RE:PI Financial: Buy rating and $0.80 target for Rye Patch GoldThese guys are really positive. They one up the other analysts with a higher target price of $0.80 :)
They are saying the $10m will be used to expand production to 100k oz//yr, which is the opposite of what the doomsayers are saying. Afterall, the prospectus outlined exactly what the $10m will be used for and said "the Company does not presently expect to use the proceeds from the Offering to fund negative cash flow from operations."
$22m working capital. With 100k oz production next year, they expect AISC to drop to $820 and eventually to $775 in 2021.
They expect Lincoln Hill AISC to be a very low $652.
Free Cash Flow $26.2m in 2018, $46.2m in 2020 with Lincoln Hill.
All incredibly good numbers if this were to actually happen!
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The doomsayers think the one month drop in production will drop the production of all future months because they think ramp ups must increase linearly in a straight line from month to month. That just isn't what happens in mining. Production usually makes step jumps with the changes that are made. Putting 2 circuits back online makes a step jump in production. Just because 1 month is down doesn't mean all future months will be down too. The 2 circuits offline doesn't stop more ore from being stacked. It doesn't stop the leaching from progressing.
The Q1 financial report says " Approval to commence irrigation was received in March 2017 and the first application of cyanide solution was made in mid-April."
That is only 2 and a half months of leaching on the new leach pad. What do you expect in such a short time?
The audit of the new leach pad said it was performing within 1% of expectation. That is hardly a doom scenario.
stockmaster989 wrote: According to PI Financial:
https://docdro.id/MOgUrNB
INITIATING COVERAGE
July 26, 2017
RYE PATCH GOLD CORP.
(V-RPM) $0.21
RATING: BUY (initiating)
TARGET: $0.80 (initiating)
A Game Changer in Nevada
EVENT: We are initiating coverage of Rye Patch Gold Corp highlighting its transformational Florida Canyon acquisition where the company is on the cusp of declaring commercial production in 03/17.
DISCUSSION: The Florida Canyon Mine (FCM) has an extensive operating history spanning >26 years as a low-grade, heap leach, open pit mine. Upon its acquisition in mid-2016, the mine needed a new leach pad, an upgraded haul fleet and improvements to its crushing circuit. These initiatives had a capex requirement of $28M which Rye Patch was fully funded for. Success realized during the commissioning of FCM has since resulted in an expanded operating scenario.
A new player in Nevada: FCM was expected to produce ~75,000oz/yr under its previous operating scenario. However, a recent $10M financing is planned to help fund an expanded haul fleet and provide further upgrades to its crushing circuit which allows throughput to go from 20,000tpd to 30,000tpd. Once completed, this brings the FCM targeted gold production run-rate to ~105,000oz/yr.
Consolidation potential: Florida Canyon lies along Interstate 80 and just 30km to north of Rye Patch's other development assets Lincoln Hill and Wilco. Both are simple oxide gold deposits that have already seen preliminary economic, metallurgical, permitting work and would require only nominal start-up capex. Utilizing Florida Canyon as a centralized location for gold recovery (ADR plant), Rye Patch has the potential to begin targeting >130,000oz/yr with the addition of Lincoln Hill.
Mitigated risk and hedge in place: With an extensive operating history that continued operations at lower gold prices at a similar grade profile (-0.5g/t Au), Rye Patch should be able to maintain a comparable operating profile while using cash flow for regional exploration. Furthermore, the start-up phase is protected to the downside with a $1,275/oz hedge in place.
Favourable valuation: Considering Rye Patch's recent evolution into a gold producer, they currently trade only 0.3x our NAVPS and 3.0x its 2018 P/CF compared to its peers at 0.9X and 4.9x, respectively. We highlight that as Florida Canyon demonstrates sustainable cash flow, consistent production levels and an escalating production profile, that Rye Patch's valuation will begin to close the gap on our target price and more in-line with its peer group.
RECOMMENDATION: We are initiating coverage of Rye Patch Gold with a BUY rating and $0.80/sh target price. Our target is generated using a 1.0x NAVPS multiple based on a LT $1,350/oz gold price and 5% discount rate. Until Rye Patch can demonstrate sustainable cash flow, shares should be considered SPECULATIVE.