Mr. Martin Purvis reports

TROY RESOURCES LIMITED: HALF-YEAR ENDED 31 DECEMBER 2014 FINANCIAL RESULTS

Troy Resources Ltd. has released its financial results for the half year ended Dec. 31, 2014.

Highlights:

• Gold equivalent production for the first half of fiscal year 2015 of 65,014 ounces (1H 2014: 60,334 ounces);
• Cash costs of $706 (U.S.) per ounce (on a co-product basis) (1H 2014: $861 (U.S.) per ounce);
• Revenue of $92.2-million, up 22 per cent on 1H 2014 revenue of $75.7-million;
• Gross profit of $10.8-million (1H 2014: loss of $4.3-million);
• EBITDA (1) of $21.3-million (1H 2014: $3.1-million);
• Underlying profit after tax (2) of $1.9-million and net loss after tax of $26.7-million (1H 2014: loss of $6.9-million) due primarily to a non-cash asset impairment of the Casposo gold and silver project in Argentina of $28.0-million after tax;
• Cash flow generated from operations of $12.9-million compared with an outflow of $11.7-million in 1H 2014;
• $100-million debt facility approved by Investec Bank PLC;
• Karouni project on track for first production in the June quarter of 2015.

Results

Production for the first half increased by 8 per cent to 65,014 gold equivalent ounces compared with the previous corresponding period, despite the 12-per-cent deterioration in the gold-to-silver ratio. Notwithstanding a 15-per-cent fall in the silver price and a 5-per-cent fall in the gold price, revenue increased by 22 per cent compared with the previous corresponding half-year figure, resulting in a gross profit of $10.8-million.

The group also recorded an 18-per-cent decrease in cash costs per ounce (on a co-product basis) to $706 (U.S.). Given that AISC (all-in sustaining cost) was only first reported for the group in the December quarter for FY 2014, no comparison is available for the previous corresponding half year.

Net cash generated by operating activities totalled $12.9-million, representing a significant improvement on the cash outflow of $11.7-million in the previous corresponding period. This was principally due to higher production and lower operating costs.

This was the first half-year reporting period where all mined production at Casposo came from underground operations. The mine processed a total of 263,002 tonnes at an average gold grade of 4.09 grams per tonne gold and 209.68 g/t silver to produce 31,682 ounces of gold (1H 2014: 29,590 ounces) and 1,429,647 ounces of silver (1H 2014: 937,013 ounces).

The company recorded a net loss after tax of $26.7-million after allowing for a $28.6-million non-cash asset impairment charge, $28.0-million of which relates to the Casposo gold and silver mine.

As mining progresses deeper at Casposo, the silver grade of the ore increases. During the first two years of operation, gold contributed about 80 per cent of total revenue. Since processing of underground ore commenced in July, 2013, the relative proportion of silver produced has increased significantly. The December, 2014, quarter saw revenue split equally between gold and silver, and over the remaining life of the mine, the proportion of revenue attributable to silver is expected to rise to about 60 per cent. Consequently with the silver price falling at a higher rate compared with gold, a greater amount of silver is required to be produced for an equivalent ounce in gold.

As a consequence of this economic impost on the operation and the less favourable fundamentals for silver within the foreseeable future, the board has decided to take a cautious view when considering the carrying value of Casposo. This has resulted in a non-cash, after-tax impairment of $28.0-million being brought to account.

Underground activities at Andorinhas will cease this month, and the operation is scheduled to close in the middle of the year. Andorinhas produced 12,582 ounces of gold during the half year at an AISC of $1,103 (U.S.)/ounce. Production for the remainder of the operating life will come from the Coruja open pit, as well as from existing surface stockpiles.

Significant progress continues at Karouni, where plant construction is well advanced, and open pit prestrip is now in progress. The company remains on track for first production in the June quarter of 2015.

(1) EBITDA is earnings before interest, income taxes, depreciation, amortization and non-cash impairment charges.

(2) Underlying profit after tax is profit after tax before non-cash impairment charges.

We seek Safe Harbor.