Executive Summary / Key Takeaways

• TRX Gold is transitioning from a junior explorer to a robust, self-funding gold producer, leveraging its scalable Buckreef Gold Project in Tanzania. The company's strategy focuses on disciplined capital management, reinvesting operational cash flow to drive growth and minimize shareholder dilution.
• A recently released Preliminary Economic Assessment (PEA) outlines a compelling roadmap for the Buckreef Gold Project, projecting an average annual production of 62,000 ounces over an 18-year mine life with low cash costs of $1,000/ounce and an after-tax Net Present Value (NPV) of $766 million at $3,000/ounce gold.
• Operational enhancements, including a pre-leach thickener and a new absorption desorption recovery (ADR) plant, are expected to significantly improve gold recovery rates to the low 80s in the near term, with further advancements targeting high 80s/low 90s through a flotation circuit and fine grinding.
• The company is poised for increased production and improved profitability in the second half of fiscal year 2025, following the completion of a strategic stripping campaign that provides access to higher-grade ore.
• Key factors for investors to monitor include the successful execution of the PEA's phased expansion, the normalization of working capital, and ongoing discussions with the Tanzanian government regarding the joint venture agreement.

A Foundation Forged in Tanzania

TRX Gold Corporation, with its roots tracing back to 1990 as Tanzanian Gold Corporation, has undergone a significant transformation to emerge as a focused gold producer. Its flagship Buckreef Gold Project in Tanzania, an asset with a history of underground mining dating back to the 1970s, now stands at the core of the company's strategy. Since a management refresh and an early capital raise in 2021, TRX Gold has embraced a philosophy of self-funded, value-accretive growth, aiming to expand its operations without relying on dilutive equity financing. This disciplined approach has been instrumental in shaping its current position within the dynamic gold mining industry.

The broader gold market is currently experiencing robust tailwinds, with gold prices consistently trading at elevated levels. This environment significantly benefits producers like TRX Gold, amplifying revenue and profitability. Tanzania itself is increasingly recognized as a Tier 1 mining jurisdiction, attracting substantial investment from major players. The government's proactive stance on local beneficiation, exemplified by the newly enacted mining law requiring a minimum 20% local gold sale to the Central Bank, underscores a strategic shift that TRX Gold has successfully integrated into its operations. This agreement, which offers a reduced royalty rate of 4% for domestic sales compared to 7.3% for exports, not only enhances TRX's profitability but also aligns with the government's objective to bolster foreign exchange reserves.

Competitive Landscape and Strategic Positioning

TRX Gold operates within a competitive global gold mining landscape, contending with both large-scale producers and mid-tier companies. Major players such as Barrick Gold Corporation (GOLD), Newmont Corporation (NEM), Kinross Gold Corporation (KGC), and AngloGold Ashanti Limited (AU) represent the upper echelon of the industry, characterized by vast global portfolios, diversified assets, and significant operational scale. These larger competitors typically exhibit more stable cash flow generation and greater financial resilience due to their extensive operations. For instance, Barrick Gold's ability to operate at scale provides substantial operational leverage and access to capital, while Newmont's technology-driven strategy emphasizes advanced extraction methods across its diversified assets.

TRX Gold, as a smaller, single-asset producer, occupies a more niche position. Its competitive advantages are rooted in its specialized local expertise and agile operational model within Tanzania. The company's deep understanding of Tanzanian regulations and strong local partnerships translate into smoother project approvals and robust community relations, potentially leading to reduced delays and enhanced operational efficiency. This localized expertise allows TRX to differentiate itself by offering tailored solutions in a market where larger, more globally diversified companies might face challenges in site-specific execution. While TRX's operational scale is smaller, its focused approach has enabled it to construct and expand its processing plant at a significantly lower cost compared to international benchmarks, demonstrating a unique cost leadership in its specific operational context.

However, TRX's reliance on a single project, the Buckreef Gold Project, presents a vulnerability. Project concentration exposes the company to higher revenue volatility and market share risks should operational issues arise at Buckreef. This contrasts with the diversified portfolios of competitors like Kinross Gold, which benefit from geographical spread and multiple operating assets, offering greater stability. Furthermore, TRX's smaller operational scale can result in higher per-unit costs in certain areas, potentially hindering its ability to compete on efficiency with the advanced, integrated operations of a company like Newmont. Despite these challenges, TRX's strategic adaptability and proven track record of cost-effective development position it to capitalize on opportunities within its chosen market segment.

Technological Differentiators and Operational Excellence

TRX Gold's operational backbone is its crush-grind-Carbon-in-Leach (CIL) processing plant at Buckreef. The company's approach to plant development and expansion represents a significant technological and operational differentiator. Unlike many industry peers that incur substantial upfront capital expenditures for large-scale plants, TRX has successfully completed three expansions, incrementally increasing capacity to 2,000 tonnes per day (tpd) at a cost of less than $20 million. This is notably "well below international averages" for similar capacity plants, which can range from $70 million to $80 million. This cost-effective, phased expansion strategy has been executed "on time and on budget," demonstrating a core competency in efficient project delivery.

The tangible benefits of this approach are evident in the company's financial performance. The expanded 2,000 tpd plant has achieved significant economies of scale, reducing processing costs per tonne to "below $15" in Q3 2025, and as low as "$12.60" in Q1 2025, representing a "111% decrease" year-over-year. This efficiency directly contributes to higher gross profit margins and stronger cash flow generation.

Looking ahead, TRX Gold is committed to further technological enhancements to optimize recovery rates and throughput. Key initiatives include:

• Pre-Leach Thickener: Planned for installation by the end of calendar year 2025, this will enable the plant to process 100% sulfide ore, which typically has a higher head grade. This is expected to "raise our head grade by about 0.3 of a gram, 0.4 of a gram" and improve overall recovery.
• New Absorption Desorption Recovery (ADR) Plant: Targeted for installation within the next five to six months (early 2026), this upgrade will significantly enhance carbon management, minimizing breakage and gold loss, and is expected to deliver "another 3% or 4% improvement in recovery."
• Flotation Circuit and Fine Grinding: This major upgrade, anticipated to be operational by fiscal year 2027, will involve a flotation circuit to recover sulfide concentrates, followed by fine grinding in a high-intensity grind (HIG) or IsaMill. This process aims to achieve recovery rates in the "high 80s, low 90s" by grinding ore finer (from 75 microns to 40-50 microns), exposing more gold to the cyanidation process.

These technological advancements are critical to TRX Gold's competitive moat. They are designed to lower cash costs per ounce, increase gold production, and maximize profitability, even as the company transitions to harder sulfide ores. The ability to continually refine and upgrade its processing capabilities in a cost-effective manner provides a sustainable competitive edge, contributing directly to the company's financial performance and long-term growth strategy.

Financial Performance and Operational Momentum

TRX Gold's recent financial performance reflects its strategic focus on operational efficiency and leveraging favorable gold prices. In the third quarter of fiscal year 2025 (ended May 31, 2025), the company reported robust financial metrics, including revenues of $12.5 million, a gross profit of almost $4.5 million (representing a 35% margin), and adjusted EBITDA of $4 million. Gold production reached just under 4,700 ounces, a substantial increase from the prior quarter, benefiting from a realized gold price exceeding $3,100 per ounce. The company's own mining fleet contributed to improved mining costs, moving approximately 300,000 tonnes of material at a rate of $1.80 to $1.90 per tonne, which is "well below international contract rates."

The first half of fiscal year 2025 involved a strategic Stage 1 stripping campaign, which, while temporarily resulting in lower head grades and slightly reduced recovery rates, was crucial for accessing higher-grade ore blocks deeper in the pit. Despite these temporary impacts, the expanded 2,000 tpd plant demonstrated its scalability, increasing throughput by over 100% year-over-year and effectively offsetting the lower grades to maintain production levels. This operational effectiveness, coupled with prudent capital management, saw TRX Gold reinvest $5 million of cash flow back into the business during Q3 2025.

The company's liquidity has also seen significant improvement. Subsequent to Q3 2025, TRX Gold's adjusted working capital turned positive, increasing from a negative $3.3 million to approximately $3.9 million, with the current ratio improving from approximately 0.8 to 1.1. This was achieved by reducing accounts payable and accrued liabilities by approximately $5.6 million and substantially repaying short-term borrowings, providing full access to its liquidity lines. Management emphasizes that the company has "no long-term liabilities besides a couple of leases on long-term equipment," underscoring its strong balance sheet.

Strategic Initiatives and Growth Outlook

The cornerstone of TRX Gold's future growth is the Preliminary Economic Assessment (PEA) for the Buckreef Gold Project, released on April 22, 2025. This comprehensive study outlines a compelling roadmap for expansion, projecting an average annual production of 62,000 ounces over a 17.6-year mine life, peaking at over 90,000 ounces. The PEA, based on a gold price of $3,000 per ounce, estimates a pre-tax NPV of $1.2 billion and an after-tax NPV of $766 million, with remarkably low cash costs of $1,000 per ounce and all-in sustaining costs (AISC) of $1,200 per ounce. These figures position Buckreef Gold firmly within the lowest quartile of global gold producers.

The PEA's growth capital expenditure is estimated at $89 million over a four-year period, with the initial two years focused on plant expansions and the subsequent two years on developing the underground mine. Crucially, this capital is expected to be predominantly self-funded through operating cash flow, aligning with TRX Gold's disciplined capital management strategy. The company has already commenced preparatory work for these expansions, including capital expenditure for plant upgrades and camp expansion.

Operationally, the company is transitioning from a Stage 1 stripping campaign to accessing higher-grade ore blocks, which is expected to normalize the grade profile and significantly boost production in the latter half of fiscal year 2025. Management anticipates higher revenue and EBITDA for the full fiscal year 2025 compared to fiscal 2024, which saw over $40 million in revenue and $15 million in EBITDA. The ongoing plant optimization efforts, including the installation of a pre-leach thickener by the end of calendar year 2025 and a new ADR plant by early 2026, are projected to improve recovery rates to the low 80s. Further enhancements, such as a flotation circuit and fine grinding, are targeted for fiscal year 2027, aiming for recovery rates in the high 80s to low 90s.

Beyond the current mine plan, TRX Gold plans to re-engage in an extensive exploration drilling program in fiscal year 2026. High-priority targets include the Anfield and Stamford Bridge zones, which have shown promising high-grade potential and are not yet fully incorporated into the PEA economics, representing significant "blue-sky potential." A geophysical survey is also planned to identify additional high-grade trends across the property.

Risks and Challenges

While TRX Gold presents a compelling investment thesis, several risks and challenges warrant investor attention. Historically, the company's market valuation has been impacted by negative working capital, a factor management is actively addressing to "rightsize that working capital ratio and making sure that it gets above 1." The 55-45 joint venture agreement with STAMICO, the Tanzanian state mining company, is also perceived by the market as less favorable than other arrangements, creating some uncertainty. Ongoing discussions with the Tanzanian government aim to revise this agreement to a more economically balanced structure.

The presence of a warrant book, with expiries starting in the new year, has also been identified as a factor influencing share price performance. Operationally, the company has navigated periods of lower head grades and slightly reduced recovery rates during stripping campaigns and when mining harder sulfide ores. While the team has demonstrated its ability to manage these challenges, the in-country refining capacity in Tanzania currently represents a bottleneck for all miners, including TRX Gold, in fully leveraging the domestic sales agreement with the Bank of Tanzania. Furthermore, managing old underground voids from historical mining operations requires careful planning and execution to ensure safety and efficiency.

Conclusion

TRX Gold Corporation is at an inflection point, transitioning from a successful developer to a growing gold producer with a clear, self-funded roadmap for expansion. The Buckreef Gold Project, underpinned by a robust PEA, offers a compelling combination of significant resources, low operating costs, and substantial growth potential. The company's disciplined capital management, coupled with its proven ability to execute cost-effective plant expansions and implement technological enhancements, forms a strong competitive advantage.

As TRX Gold moves into a period of higher-grade ore access and continued operational optimization, the anticipated increases in gold production, revenue, and cash flow are expected to drive shareholder value. While challenges such as working capital normalization and the joint venture agreement persist, management is actively addressing these issues. The long-term outlook is further bolstered by the "blue-sky potential" of exploration targets like Anfield and Stamford Bridge, which could significantly enhance the project's economics beyond the current PEA scope. For discerning investors, TRX Gold represents an opportunity to participate in the growth of a high-margin, low-cost gold producer in a favorable jurisdiction, with a clear trajectory towards unlocking substantial value.