Troy buys Intrepid’s Casposo for US$22 million

Vancouver – Two operating mines is not enough for Troy Resources (TRY-T) – the company is spending US$22 million to add Intrepid Mines’ (IAU-T) Casposo project in Argentina to its portfolio.

Casposo is a development-stage gold-silver property in San Juan province. A feasibility study in early 2007 envisaged a six-year mine life; in the first four years a gold-rich open pit would provide mill feed while in the final two years ore would come from a silver-rich underground operation.

The property hosts a low-sulphidation epithermal-style gold-silver deposit with mineralization hosted in rhyolite breccias and andesite. The mineralized structure occurs along a 10-km long northwest-trending structural corridor, which consists of two parallel vein sets that dip to the southwest.

Intrepid completed a resource estimate for Casposo on mid-2008, containing open pit resources within a US$760-per-oz. gold price shell. For underground resources the calculation used a cut-off grade of 3.5 grams gold per tonne.

In the open pit, indicated resources total 1.88 million tonnes grading 5.39 grams gold and 130 grams silver while inferred resources add 15,800 tonnes grading 5.61 grams gold and 137 grams silver. The underground resource comprises 193,800 indicated tonnes grading 1.97 grams gold and 196 grams silver as well as 8,800 inferred tonnes averaging 2.43 grams gold and 294 grams silver.

Probable reserves comes in at 1.4 million open pit tonnes grading 5.44 grams gold and 96 grams silver and 335,000 underground tonnes averaging 3.99 grams gold and 220.5 grams silver.

Troy has enough cash on hand to finance the purchase, which comprises a US$20-million payment immediately and an additional US$2-million payable six months after the start of production.

And Troy says it plans to bring the mine into production quickly, which is something with which the Australian-based miner has had success in the past. Casposo would be Troy’s third mine in South America. In 2002 the company bought Serato, a Brazilian property with a defined gold-silver resource, and brought it into production in 14 months by refurbishing a second-hand plant.

In late 2006 the resources at Serato were depleted so the company bought another gold property in Brazil, Andorinhas. Using the plant from Serato, Troy brought Andorinhas into production in 16 months. The open pit reserves are mined out, with 15 months of stockpiled material now being processed, and now the company is developing a high-grade underground mine at Mamao, which is just 7 km to the southeast.

To bring Casposo in production quickly Troy says it expects to use some or all of the gold plant it has in storage in Cobar, New South Wales.

Casposo’s original owners still hold royalties on the property. If Troy brings the property into production it will have to pay the original owners US$6 per oz. gold equivalent on the first 450,000 oz. gold and then US$5 per oz. for production beyond 450,000 oz.

In the second half of 2008 Troy earned A$13.5 million, stemming from 32,450 oz. gold production and A$34.97 million in gold sales. The company spent A$3.9 million on exploration and allowed A$5.7 million for depreciate and amortization over the six months. It also booked a pre-tax profit of A$21 million from selling its stake in Comaplex Minerals (CMF-T) to Agnico-Eagle Mines (AEM-T) for A$48 million.

Troy’s Sandstone gold mine in Western Australia, which has been the company’s backbone for nine years, was supposed to close in February after processing stockpiled material for 18 months. In January, however, Troy announced it was re-starting mining at the Lord Nelson pit because high gold prices make mining the low-grade ore that remains economic. The mine is now expected to continue operating through 2009.

Sandstone produced 18,700 oz. gold in the second half of 2008 while Andorhinas produced 13,750 oz. At the end of 2008 Troy had A$60 million on hand and carried no debt or forwards sales.

And on news of the Casposo purchase Troy’s share price gained 14¢ in two days to close at $1.15. The company has a 52-week trading range of 51¢ to $2.50 and has 70 million shares outstanding.

For its part, Intrepid says the Casposo sale will allow the company to focus on its Paulsens gold mine in Western Australia, which produces 80,000 oz. gold annually. The sale will also provide “additional financial flexibility in considering its options for developing the Tujuh Bukit gold-silver oxide resource in East Java, Indonesia.”

And Intrepid has been enjoying drilling success at Tujuh Bukit of late. The company is probing Zone B, where near-surface oxide gold-silver mineralization overlies high-sulphidation copper-gold-silver mineralization at depth. The project’s two other, better defined zones, A and C, show similar mineralization.

One of the latest holes into Zone B, hole 58, cut 64 metres of oxide mineralization grading 2.65 grams gold and 17.2 grams silver, starting 24 metres downhole. Then, at 248 metres depth, the drill hit 44 metres of high-sulphidation mineralization grading 0.11 gram gold, 13.3 grams silver, and 0.31% copper, followed closely by another 28 metres grading 1.5 grams silver and 0.22% copper.

Nearby holes returned similar results: hole 57 cut 92 metres of oxide grading 0.77 gram gold and 15.7 grams silver, followed by 118 metres grading 0.19 gram gold, 17.6 grams silver, and 0.46% copper.

Some drills have also hit a third later of mineralization below the high-sulphidation intercepts. Hole 57, for example, cut 198 metres of high sulphidation mineralization grading 0.26 gram gold, 12 grams silver, and 0.25% copper from 76 metres depth and then encountered 226 metres of porphyry mineralization grading 0.72 gram gold and 0.44% copper from 450 metres depth.

Intrepid is now conducting an extensive soil geochemistry program at Tujuh Bukit and plans to run additional geophysical surveys later in the year. The company has already defined inferred resources at Zones A and C that total 1.5 million oz. gold and 68 million oz. silver. At Zone A, the northern-most zone, inferred resources come in at 43.6 million tonnes grading 0.63 gram gold and 27.8 grams silver; the resource is all oxide or partially-oxidized material. At Zone C, 500 metres to the southwest, the inferred count is currently 36.5 million tonnes grading 0.53 gram gold, 25 grams silver, and 0.1% copper.

The hiccup at Tujuh Bukit is that parts of the property – specifically those that sit above a certain elevation – are designated “protection forests”, which means open pit mines are not allowed. The rest of the property is classed as “production forest” where the government allows open pit mines, subject to permitting.

The company says the designations are intended to prevent mass clear-cutting and the drainage and erosion problems it creates. Intrepid is in talks with the government to reclassify all of its land as production forest, a move the Indonesian government has made before to allow mine development. Intrepid hopes to resolve the issue before the middle of the year.

Intrepid is debt free and enjoys a cash flow of roughly US$3 million each month from Paulsens. On news of the Casposo sale Intrepid’s share price gained 3¢ to close at 26.5¢. The company has a 52-week trading range of 5¢ to 38¢ and has 415 million shares outstanding.