Market Destabilization Positive for Miners

Q: How would you assess the last 12 months for the company, and what should investors expect for the rest of 2016?

A: The last 12 months have been a period of major transition for Torex as we finished construction and began producing gold, and the market tends to re-rate or increase a mining company’s share price if this transition goes well. The re-rating of our share price has started, and I would expect this to continue through 2016 as we demonstrate successive quarters of solid operational and cost performance.

Q: What inspired the decision to introduce the 10 for one share consolidation on Torex Gold’s outstanding shares?

A: There are a number of large institutional investors that cannot invest in companies with share prices as low as ours currently stands. There are also brokerage rules that prevent margin buying of ‘low price’ shares. We have approximately 780 million shares outstanding, and spreading the value of the company across that many shares is the reason the share price is where it is. While consolidating the number of shares by a factor of 10 does not inherently change the value of the company, it does spread that value over fewer shares. The resulting higher share price will make our shares accessible to new large investors, which should increase demand and hence benefit all shareholders. As noted, global uncertainty is negative for society but positive for gold. Torex is now producing and can take advantage of the increased gold price. The market will recognize this, which should lead to a positive outcome for Torex investors.

Q: Why were operations at El Limon-Guajes (ELG) temporarily suspended in April 2016?

A: Production was halted because a blockade was set up in an attempt by a small group of families to force us to pay compensation for perceived environmental damage. The state government investigated the claims and found that they were unfounded. A mine is a fairly easy target for such claims but ours is not an ordinary mine. For example a claim that the mine is polluting the reservoir and harming the fish is something that some people would be inclined to believe. However, our mine does not release any process water to the environment, since it is all recycled. This makes the claim easy to refute and after the state government inspected the mine site it rejected these claims. It then worked with the blockaders to demonstrate that their actions based on perceptions and not facts were damaging the economic prospects of a great many local citizens. We appreciate the government’s success in using dialog to resolve the issues.

Q: What were the main revelations of the preliminary economic assessment (PEA) for the Media Luna project, and what is the timeframe for this project to initiate metal production?

A: The PEA was published last July and it shows strong potential for an economic underground mine with a capital investment of approximately US$500 million. Operating costs would be expected to be close to the operating costs for the ELG mine. The project is now undergoing a permitting phase as we prepare for underground exploration to further define the deposit in preparation for the next level of technical study. The PEA indicated that production could start four years after a construction decision, which could happen after the completion of further technical studies. The PEA envisioned 7000t/d of production at approximately 4.5g/t of gold equivalent, which means that this concession shows promise of producing gold equivalent ounces at a similar level to the ELG mine. The low costs at our mine are primarily a function of the high grades of ore that are near to the surface. The Guerrero Gold Belt offers the potential for elusive high grades.