Since cofounding Rye Patch Gold (TSXV: RPM; US-OTC: RPMGF) a little over a decade ago, president and CEO William Howald has folded seven projects into the junior’s asset portfolio and become a significant explorer on the Oreana gold trend in west-central Nevada near the town of Lovelock, as well as along the renowned Cortez gold trend in the north-central part of the state.
Along the way, the geologist has expanded the junior’s gold footprint from 150,000 inferred equivalent oz. gold in 2006 to 2.4 million oz. in the measured and indicated category, and another 1 million oz. in the inferred.
“I’m proud of Rye Patch,” says Howald, who cut his teeth running Placer Dome’s exploration programs in the U.S. (mostly Nevada) and Latin America, before the company was swallowed up at the end of 2005 by Barrick Gold (TSX: ABX; NYSE: ABX). “We’ve been around for 10 years and we’ve kept our eye on properties we like. If people drop their claims and there’s an opportunity to pick them up, we do.”
The company’s Florida Canyon project is just one example of how the junior’s management team parlays its knowledge of Nevada into shareholder value.
Rye Patch bought the Florida Canyon mine last August, and after a US$27-million build-out, which involved refurbishing the mining fleet, moving the crusher and building a new leach pad, the asset is on track to pour its first gold before the end of March.
“We’re mining at pretty much full capacity now,” Howald says. “We’ve got all of our trucks and loaders up and running and delivering to the crusher, and we’re running at 1,000 tonnes per hour, or 24,000 tonnes a day. We can go higher than that. We’re waiting for one more permit that will get us up to 1,600 tonnes per hour.”
In the meantime, the company has loaded more than 300,000 tonnes onto the new leach pad and is waiting for state approval to spray it with cyanide — the last step before running the material through the company’s carbon plant and making gold.
“We’re two to three weeks away from getting state approval, but as we wait for those approvals, we can continue to load the pad with material,” he says. “We’re there. We bought the mine in August, started the project in September and now we are getting ready to pour gold. It’s exciting.”
The permitted mine, 210 km northeast of Reno and halfway between Lovelock and Winnemucca, produced 2.29 million oz. gold over three decades starting in 1986.
Rye Patch bought Florida Canyon out of receivership from a Japanese bank for US$15 million in cash and 20 million shares.
During the 10 years before Rye Patch bought the mine, Florida Canyon was owned by Jipangu, a Japanese conglomerate that at the time had no other significant mining assets.
Jipangu had permits to expand the heap-leach operation at the end of 2014 and a loan to do so. But instead of using the money for the mine, Jipangu used it for a different project in Japan, breaching the loan’s covenant.
Howald says that without even pouring an ounce of gold, Florida Canyon was worth US$35 million when Rye Patch acquired the project. But the mine and surrounding property was even more valuable than that, given its synergies with Rye Patch’s other gold projects in the area.
The company’s Lincoln Hill, Wilco and Gold Ridge properties are 30 km south of Florida Canyon and can benefit from the mine’s facilities — including its carbon-stripping plant, refinery and assay labs — to keep costs down.
The junior acquired 100% of Lincoln Hill, a bulk-tonnage deposit with more high-grade underground and surface targets in 2007. It was acquired for its geological setting and location near recent gold discoveries at the company’s Wilco property, 10 km west.
“In the 2014 Lincoln Hill PEA, capex was US$40 million, so having those facilities nearby at Florida Canyon will impact capital expenses at Lincoln Hill,” Howald says of the oxide heap-leach project, 20 km south of Florida Canyon and 160 km northeast of Reno.
Howald sees similar cost savings at Rye Patch’s wholly owned Wilco project, a bulk-tonnage project with near-surface resources.
“Having the operating platform of Florida Canyon makes putting those projects into production a lot easier, because we won’t have to raise money. We can finance them through revenue from the mine.”
At Wilco, the company has a resource of 1.4 million equivalent oz. gold in the measured and indicated category and another 600,000 oz. in the inferred category. The geology is similar to Florida Canyon’s.
“It’s basically in the same rocks. We’ll process ore on-site at Wilco, but we can benefit from shared management and facilities,” Howald says. “We would build a leach pad and carbon plant, process on-site and truck the active carbon to Florida Canyon to strip and process.”
Capacity won’t be a problem. According to Howald, the Florida Canyon refinery has a capacity of 180,000 oz. gold per year, and the company’s initial plans for Florida Canyon are to produce an average 75,000 oz. gold a year. “We have plenty of capacity to take on Lincoln Hill and Wilco,” he says. “We could handle that extra carbon.”
Rye Patch has already started the environmental assessment process for both projects. Lincoln Hill is more advanced because infill drilling and metallurgical work have been completed over the last few years. Wilco is slightly behind, as metallurgical studies and infill drilling have yet to begin.
Howald notes that at Lincoln Hill, the company is well along in the EA permitting process. “We’re close to the end, so that permit is just pending,” he says. “We should have it by the second half of this year.
“The EA permit allows up to 25 sq. km of disturbance, which will include bulk metallurgical sampling, infill drilling and weather station finalization. Then we will work towards our permits for mining,” he adds.
At Lincoln Hill, the PEA envisioned an open-pit operation that would have a five-year mine life and annual production of 33,000 oz. gold and 753,000 oz. silver. “At current gold and silver prices it’s a robust project, and those current prices are pretty close to those in the PEA,” Howald says.
“In the second half of 2017, we’ll do more infill drilling at Lincoln Hill and start the mine-permitting process, and we’re on track to get there in 2019,” he says. “We plan to start metallurgical work and infill drilling at Wilco in 2018. It’s a more distant start-up, sometime in 2020 or 2021.”
Combining the resources of Florida Canyon, Lincoln Hill and Wilco brings the projects’ total measured and indicated resource to 227.7 million tonnes grading 0.37 gram gold per tonne, 4.91 grams silver per tonne — or a gold-equivalent grade of 0.47 gram gold per tonne — for 2.76 million contained oz. gold and 20.55 million oz. silver, or 3.18 million equivalent oz. gold.
Inferred resources add 80.9 million tonnes grading 0.45 gram gold and 6.65 grams silver — or a gold-equivalent grade of 0.59 gram gold — for 1.19 million contained oz. gold and 14.26 million oz. silver, or 1.47 million equivalent oz. gold.
In addition to these projects, Rye Patch owns a number of others, including 100% of Gold Ridge, next to Lincoln Hill. Gold Ridge’s main zone is 2 km west of Lincoln Hill and could add ounces.
It also owns 100% of the X Claims in Nevada’s Pershing County, near Coeur Mining’s (NYSE: CDE) Rochester mine. (Rye Patch has a 3.4% net smelter return royalty on the mine.)
The X Claims are sandwiched between the Rochester mine to the north and Pershing Gold’s (TSX: PGLC; NASDAQ: PGLC) Relief Canyon mine to the south, along the Black Ridge Fault. Rye Patch has done initial mapping and sampling and has had encouraging results at the X Claims project, Howald says.
Rye Patch’s wholly owned South Coal Canyon property is an early-stage exploration project that extends from the structural zone south from Wilco along the Oreana trend. The main target is an outcropping breccia pipe that Rye Patch says is similar to the Spring Valley gold deposit, previously owned by Barrick but sold to a Waterton subsidiary in 2015. “We have commenced mapping and sampling,” he says, “with additional work planned for 2018–2019.”
The company’s wholly owned Gold Ridge project adjoins Lincoln Hill and has targets for both bulk-tonnage and high-grade underground mineralization, while the Panther Canyon project, located on a structural zone between Wilco and Florida Canyon, with the same kind of geology, was acquired last year.
The company owns 100% of Garden Gate Pass, an early stage project in Nevada’s Eureka County, 65 km southeast of Battle Mountain and surrounded by major gold deposits, including Barrick’s Cortez Hills mine 12 km north–northwest, and Barrick’s nearby Goldrush discovery 2 km north.
“Garden Gate Pass is a hole in Barrick’s land position, so we’re surrounded on three sides by Barrick and located south of their Goldrush discovery,” he says. “Every day, Barrick’s geologists and equipment drive across our property to get to Goldrush, so it definitely has strategic value for Barrick, and we hope the extension of that Goldrush mineralization comes onto our ground.”
Howald notes that Garden Gate Pass is in the same geological environment and in the same rocks. “We’ve seen gold values of up to 3 grams gold per tonne in drill holes, so it’s intriguing,” he says, adding that the company has drilled 12 holes (four core and eight reverse circulation). “The Cortez trend is going to end up in the same magnitude of numbers as the Carlin trend, as more exploration is done.”
As for Florida Canyon, Howald is confident the property offers potential for more exploration.
“We’ve had our geologists mapping and sampling around the pit, and based on the results of these efforts, we believe there’s quite a bit of upside immediately adjacent to the deposit. We’ll add ounces when we start infill drilling.”
Underneath the oxide there’s a sulphide body, and it’s been tested by a few deeper drill holes from past operators, he adds.
“It has significant grades — we’ve seen gold values of up to 12 to 15 grams in those historic drill holes, and we’ve noted that in the mid-1990s, the previous owner, Pegasus, had done extensive metallurgical work on the sulphides that looks quite promising, so after we mine the overlaying oxide ore, we can do something with the sulphide.”
Over the last year, Rye Patch Gold’s shares have traded within a 52-week range of 14¢ (February 2016) to 47¢ (July 2016), and at press time were trading at 32¢.
The junior has 387 million shares, fully diluted, and Howald owns a little over 5 million shares and options.
Says Howald: “I’m a big shareholder, and I have the same hopes and wishes as other shareholders in the present and future successes of Rye Patch Gold.”
Michael Gray of Macquarie Research has an “outperform” rating on the company and a 65¢-per-share price target.
“Rye Patch remains a top pick among developers on an anticipated re-rate, as they enter into production in the first half of 2017.”