Stockhouse (Sh): Which one of your gold/silver projects is most advanced? How close are you to production? What type of mining operations are you pursuing (e.g. open pit, etc.)? Any estimates as to the cash costs?
Bill Howald (BH): Our current portfolio of projects contains three advanced projects and one early-stage project. The three advance projects include Wilco, Lincoln Hill and Jessup. These are advanced project because they contain National Instrument 43-101 compliant resources. At this time, Rye Patch has an inventory of 1.2 million ounces of gold equivalent in the measured and indicated category and 2.7 million ounces of gold equivalent in the inferred category.
Rye Patch has a very focused exploration program with all of the projects located along the Oreana gold trend in West Central Nevada. The trend has potential for significant gold and silver resources, and Rye Patch controls the lion’s share of the ground along the trend. Our competitors include Newmont, Barrick and Coeur.
Rye Patch is building a substantial gold and silver resource base in Nevada because Nevada has all the major mining companies working and mining in the state. Rye Patch is very good at finding gold and silver ounces and is finding gold equivalent ounces at US$1.25 per ounce. These very robust finding costs are proof of our exploration team’s efficiency - considering the world-wide average for finding gold ounces is in the US$50 per ounce range.
Our project portfolio is in the exploration stage where we are still quantifying our resource inventory on our advanced project since the resources are open and additional drilling can expand the known resources. Our corporate goal is to build a 10-million ounce resource base by 2012. The company will achieve this objective through organic growth on its existing project portfolio and by using its unique networking ability.
We believe once our gold and silver inventory reaches a significant size, the gold mining companies operating in Nevada will want to acquire our ounces to increase their resource base and extend their production profile.
Sh: What geometrics does your company use to come up with your potential tonnage and drill targets?
BH: Rye Patch has acquired projects within old mining district and near operating mines. The idea is an old one – the best place to find new mines is around old or headframe exploration.
I worked for Placer Dome for many years, and we had an exploration program that was dedicated to working around our existing mines. This program was able to add significant gold resources to the Placer Dome bottom line and the majority of these projects were able to be developed and included to the operating mine plan. At Rye Patch we are using a similar strategy by employing new exploration ideas around old mine sites. Our Wilco, Lincoln Hill and Jessup projects are good examples of implementing this strategy.
In 2006 when Rye Patch was formed, the company had 150,000 ounces of gold on its books. In four short years the company has increased its resource base to 3.9 million ounces of gold and 40 million ounces of silver in all categories. These substantial increases are due to our ability to identify key mine areas and districts that have not participated in the evolution of geologic thinking over the last 20 years in Nevada. Using modern and innovative concepts, we have been able to add rapidly and significantly to the company’s gold and silver resource inventory.
Sh: What distinguishes your company from other explorers in the region?
BH: As I mentioned earlier, Rye Patch has a unique networking capability, and the management has worked around the world on projects ranging from grassroots to feasibility. We like to boast that Rye Patch has large-cap management in a small-cap company. Because of our expertise and experience, we have relationships with all the major mining companies, which gives Rye Patch an inside track advantage on project opportunities the ordinary junior company would not possess.
We have compiled a list of advanced-stage Nevada opportunities that potentially have what I call “corporate fatigue.” These are projects where corporate management does not want to continue on for various reasons and are available. Our network allows us to become involved with potential projects long before the market knows about them and bring them into the Rye Patch portfolio.
The other advantage Rye Patch has is its exploration team. Our geologic staff is second to none for identifying drill targets and bringing project to an advance resource stage. The fact that our group is finding gold equivalent ounces at US$1.25 per ounce shows the efficiency of our exploration programs. I don’t believe others working in the region are even close to these finding costs. In a nutshell, a million dollars roughly equals an addition of one million ounces to Rye Patch’s resource inventory.
Finally, based on the company’s current market cap of $18 million, Rye Patch holds an in–situ (in the ground) gold value of around $4.60 per ounce. Recently, Canaccord Adams issued a mining report stating that in-situ gold is worth approximately US$85.09 an ounce (Nov. 30 2009). Based on this value, Rye Patch’s resource value can be calculated at more than $332 million (3.9M oz x $85.09), or over $3.60 per share based only on the gold and gold equivalent reported to date. I believe this illustrates the opportunity investors have at this time.
Sh: How much cash do you have? Do you have sufficient funding for the foreseeable future or will you be going back to the market for more capital?
BH: At the end of this first quarter, Rye Patch has CDN$6.6 million in the bank. We are well funded and do not expect to raise capital anytime soon. Our current exploration programs total US$1.4 million for 2010; however, we are seeking an advanced opportunity in Nevada so our exploration programs could be re-prioritized if a significant new exploration opportunity is acquired.
Sh: What would you say is the biggest risk for investors in your stock?
BH: Rye Patch is relatively unknown in the junior market at this time and this question and answer interview is part of a larger effort to get the Rye Patch name out in the market. As you can see, the company is highly leveraged to the gold and silver price. Our resource ounces have option value to the price of gold and silver. As these commodities increase in price from our current economic situation, I believe the biggest risk to investors is not having a commodity play in their stock portfolio, and I believe Rye Patch Gold (TSX: V.RPM, Stock Forum) and (OTO:RPMGF, Stock Forum) has significant upside potential in this rising commodity market.
Sh: What else do your shareholders have to look forward to in the coming year?
BH: On June 7, 2010, Rye Patch announced significant gold and silver drill intercepts from our Wilco project. We are finishing the spring drill program and additional drill results will be out this summer. A fall drilling program is planned for Jessup and Lincoln Hill and a follow-up program at Wilco. We are also working our lands along the Oreana trend and will define drill targets for a fall program. The company should have a continuous flow of news through the end of the year.