A Macquarie Research report finds many leading indicator metrics promising for early 2018 commercial production at a Nevada gold mine.
Many exploration companies announce an intention to be a "mid-tier gold producer."
Rye Patch Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) has a clearly articulated plan to reach 200,000 ounces gold production.
In 2016, the company built a new leech-pad for the spluttering Florida Canyon Gold Mine in Nevada—and quickly changed the production profile.
Production highlights for Q3/17 (compared to the previous quarter):
- Gold production increased 13% to 7,982 ounces
- 45% increase of gold sent to pad (7,125 ozs per month)
- 57% increase in ore tons mined (810,000 tons per month)
- Strip ratio decreased 56% to 0.54
- 29% increase in ore tons crushed (660,000 tons per month)
- 10% gold grade increased to 0.011 ozs per ton
The company stated that "the gold recovery is behaving as modelled."
Rye Patch is focused on the development of gold and silver mines and projects along the Oreana trend in west central Nevada.
Rye Patch's portfolio has four geographically constrained components, which offer financial and logistical synergy. The company now controls a "trend-scale platform with operations, replacement assets and exploration upside."
On October 16, 2017, Rye Patch announced its intention to expand the oxide resource and delineate sulfide potential along the Oreana trend in west-central Nevada.
"The initial drill program will consist of 1,200 metres of core and 8,800 metres of reverse circulation drilling. Drill-hole depths will range between 150 to 300 metres for the sulfide program and 60 to 180 metres for the oxide program."
The $1 million drill program began in early October. "The Company is currently mining a 1.12-million ounce measured and indicated (M&I) oxide gold resource," stated Rye Patch President and CEO William Howald. "Management believes the sulfide resource beneath Florida Canyon has a similar number of ounces of gold but at a much higher grade."
A 1996 "Sulfide Project Pre-feasibility Study" revealed that 262 drill-holes had reached the sulfide body, yielding an average grade of 2.36 grams per ton of gold.
The metallurgical test work showed an overall recovery of 90% with flotation with 94% of the gold reporting to a sulfide concentrate.
On Oct. 11, 2017, Macquarie Research published a report on Rye Patch entitled, "Promising Leading Indicators for 1Q18 Florida Canyon Commercial Production." Macquarie put a 12-month price target of C$0.50—more than double the current share price.
Macquarie analyst Michael Gray noted that gold production is "likely turning the corner in 4Q17 via increased pad surface area and fast kinetic/'near plastic' pad space. . .with ~500kt overliner placed in 3Q, we estimate the pad surface area has increased by ~75% vs the winter contingency pad or ~60% of the ultimate pad surface area. RPM plans to complete the remainder of the pad overliner by mid-Dec/17. With stacking and irrigating of new pad surface area with fast leach kinetics/'near plastic' underway, we expect an improvement in gold production in 4Q17 and estimate 15 koz Au recovered."
"Rye Patch trades at a significant NAVPS discount at 0.3x NAV vs our global junior producer peers at ~0.7x NAV," stated Gray, "and we see considerable re-rating potential, particularly once commercial production is achieved (targeting 1Q18)."
The company believes there may be a significant sulfide resource beneath the Florida Canyon oxide deposit.
That theory will be tested with a 10,000-meter expansion drilling campaign designed to confirm the grade, character and extent of sulfide mineralization beneath the oxide ore body.
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Additional disclosures about the sources cited in this article
Macquarie Research, Rye Patch Gold, Oct. 15, 2017
Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Ltd total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities.
Company-specific disclosures: RPM CN: A Research Associate has visited the material operations and development assets of Rye Patch Gold within the past year; the company has furnished local transportation and accommodations as part of these site visits. MACQUARIE CAPITAL MARKETS CANADA LTD./MARCHÉS FINANCIERS MACQUARIE CANADA LTÉE. or one of its affiliates managed or co-managed a public offering of securities of Rye Patch Gold Corp in the past 24 months, for which it received compensation. Macquarie Group Limited together with its affiliates beneficially owns 1% or more of the equity securities of Rye Patch Gold Corp.
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