Thibaut Lepouttre:Santa Claus Gives Away Top 5 Junior TL: Rye Patch Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) is an excellent company. It owns Lincoln Hill, a small open-pit gold project that is 2–3km from Coeur Mining Inc.'s (CDM:TSX; CDE:NYSE) Rochester mine in Nevada. Rye Patch's preliminary economic assessment (PEA) on Lincoln Hill envisions an open pit using a gold price of $775/oz, which is probably the most conservative economic study that I have seen in the past five years. That means the economics will be robust. The current mine plan calls for processing about 170 Koz gold and a little bit less than 4 Moz silver.
But the real catalyst will be the results of ongoing metallurgical studies. The current PEA bases its economics on a run-of-mine heap-leap operation. But next door at Rochester, Coeur is crushing the ore before it reaches the leach pad and it is recovering roughly 92% of the gold. Rye Patch's PEA considers 65% a viable recovery rate. If Rye Patch could boost its recovery rate to 80 or 85%, more gold would be produced and lower-grade ore would become economic.
TGR: Why would Lincoln Hill get financing over similar projects?
TL: The initial capital expenditure would be about $30M, and if you add a crushing circuit that would rise to $35–37M. That is financeable. Also, if Rye Patch boosts gold recoveries and production in the first few years of mine life, the internal rate of return could be in excess of 50%, even at $1,100/oz gold.