Canadian miner 'flush with cash' producing
A miner with spending money just increased its fleet and made another giant leap forward in expanding its already producing Nevada project.
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 Patch’s share price won't lack for potential catalysts in the next few months. It remains a buy at current levels."
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