On Aug. 18, Rye Patch Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) announced the purchase of four additional Caterpillar 785C haul trucks, increasing the fleet at the Florida Canyon mine in Nevada. According to Rye Patch CEO William Howald, the purchase "will enable to the Company to increase its production by taking advantage of excess capacity at the crusher. The crusher is routinely operating at 20 to 40 percent over plan requirements and is permitted at 60 percent over plan at 1,600 tons per hour, effectively bringing the 2018 expansion forward."
In an Aug. 18 report, Michael Gray, an analyst with Macquarie Research, noted that he was impressed at how quickly Rye Patch Gold acquired 15 trucks, which increased its haulage fleet by 36%. He pointed out that the additional trucks have the potential to increase the run rate production "to +85kozAupa (from ~70kozAupa) at Florida Canyon." Gray added that "with Florida Canyon operating as a low grade, crushed heap leach mine, operating at low unit costs is very important and with the larger fleet size we expect downward pressure on unit costs. . .if successful, the 85kozpa run rate with -5%/-20%/-10% mining/G&A/processing unit costs implies an additional +C$0.15 NAVPS."
"The decision to secure the trucks, in our view, shows management's conviction that the ramp-up is trending in the right direction. That said, we remain focused in the near term on achieving positive free cash flow, design unit cost and heap leach performance. We will be carefully monitoring production updates," Gray concluded.
Gray maintained a recommendation of Outperform with a target price of CA$0.65. Rye Patch Gold is currently trading at CA$0.21.
In the August edition of the Gold Newsletter, Brien Lundin reported that Rye Patch Gold was "flush with cash" due to the recent private placement and could use the cash "to fine tune production at Florida Canyon." He highlighted that "the mine's Q2 production included 7,075 gold ounces, a more than 1,500-ounce besting of the company's plan for the quarter. It generated these results in spite of equipment issues that hampered its June production numbers," which still came in higher than the forecast.
Lundin concluded that "between ongoing monthly production updates from the ramp-up at Florida Canyon and an upcoming prefeasibility update on its resources, Rye Patchs share price won't lack for potential catalysts in the next few months. It remains a buy at current levels."
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Disclosures from Macquarie Research, Rye Patch Gold, Aug. 18, 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.
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.
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.
Target Price Risk: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures.
Disclosures from Gold Newsletter, August 2017
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