1.64/shr in December 2017, TLG is well-funded for the currently envisaged work program. The drilling will look to both expand existing underground and open-pit resources, and test other regional targets along the important Troilus Diorite boundary. The drilling campaign is in anticipation of an updated NI 43-101 Resource Estimate in Q218, followed by a PEA in H218.

TLG recently formally notified First Quantum Minerals Ltd. (FM-TSX, NR) of its expectation to exercise its option to acquire 100% of the Troilus property, and notes that it has completed all payments required under the option agreement (a total of $300,000 in cash and $1M spent on engineering and technical studies). TLG is working with FM to accomplish the actions required following delivery of the Notice until the exercise date, including all necessary approvals, applications, agreements and other steps to formally transfer title, which is expected within 60 days.

Remaining Infrastructure Provides a Built-in Head Start. Additionally, as host to a formerly producing Au-Cu open pit mine (historic production of 2Moz Au and 70,000 tonnes Cu between 1997 and 2010), Troilus retains some associated infrastructure, including an operational and energized electrical transformer station, and a fully permitted tailings water treatment plant, pump houses and permitted tailings pond (with substantial remaining capacity), and a bunkhouse/office building, among other ancillary items. TLG estimates the infrastructure represents potential savings of about $100M. Such existing infrastructure, combined with local and regional infrastructure associated with the established Abitibi mining region, provides TLG with a head start on any eventual positive production decision. Likewise, previous operation and reclamation at site provides TLG with a head start on permitting, with the likelihood of permit updating and amendment requirements, rather than starting permitting from square one.

Potential Share Price Catalysts

▪ Results from a recently launched 30,000m drill — Q118;

▪ Completion of an updated NI 43-101 Resource Estimate — Q218; and

▪ Completion of a PEA — H218.

A 2.4Moz/151.3Mlb Start. In addition to some remaining infrastructure, Troilus is also home to existing resources, including potentially underground mineable Indicated Resources totalling 29.6M tonnes grading 1.48g/t Au and 0.157% Cu (1.4Moz Au and 102.2M lbs Cu), with another 12.6M tonnes of Inferred Resources at 1.18g/t Au and 0.102% Cu (478Koz Au and 28.4M lbs Cu). Potentially open-pittable Indicated Resources stand at 14.4M tonnes at 0.83g/t Au and 0.045% Cu (386Koz Au and 14.3M lbs Cu), with Inferred Resources of 6.1M tonnes at 0.73g/t Au and 0.048% Cu (144Koz Au and 6.4M lbs Cu). Importantly, the resources remain open for immediate expansion at depth. Indeed, drilling below existing resources at Z87 include 32m grading 3.2g/t (Exhibit 2), and drilling down-plunge in the J4 Zone suggests a thickening of mineralization, and higher grades, with historic hole TN-26 cutting 24m averaging 4.95g/t, including 3m at 34.7g/t.

On a broader scale, a large (500m long) zone of anomalous gold, named the Southwest Zone (3.5km from Z87 Zone), remains little-drilled (Exhibit 1), with previous drilling highlighted by 36m grading 1.23g/t Au. The zone reportedly exhibits characteristics similar to those at the Z87 Zone. Meanwhile, limited drilling on the nearby 86 Zone is highlighted by 41m at 0.67g/t.

J4/J5 — Potential Start Pits. Equally important, the Z87 Zone (which provided the bulk of historic production and comprises the bulk of existing resources) mineralization gold grade and thicknesses are described as a very continuous with moderate to steep dip, and widths in the tens of metres, suggesting amenability to (cheaper) bulk-tonnage mining techniques. Remaining existing resources also include potentially open-pittable mineable resources totalling 0.53Moz Au (at 0.8g/t) and 20.6M lbs Cu (at 0.05% Cu) in the J4 and J5 zones, which could offer a source of early cash flow to help fund underground development in the Z87 Zone. Both zones remain open.




Ongoing Work

TLG recently began a 30,000m drill program in anticipation of an updated Resource Estimate in Q218, which will form the basis for a PEA in H218. The drilling is aimed at the following:

▪ Expanding defined underground mineral resources down-dip and along strike below the historic producing Z87

open pit, and upgrading Inferred resources on the flanks and down-dip extensions into the Indicated category;

▪ Expanding mineral resources below the formerly producing J4 and J5 open pits to demonstrate the potential for

additional near-surface mineralization (potential starter pit material); and

▪ Initiate near-surface exploration of the Southwest Zone, 3.5km southwest of the Z87 open-pit along the Troilus

Diorite boundary, as part of a property-wide exploration program.

Exhibit 1 — Idealized Troilus Geology and Exploration Target Map

Source: Troilus Gold Corp.




Exhibit 2 — Idealized Troilus Geology and Exploration Target Map





Exhibit 3 — Key Exploration Target — The Z87 Zone


Exhibit 4 — Eyeing Additional Near-Surface Ounces at J4/J5





Exhibit 5 — The Little-Drilled Southwest and Z86 Zones


Exhibit 6 — Troilus Zones Looking North — Open for Expansion





Troilus Gold Corp.

Company Overview

Troilus Gold is a Toronto-based development-stage company focused on expanding resources, and the potential restart of mining at the formerly producing Troilus gold mine situated in the Frotêt Evans Greenstone Belt in Quebec, Canada. Troilus was formed via the amalgamation of a subsidiary of Sulliden Mining Capital Inc. (SMC-TSX, NR), Pitchblack Resources Inc., and a private numbered Ontario company. Troilus has a two-year option to acquire a 100% interest in the Troilus mine from First Quantum Minerals Ltd. by spending at least $1M on engineering and technical studies to evaluate the economic viability of the project. Troilus recently noted that it has completed all payments required under the option agreement. Formal notice of exercise has been presented to First Quantum and TLG expects completion of title transfer within 60 days. FM retains a variable NSR royalty of 1.5% (if the gold price is less than US$1,250/oz) and 2.5% (if gold exceeds US$1,250/oz).

Exhibit 7 — The Troilus Project Location Map


Key Project: Troilus Gold-Copper Project

Location & Infrastructure

Existing Infrastructure a Head Start on any Restart. Troilus is located ~175km by road from the town of Chibougamau, and comprises 81 mineral claims (and one surveyed mining lease) covering ~4,700ha. As a formerly producing mine, the project site retains roads, an operating high-voltage sub-station and power lines (and emergency generator), a permitted tailings pond and associated (operational) water treatment facilities, and camp buildings and gatehouse. The former mill was sold and removed during previous reclamation efforts.




Exhibit 8 —Remaining Infrastructure a Significant Head Start on Any Eventual Production Restart


Permitting

Previous production provides a head start on permitting. While the Troilus project maintains a site and mining permit, both will require updating/amending to reflect the potential open-pit and underground mining scenario currently envisaged by the Company. Likewise, the site also hosts a fully permitted tailings pond with significant remaining capacity, however the associated Environmental Impact Assessment (EIA) will need to be updated. TLG notes that the permitting efforts should benefit from data available from more than 12 years of production, and subsequent successful reclamation.

First Nations. The Troilus project is located within the Cree Nation of Mistissini, with which TLG has a Pre-Development Agreement (PDA). The PDA contemplates the completion of an Impacts and Benefits Agreement (IBA) upon the demonstrated economic viability of the Troilus project via completion of a positive Pre-feasibility Study. Importantly, we note here that prior to former operations, Troilus was just the second project in Canada to establish an IBA, which was signed in 1994. The IBA between the Troilus mine and the Cree of Mistissini had a particular emphasis on setting Cree employment targets, providing economic development benefits through procurement contracts for goods and services during construction and operation of the mine, and ensuring environmental protection. It also made provisions for a number of local families who were directly affected by the development, establishing a socio-economic development remedial fund and allowing for use of the access road, the main camp, and its services. We contend that the existence of a previous IBA suggests that local First Nations are amenable to such agreements, and are not unfamiliar with the process, which bodes well for future such efforts.




Geology

The Troilus Au-Cu deposit is situated within the eastern segment of the +300km-long Frotêt-Evans Greenstone Belt, in the Opatica Subprovince of the Superior Province in Quebec. The belt comprises two similar volcano-sedimentary domains — the west and east domains. Troilus is situated in the east domain, known as the Frotêt-Troilus Domain, which is underlain by a supracrustal sequence of submarine mafic volcanics with intercalated cogenetic mafic intrusions. The rocks are variably deformed and affected by a strong regional foliation. The metamorphic grade in the Troilus area ranges from greenschist to lower-amphibolite facies. The higher metamorphic grade is apparent adjacent to boundaries of intrusions and margins of the greenstone belt. The Troilus region contains many gold, base metal, and molybdenite mineralization occurrences, with Troilus representing the largest known gold deposit. The three largest base metal volcanogenic massive sulphide (VMS) occurrences are the Lessard, Tortigny, and Clairy deposits.

At the property scale, the geology comprises a fault-bound package of intermediate to mafic flows and breccias, with local felsic volcanic rocks, and co-magmatic gabbro and ultramafic sills. Gold mineralization at Troilus is hosted in breccias and amphibolite-grade metamorphic rocks within a much broader, 4.5km-by-400m metamorphosed diorite, known as the Troilus Diorite. The breccia unit is the main host rock of the Z87 and J4 zones. Fine-grained disseminated gold accounts for ~90% of mineralization at Troilus, primarily as native gold and electrum with grains as large as 20 microns. Chalcopyrite, pyrite, and pyrrhotite are broadly disseminated throughout the ore body, which are rarely associated with gold (<1-3%). Vein-hosted gold accounts for ~10% of mineralization, but is associated with very high-grade intercepts (>50g/t over 1m).

Exhibit 9 — Detailed Troilus Geology





NI 43-101 Indicated & Inferred Resource

Consultancy Roscoe Postle Associates Inc. (RPA) completed an updated resource estimate at Troilus in June 2016. Underground resources employ a cut-off grade of 0.8g/t Au, with open-pit resources reported at a 0.3g/t cut-off; a 10g/t Au capping level was applied to all zones. Open-pit resources in the J4 and J5 zones are constrained by a Whittle pit shell. The Troilus drill hole database contains 645 drill holes totalling 127,454m and 70,435 assays, with 101 holes totalling 48,387m (15,999 assays) used to define the Z87 underground resources. The estimates rely on historical drill data, and in RPA’s opinion, check assay data do not reveal any major biases that could have a significant negative effect on the Troilus resource grade estimates, and that overall, production data reconciled well with the resource model.

Exhibit 10 — Troilus Project NI 43-101 Resources

Underground Resources

Category Zone Tonnes Gold Copper Au-Eqv. Gold Copper Au-Eqv.

M g/t % g/t Moz Mlbs Moz

Z87 29.60 1.48 0.16 1.72 1.403 102.2 1.635

J4 - - - - - - -

J5 - - - - - - -

Total 29.60 1.48 0.16 1.72 1.403 102.2 1.635

Z87 7.90 1.19 0.14 1.41 0.305 24.2 0.360

J4 4.40 1.15 0.04 1.21 0.163 3.9 0.172

J5 0.30 0.98 0.05 1.05 0.010 0.3 0.011

Total 12.60 1.18 0.10 1.33 0.478 28.4 0.543

Open-pit Resources

Category Zone Tonnes Gold Copper Au-Eqv. Gold Copper Au-Eqv.

M g/t % g/t Moz Mlbs Moz

Z87 - - - - - - -

J4 12.2 0.84 0.044 0.91 0.329 11.8 0.356

J5 2.20 0.80 0.05 0.88 0.057 2.5 0.063

Total 14.4 0.83 0.045 0.9 0.386 14.3 0.419

Z87 - - - - - - -

J4 2.90 0.85 0.04 0.92 0.081 2.8 0.087

J5 0.70 0.78 0.06 0.87 0.018 0.9 0.020

J4Low 2.50 0.56 0.05 0.64 0.045 2.7 0.051

Total 6.10 0.73 0.05 0.81 0.144 6.4 0.158

Underground Resources at a 0.8g/t Au cut-off; open-pit at 0.3g/t Au.

Based on US$1,500/oz Au and US$3.50/lb Cu

Indicated

Inferred

Indicated

Inferred





Balance Sheet & Capital Requirements

TLG completed a $23M bought-deal private placement at $1.64/shr in December 2017, and is well-funded for the currently envisaged work program. The Company currently has 41.5M shares outstanding, with 4.1M options outstanding that can be exercised at $1.64/shr until January 2023. If exercised, the options would represent an equity capital inflow of $4.6M. TLG also has another 14M warrants exercisable at $2.50/shr until November 2020, representing another potential capital inflow of $35M.

Looking Ahead. We assume TLG issues 5M shares at $2.00/shr in H218, and 7.5M shares at $2.25/shr in H219 for working capital purposes. Longer term, we assume TLG issues 49M shares priced at $2.50 in H220 for gross proceeds of $122.5M to help fund capex and working capital for mine development at Troilus. Our fully diluted, fully financed NAV7.0% estimate includes all associated dilution. We further assume that the Company secures $210M in project debt at an annual interest rate of 6.5% (with interest capitalized during the construction period, and repaid in 36 equal quarterly instalments during operation).

Valuation

We are initiating coverage on Troilus Gold Corp. with a Speculative Buy rating and $3.50/shr price target. Our target is based on our conceptual DCF model of the Troilus Au-Cu project in Quebec. We adjust our NPV for corporate activities, cash, an in situ valuation of un-modelled potentially open-pittable resources in the J4 and J5 zones at Troilus (US$100/oz for Indicated, US$50/oz for Inferred — both premiums to exploration/development peer averages to reflect proximity to existing and planned infrastructure — and to help reflect the substantial exploration upside at Troilus), options/warrants, and proceeds from future equity financings, at par, providing for an adjusted NAV7.0% of $413M ($3.43/f.d., f.f. share). Ultimately, we arrive at a rounded $3.50/shr price target, based on 1.0x our adjusted NAV subject to corporate adjustments. While our valuation already bakes in exploration success (our conceptual DCF includes 25% resource growth) at the Troilus, we contend that further upside to our target remains in this regard based on the property’s exploration potential, as evidenced by the nearby and little-drilled Southwest and Z86 zones.

Exhibit 11 — Valuation Summary

Discount C$ Million C$/Share C$/Share

Troilus U/G 7.0% $175 $1.46 Unadjusted NAV $1.98

Unmodelled O/P Resource In situ $62 $0.52 Target Multiple 1.00x

Project NAV $238 $1.98 Unadjusted Valuation $1.98

Corporate Adjustments ($36) ($0.30) Adjustments $1.46

Cash & Equivalents $22 $0.18 Total Valuation $3.43

Options & Warrants $42 $0.35

Future Equity Financing Proceeds $147 $1.23

Adjusted NAV $413 $3.43

Current Share Price C$1.94 12-Month Target C$3.50

P/Adjusted NAV 0.57x Implied Return 80% Source: Echelon Wealth Partners Estimates




Exhibit 12 — Project NAV Sensitivities

C$1.00

C$1.50

C$2.00

C$2.50

C$3.00

C$3.50

C$4.00

C$4.50

C$5.00

C$5.50

-30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

Pro

ject

NA

V (

C$

/sh

r)

Percent Variation

Gold Opex Initial Capex

Source: Echelon Wealth Partners Estimates

Exhibit 13 — Select Exploration & Development Comparables

Comparables Ticker SP MC EV M&I,I (Moz) EV/oz

Atacama Pacific Gold Corporation TSXV:ATM $0.62 $51.2 $48.5 5.9 $8

Auryn Resources Inc. TSX:AUG $1.80 $148.8 $133.2 2.7 $50

Barkerville Gold Mines Ltd. TSXV:BGM $0.64 $278.4 $214.5 5.0 $43

Bonterra Resources Inc. TSXV:BTR $0.50 $98.5 $80.1 1.2 $65

Continental Gold Inc. TSX:CNL $3.65 $717.1 $613.4 9.0 $68

Dalradian Resources Inc. TSX:DNA $0.93 $337.7 $288.9 4.4 $66

Eastmain Resources Inc. TSX:ER $0.27 $53.8 $46.8 1.3 $36

Gowest Gold Ltd TSXV:GWA $0.14 $47.9 $51.2 1.2 $44

First Mining Gold Corp. TSX:FF $0.51 $288.3 $265.2 12.0 $22

Filo Mining Corp. TSXV:FIL $2.60 $162.0 $156.4 4.0 $39

IDM Mining Ltd. TSXV:IDM $0.09 $37.8 $27.4 0.6 $42

INV Metals Inc. TSX:INV $0.69 $64.8 $42.0 3.1 $14

Lion One Metals Limited TSXV:LIO $0.51 $55.0 $29.2 0.8 $38

Lundin Gold Inc. TSX:LUG $5.01 $600.7 $726.5 9.5 $77

Maple Gold Mines Ltd. TSXV:MGM $0.26 $50.2 $42.6 2.8 $15

Maritime Resources Corp. TSXV:MAE $0.09 $6.9 $6.7 1.1 $6

Nighthawk Gold Corp. TSX:NHK $0.61 $116.9 $89.1 2.1 $42

Osisko Mining Inc.* TSX:OSK $3.08 $654.7 $555.8 5.4 $103

Pure Gold Mining Inc. TSXV:PGM $0.53 $122.8 $119.8 1.2 $98

Probe Metals Inc. TSXV:PRB $1.37 $133.4 $101.5 0.8 $132

Rubicon Minerals Corporation TSX:RMX $1.28 $77.9 $63.5 0.4 $154

Sabina Gold & Silver Corp. TSX:SBB $1.68 $420.5 $382.2 7.2 $53

Treasury Metals Inc. TSX:TML $0.55 $67.7 $69.5 1.4 $48

Victoria Gold Corp. TSXV:VIT $0.41 $219.8 $194.9 4.4 $44

Troilus Gold Corp. TSXV:TLG $1.94 $80.5 $58.9 2.4 $24

Average $55

Bold - EWP Covered Names; * High-grade Windfall Lake deposit only

Source: Company Reports and Filings, Capital IQ

Source: Capital IQ, Company Reports, EWP Estimates




Exhibit 14 — Echelon Wealth Partners Troilus Project Modelling Assumptions

Units EWP

Mine Life years 11.3

Commercial Startup 2022

Troilus Underground

Mineable Resource M tonnes 34.0

Head Grade

Gold g/t 1.57

Copper % 0.16%

Mill Throughput tonnes per day 8,500

Recovery Rate

Gold % 85.0%

Copper % 90.0%

Gravity Gold Recovery % 30%

Avg. Ann. Payable Production (LOM)

Gold oz 128,500

Copper lbs 9,459,000

Avergae LOM Operating Costs

Underground

Mining $/tonne ore $25.00

Processing $/tonne ore $10.00

G&A $/tonne ore $4.50

LOM Operating Costs $/tonne $39.50

LOM Avg. Cash Costs (net of byprod) US$/oz $695

LOM Avg. AISC (net of byprod) US$/oz $835

Capital Expenditures

Initial $M $350

Sustaining $M $205

LOM Cpital Expenditures $M $555

Base Case

Gold US$/oz $1,400

Gold C$/oz $1,556

Copper US$/lb $3.10

Copper C$/lb $3.44

LT CAD/USD 0.90 Note: We assume initial capex is funded via 60/40 debt:equity

Source: Echelon Wealth Partners Estimates




Exhibit 15 — Troilus Historic Production/Metallurgical Recovery (83% Au and 89% Cu LOM Recoveries)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total

Overburden 000 tonnes 3,449 5,080 3,235 967 1,949 552 63 203 843 1,702 347 - - - - - 18,389

Waste Rock 000 tonnes 988 8,840 13,052 12,073 14,370 13,441 14,912 11,279 10,344 11,452 9,787 6,951 6,999 212 - 134,700

Stockpile 000 tonnes 118 865 1,423 1,144 61 1,081 8 261 468 888 371 167 784 - - 7,640

Ore Mined 000 tonnes 629 3,798 4,176 4,959 4,913 5,901 5,943 5,923 6,045 6,929 6,670 6,463 5,599 1,692 - 69,639

Total Excavated 000 tonnes 3,449 6,814 16,737 19,618 20,126 19,895 20,485 21,065 18,307 18,559 19,616 16,828 13,582 13,382 1,904 - 230,368

Mill Head Au (g/t) 1.35 1.44 1.34 1.26 0.90 1.10 1.08 1.03 0.95 0.94 0.86 0.87 0.95 0.83 0.52 1.00

Mill Head Cu (%) 0.16 0.16 0.14 0.13 0.10 0.16 0.13 0.11 0.09 0.08 0.05 0.05 0.11 0.11 0.08 0.10

Gold Recovery % 80.70 85.56 86.43 85.64 82.78 83.60 83.05 83.01 80.63 81.79 82.45 81.72 84.02 84.00 81.00 83.09

Copper Recovery % 81.40 89.41 89.71 89.81 89.87 91.75 90.22 89.42 86.78 89.68 86.90 87.63 93.39 92.00 89.00 89.13

Au oz 12,941 139,888 146,970 168,364 122,532 162,578 164,602 164,061 149,028 159,545 147,876 138,391 151,297 135,200 37,900 2,001,173

Cu tonnes 471 5,158 4,915 5,416 4,786 7,836 6,817 5,791 4,814 4,444 2,881 2,772 5,707 5,900 2,000 69,708





Risks

Political, Social, and Environmental Risks

Troilus Gold operates in Quebec’s prolific Abitibi region, a very well-established Canadian mining region, where there is rule of law and a well-established mining culture. Quebec ranked 6th globally out of the 104 jurisdictions evaluated in the 2016 Fraser Institute Mining Survey’s Investment Attractiveness Index (Saskatchewan ranked first).

General Exploration and Development Risks

An investment in Troilus Gold carries all the typical risks associated with an exploration and development company, including cost inflation, fluctuations in commodity prices, operational issues, and unforeseeable development delays. Timely permitting and the subsequent arrangement of financing would reduce these risks.

Operational and Commodity Price Risks

Like all mining companies, TLG is subject to various factors, including, but not limited to: fluctuations in commodity and consumable prices; operational issues, such as unforeseeable development delays; unscheduled shutdowns; unexpected environmental issues; unanticipated metal recoveries; and inflationary factors. We contend that the project’s status as former producer helps to lower operational risk, but clearly does not eliminate such risks. Additionally, completion of a PEA (planned for H218) will help further reduce such risk in the near term.

Financing Risk

TLG is adequately financed in the near term having raised $23M in late 2017. As an exploration/development-stage company, TLG will be required to raise external capital to advance the development of the Troilus project. Future financing will be subject to prevailing market conditions, with no guarantee that the project will be financed as anticipated.

We assume TLG issues 5M shares at $2.00/shr in H218, and 7.5M shares at $2.25/shr in H219 for working capital purposes. Longer term, we assume TLG issues 49M shares priced at $2.50 in H220 for gross proceeds of $122.5M to help fund the capex and working capital for mine development at Troilus. Our fully diluted, fully financed NAV7.0% estimate includes all associated dilution. We further assume that the Company secures $210M in project debt at an annual interest rate of 6.5% (with interest capitalized during the construction period, and repaid in 36 equal quarterly instalments during operation).

Economic and Resource Uncertainty

Our conceptual DCF of Troilus is preliminary in nature, and is partly based on as yet undefined resources. Ongoing infill drilling and completion of a PEA will help to offset the associated uncertainty, but not eliminate it.

Permitting

While the Troilus project maintains a site and mining permit, both will require updating/amending to reflect the potential open-pit and underground mining scenario currently envisaged by TLG. Likewise, the site also hosts a fully permitted tailings pond with significant remaining capacity, however the EIA will need to be updated. With changes in both the proposed operation and associated regulations, the permits will require updating/amending should the project advance to operation. While Troilus has an operating history and a successful ongoing reclamation record, there can be no assurance that any permitting will be obtained in a timely manner. We do note that such historic data should provide a head start on permitting.




Management & Board of Directors

Exhibit 16 — Management & Board Members

Management Board of Directors

Justin Reid - CEO & Director G. Scott Moore - Chairman

Paul Pint - President Peter Tagliamonte - Executive Director

Denis C. Arsenault - CFO & Sr. VP Quebec Justin Reid - CEO

Michael Timmins - Sr. VP Corporate Development Hon. Pierre Pettigrew, p.c.

Ian Pritchard - Sr. VP Technical Services Thomas Olesinski

Joe Milbourne - Sr. Technical Services Manager

Blake Hylands - VP Exploration

Stéphane Amireault - Sr. Exploration Advisor Source: Troilus Gold Corp.

Exhibit 17 — Insider Holdings and Transactions (Last Six Months) Summary

Insider Position Shares % of S/O

Paul Pint President 41,088 0.260

Peter Tagliamonte Executive Director 7,622 0.048

Justin Reid CEO & Director 5,061 0.032

Source: Capital IQ & Canadian Insider




Important Information and Legal Disclaimers

Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients.

Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.

Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.

U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States. The firm that prepared this report may not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts.

U.K. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. ECHELON WEALTH PARTNERS INC. IS NOT SUBJECT TO U.K. RULES WITH REGARD TO THE PREPARATION OF RESEARCH REPORTS AND THE INDEPENDENCE OF ANALYSTS. The contents hereof are intended solely for the use of, and may only be issued or passed onto persons described in part VI of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein.

Copyright: This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express written consent of Echelon Wealth Partners.

ANALYST CERTIFICATION

Company: Troilus Gold Corp. | TLG:TSXV I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report. IMPORTANT DISCLOSURES

Is this an issuer related or industry related publication? Issuer

Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? If Yes: 1) Is it a long or short position? No position; and, 2) What type of security is it? None

No

Does the Analyst or household member serve as a Director or Officer or Advisory Board Member of the issuer? No

Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No

Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer?

No

During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer?

No

During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? No

Has the Analyst had an onsite visit with the Issuer within the last 12 months? No

Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No

Has the Analyst received any compensation from the subject company in the past 12 months? No

Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No




RATING DEFINITIONS

Buy The security represents attractive relative value and is expected to appreciate significantly from the current price over the next 12 month time horizon.

Speculative Buy The security is considered a BUY but in the analyst’s opinion possesses certain operational and/or financial risks that are higher than average.

Hold The security represents fair value and no material appreciation is expected over the next 12-18 month time horizon.

Sell The security represents poor value and is expected to depreciate over the next 12 month time horizon.

Under Review While not a rating, this designates the existing rating and/or forecasts are subject to specific review usually due to a material event or share price move.

Tender Echelon Wealth Partners recommends that investors tender to an existing public offer for the securities in the absence of a superior competing offer.

Dropped Coverage Applies to former coverage names where a current analyst has dropped coverage. Echelon Wealth Partners will provide notice to investors whenever coverage of an issuer is dropped.

RATINGS DISTRIBUTION

Recommendation Hierarchy Buy Speculative Buy Hold Sell Under Review Restricted Tender

Number of recommendations 51 45 15 1 4 2 1

% of Total (excluding Restricted) 44% 39% 13% 1% 3%

Number of investment banking relationships 8 21 1 1 0 2 1

% of Total (excluding Restricted) 26% 68% 3% 3% 0%

PRICE CHART, RATING & PRICE TARGET HISTORY

Date Target (C$) Rating

12 Feb 2018 $3.50 Spec Buy

Data sourced from: Capital IQ

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Feb 15 Jun 15 Oct 15 Feb 16 Jun 16 Oct 16 Feb 17 Jun 17 Oct 17

Troilus Gold Corp. (TSXV:TLG)

Price PT revision




Toronto Wealth Management

1 Adelaide Street East, Suite 2000

Toronto, ON M5C 2V9

416-572-5523

Toronto Capital Markets

130 King Street West, Suite 2500

Toronto, Ontario M5X 2A2

416-649-4273

Montreal Wealth Management and Capital Markets

1000 De La Gauchetière St. W., Suite 1130

Montréal, QC H3B 4W5

514-396-0333

Ottawa Wealth Management

360 Albert Street, Suite 800

Ottawa, ON K1R 7X7

1-877-967-5866

Calgary Wealth Management

350 - 7th Avenue SW, 19th Floor

Calgary, AB T2P 3N9

403-218-3144

Vancouver Wealth Management and Capital Markets

1055 Dunsmuir St. Suite 3424; P.O Box 49207

Vancouver, BC V7X 1K8

604-647-2888

Victoria Wealth Management

730 View Street, Suite 210

Victoria, BC V8W 3Y7

1-877-978-9300

Oakville Wealth Management

1275 North Service Road, Suite 612

Oakville, ON L6M 3G4

289-348-5936

London Wealth Management

495 Richmond St., Suite 830

London, ON N6A 5A9 V8W 3Y7

519-858-2112

Saskatoon Wealth Management

402-261 First Avenue North

Saskatoon, SK S7K 1X2

306-667-2282

Tokyo Capital Markets

Holland Hills Mori Tower; RoP #603

5-11-1 Toranomon, Minato-Ku,

Tokyo, 105-0001, Japan

+81.90.1470.1684


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company description · ltd. and changed its name to troilus gold corp. in december2017.troilusgold...

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