Rye Patch Gold RPMGD

RE:Industrial Alliance Securities comments on Rye Patch Gold

[ts9222]

"(leased annually with a total credit financing cost of US$3.7M)."
The news release and MDA both say the trucks were purchased for $3.67m not leased. They got a $3.67m equipment loan so they conserve cash without using cash up front.

"delivering 25% of production into its hedge at US$1,275/oz, and selling the rest at spot"
Sounds like a flexible hedge.
Rye dropped in the past when gold rose a lot. The share price is up big today on large volume. It is almost like people just realized rye isn't fully hedged and the big rise in gold price is good for rye. Glad i bought more at 20c while the doomsayers were doing their thing.

stockmaster989 wrote: According to Industrial Alliance Securities:
 
https://www.iavaleursmobilieres.ca/research/20170828RPM.pdf
 
Rye Patch Gold Corp. (RPM-V)
 
Rating: BUY (unchanged)
 
Price Target: $0.75 (unchanged)
 
Rye Patch Announces Q2 Production
 
Event
 
Rye Patch Gold released financial and operational results for Q2/17. Production numbers were pre-released, so we examine the Company’s financial position. 
 
Highlights
 
- Pads like Summer: The production build-up at the Florida Canyon Mine should be improving after the step back in June. The Company plans the addition of four Caterpillar haul trucks to the existing eleven-truck fleet (leased annually with a total credit financing cost of US$3.7M). The trucks will be delivered in Q4, and will better match the two shovels thereby increasing ore to pad placement from the average 6,200tpd in Q2 towards the 27,000tpd design by year-end. Additionally, the Company appointed Michael Iannacchione — a Goldcorp (G-T, Not Rated), Barrick (ABX-T, Not Rated), and Kinross (K-T, Not Rated) alumnus— to the position of Florida Canyon General Manager in July. 
 
- With the recent strength in gold prices, Rye Patch will participate by delivering 25% of production into its hedge at US$1,275/oz, and selling the rest at spot.
 
- Cash stands at $22.1M as of June 30, with an $8.1M working capital deficit. Accounts payable have held steady year-to-date at $8.5M. The US$25.8M Macquarie credit facility outstanding is payable over the next four years, with US$5.0M due in 2017. Free Cash Flow for the quarter, excluding financings, was a $10.8M loss, due to $11.9M in development and other capex expenditures for the quarter. As this expense is mainly past, the Company should currently be operationally FCF positive.
 
- We Expect Commercial Production should be Achieved by Year-end: The Company has a final $6.7M payment to the vendor on that milestone payable in cash or stock (floor of US$0.20/sh). Going forward, production will be reported on a quarterly basis with financial results, with 7,075oz of gold dor produced in Q2.
 
Valuation
 
We use a long-term gold price of US$1,600/oz, and have accordingly adjusted costs higher. We use a 7% discount for the Florida Canyon Mine, and a 10% discount for the Lincoln Hill Mine (start production in 2019) and the Wilco Mine (start production in 2022) to reach our NPV valuation of $0.75/sh. 
 
Bottom Line
 
With the recent equipment and management additions, Rye Patch has positioned itself for a successful ramp-up in H2/17. A consequence of low upfront capital is that much of the equipment is used and prone to breakdown until maintenance is caught up. We expect Q3/17 and Q4/17 production of 11Koz and 15Koz, respectively, (of which 4.5Koz will be commercialized, see Exhibit 1) and financial self-sufficiency to be declared by year-end. We reiterate our Buy rating and 12-month target price of $0.75/sh.