Mike Fagan's Precious Portfolio: Special Alert No. 13: Tier-2 Portfolio Addition

Alert No. 13
March 16, 2021

Special Alert: Tier-2 Portfolio Addition

Dear Precious Portfolio subscriber,

In today’s alert, we’re announcing a new portfolio addition for Tier-2 (Mid-Tiers) — Torex Gold Resources Inc.

Torex offers speculators exposure to gold-silver-copper via an innovative intermediate producer with a strong financial position, solid precious and base metals production, expansive exploration upside, and near-term M&A potential.

Precious Portfolio Alert #13:

Tier-2: Torex Gold Resources Inc. (OTC: TORXF)(TSX: TXG)

Tier-2: Torex Gold Resources Inc. (OTC: TORXF)(TSX: TXG)

Toronto-based Torex Gold is an intermediate, single-asset gold producer engaged in the exploration, development, and operation of its 100%-owned Morelos Gold Property located 180 kilometres southwest of Mexico City in the state of Guerrero, Mexico.

The Morelos Gold Property – located in the prolific Guerrero Gold Belt – is truly expansive at some 70,000 acres (110 sq mi) and remains 75% unexplored.

The project encompasses the El Limón Guajes mining complex (open pit and underground operations) and the Media Luna deposit (early-stage development).

Maximizing Free Cash Flow From ELG (El Limón Guajes) A Key Focus
Evaluating opportunities to optimize mine plan and extend reserve life

torex-gold-max-free-cash-flow

Accelerating near term underground exploration given ongoing success at Sub Sill and ELD; positive drill results from 2020 program recently released
Drill testing additional high priority targets including the down dip extension of ore in the Guajes pit
Study underway to investigate potential to extend life of El Limón pit
Updated mine plan for ELG to be released in conjunction with Media Luna feasibility study in Q1 2022
Portal 3 expected to reduce underground haul distances by 50%

The company is led by president & CEO (previously COO) Ms. Jody Kuzenko who brings 20-plus years of operational and business experience primarily at Inco/Vale and boasts a proven record of execution and leadership in the areas of metals, sustainability, and government relations.

Jody Kuzenko
President & CEO
Torex Gold Resources Inc.

Last month, Torex announced full year 2020 gold production of approximately 430,500 ounces at all-in sustaining costs (AISC) of US$924 per ounce along with record net income of US$109.0 million, or US$1.27 per share on a basic basis, and US$1.25 per share on a diluted basis.

Free cash flow came in at US$168.1 million. Torex has a similar outlook for FY2021 (450,000 ounces gold production at US$945/oz), which means the company could exit the year debt-free with over US$400 million in cash.

That puts the company in a strong financial position to bring its second mine online next door at Media Luna (slated for 2024) while also having ample cash available to explore M&A opportunities.

Media Luna on Track for First Production in Q1/24
Expected to deliver strong cash flow well beyond the life of ELG

torex-gold-media-luna

Media Luna has the potential to be a multi decade underground mine

2018 PEA outlined average annual AuEq production of ~350 koz over ~10 years

Permitting well underway

CUS has been approved and MIA amendment has been filed
Baseline studies for balance of permitting requirements on track
Required land occupational agreements signed with Ejido members and land owners

Media Luna to leverage existing infrastructure at ELG

First blast on main Guajes tunnel occurred in December
Development of South Portal expected to commence mid-2021

Feasibility study expected in Q1 2022

Results of 2020 and 2021 infill drilling programs to be incorporated into the feasibility study
Both conventional and Muckahi based mine designs being studied
Feasibility study will form part of the updated Morelos Technical Report

The Media Luna underground deposit primarily contains gold, silver, and copper mineralization. Following completion of a 175-hole infill drill program in 2019, the deposit contains:

2.24 million gold equivalent ounces Indicated at a gold equivalent grade of 5.55 grams per tonne (g/t) -- 1.32 million gold ounces at a grade of 3.27 g/t
4.56 million gold equivalent ounces Inferred at a gold equivalent grade of 4.23 g/t -- 2.68 million gold ounces at a grade of 2.49 g/t

Media Luna is in Feasibility Study now which should be completed and released to the market around the midpoint of this calendar year.

Torex is highly committed to ESG standards with a focus on community relations and minimizing the mining footprint of its Morelos Gold Project.

ESG Excellence As A Foundation
Delivering value to shareholders while making a positive difference in society

esg-excellence-as-a-foundation

Productive relationships with employees

99% workforce from Mexico; 70% from Guerrero State
Competitive compensation & benefits plus profit sharing plan (PTU)
New 2 year CBA signed with unionized employees (2021 through end of 2022)

Solid environmental performance

Limited air emissions and zero water discharge operation
Filtered tailings facility materially reduces current and legacy risk relative to conventional tailings

Strong governance & diversity focus

Women make up 40% of Executive Team and 30% of Board of Directors
Leadership with deep knowledge of Mexico and highly respected by Mexican authorities
Management and Board guidelines enhanced to increase share ownership

Strong relationships with local communities and stakeholders

Community Development Agreements in place with 11 surrounding communities
$13.3M invested in local community development projects in 2019

That includes innovation (and implementation at El Limón) of Torex’s proprietary Muckahi Mining System which essentially is a roof-mounted “monorail” conveyor-based system allowing for the continuous transport of broken rock directly from the face/stope to the surface, thus, translating to greater mining rates with less tunneling.

Muckahi Mining System - A Torex Innovation
A complete rethink of underground mining
muckahi-mining-system

Steep ramps (30 degrees)

Efficient and rapid excavation
¼ the length of conventional ramps

Monorail based transport

Muck box “trains” on the level and the ramps
2 way traffic in high volume, large mines
Single lane traffic in low volume, small mines

Monorail based tunnel development

High speed development
Paradigm shift in $/m

Step change in mine footprint

Reduced energy consumption
Asset stewardship
Portable capital as equipment can be reused

The system is being designed to be all-electric (powered by the grid or with batteries) with no diesel trucks or other heavy equipment needed; the company envisions a reduction in CO2 emissions of up to 95% versus conventional mining techniques.

With potential CAPEX and OPEX savings of up to 30 percent, this innovative mining process has the potential to be a game-changer not only for Torex but for the mining industry at large.

Torex Gold is well-funded with cash and short term investments, at 31 December 2020, of US$206.2 million. And as mentioned, the company should be able to exit 2021 debt-free with over US$400 million in cash.

Torex has approximately 85.7 million shares outstanding for a current market cap of approximately US$1.1 billion.

torex-gold-1-year-chart

With its strong cash position and sound capital structure, Torex is well positioned to continue to build out its Morelos asset in Mexico while also seeking out additional growth opportunities to acquire mineral assets outside of Mexico that enable profitable and productive geographic diversification.

Current price: US$12.77 per TORXF share: Buy up to US$12.85

Establish your Torex Gold (OTC: TORXF)(TSX: TXG) position incrementally and look for opportunities to buy additional shares on any intermittent weakness. Learn more about Torex Gold Resources Inc. at www.torexgold.com.

Yours In Profits,

Mike Fagan
Editor, Precious Portfolio

Mike Fagan has mining in his blood. As a teenager he staked countless gold and silver properties in Nevada alongside his dad Brian Fagan, who created the Prospect Generator model that’s still widely used today in the resource space. One of those staking projects was put into production by a major Canadian mining company — a truly rare and profitable experience. That background uniquely qualifies him as a mining stock speculator. One of the most well-known names in the business, Mike is now putting that experience to use for the benefit of Resource Stock Digest, Hard Asset Digest, and Mike Fagan's Precious Portfolio readers.

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