From time to time LawrieOnGold is invited to meet with miners and explorers who are London-based, or who are travelling through the city usually as part of a capital raising exercise. This week we had meetings with two interesting Canadian junior precious metals explorers – both at different stages in their development – Rye Patch and Kootenay Silver.
Rye Patch Gold Corp – TSXV: RPM; OTCQX: RPMGF
Particularly interesting near development stage gold explorer with all its prospects in Nevada, U.S.A. Interesting in that through some smart research picked up licences on the Oreana and Cortez trends, in what is currently one of the most prolific gold production areas in the world, which had been allowed to lapse by major precious metals miners Coeur Mining and Barrick Gold. The former was ground around Coeur’s big Rochester silver mine which is now generating significant royalties for the junior, which is enabling it to finance its exploration work on the two precious metals trends without eating into its cash reserves in any significant way. The latest quarterly payment from Coeur totalled $1.85 million – sufficient to maintain a significant drilling programme on Rye Patch’s other highly prospective properties.
Most advanced is primary drilling activity to confirm and add value to its Lincoln Hill gold/silver project on the Oreana trend, relatively close to the Rochester mine. This is an ultra low grade project but with good potential financials given the orebody is at surface (mine strip ratio is put at 0.5:1)and the material is easily heap leachable. An initial Preliminary Economic Assessment suggested that a $750 gold pit shell and heap leach operation could be set up for a capital cost of only $30 million, giving the project a 5-year life, but with payback in only 1.3 years pre-tax with an IRR of 76.5%. At a higher gold price this pit shell is easily expandable, and there are also satellite prospects within 1-2 km which could also see a good extension to mine life, although these are yet to be drill tested. The company’s proposed development schedule here is to proceed carefully with initial production only planned for early 2019. See more detailed article on Mineweb: Junior gold explorer only spending what it earns.
But perhaps the sites with the highest longer term potential are on the highly productive Cortez trend, with one area completely surrounded by Barrick Gold property and another to the south of the Barrick holdings between it and McEwen Mining’s Tonkin Springs project. The Cortez trend includes the most productive Nevada gold mining operations after the Carlin trend and one of the Rye Patch areas borders on Barrick’s Goldrush and Goldrush South projects – which represent probably the biggest Greenfield gold discovery in the past five years. Rye Patch’s other main prospect here is a short distance further south, but still between the Goldrsush properties and McEwen Mining’s Tonkin Springs project.
Thus Rye patch is an explorer with cashflow, a significant development project and additional highly prospective ground on two major Nevada gold and silver trends. A great combination.
Kootenay Silver – TSXV:KTN
This is an earlier stage silver explorer with its prime properties in Mexico’s Sonora State in the country’s northwest and in an area already hosting several other gold and silver producing mines. It was initially focusing on its Promontorio property – a promising large resource but perhaps not quite viable at current silver prices. But exploring in the surrounding area it has outlined what it describes as a potential ‘game changer’ for Kootenay in the La Negra greenfields discovery – a large, decent grade deposit offering low cost open pit heap leach potential some 6kms from its initial Promontorio prospect. The company also controls a large land area with some other highly prospective drill targets.
At La Negra, Kootenay initially released the results of 25 drill holes which confirmed high grade silver mineralisation from surface down to around 100m. A further 5 holes in its Phase 2 drilling programme are confirming the initial results. But additionally the company’s geologists reckon that what they have found is the surface showing of a diatreme pipe which has the prospect also of hosting even higher grades at depth – a similar system , perhaps not in size, to Goldcorp’s Penasquito mine and Silver Standard’s Pitarilla project, also both in Mexico.
While it is early days yet for Kootenay its programme is to continue with its Phase 2 drill programme and come up with a detailed resource assessment later this year with a view to add value and perhaps find a partner to develop what could be a highly profitable project. Much will depend on the silver price though and should the price rise significantly, as some believe it will, that could also bring the original Promontorio project into play too where Kootenay has outlined a silver equivalent resource (the deposit also contains zinc, lead and gold) of some 92 million ounces Measured and Indicated and 24 million ounces inferred. Not to mention, of course, other highly prospective targets in and among its big land holdings. But as with most junior explorers the company has to strike a balance between ongoing expenditures and its cash balances and capital raising prospects – no easy task in the current depressed environment for precious metals juniors.