Four Active Mining Companies You Should Be Watching

The initial capital expenditure is higher as it does make more sense to immediately start producing at 1 million tonnes per year. This production boost in the first few years of the mine life caused the after-tax NPV to increase by 81% to US$450M, so Focus Ventures is trading at just a fraction of the value of its project.

TGR: What's holding the share price back then?

TL: Focus will have to repay a loan in the second half of this year, and I think the market is waiting for Focus to solve this "issue" before reducing the discount to the NPV of the asset. The convertible loan will either have to be repaid or extended, and once this hurdle is cleared, the market will probably start to catch up.

TGR: We have seen more M&A activity lately with Goldcorp Inc. (G:TSX; GG:NYSE) buying Kaminak Gold Corp. (KAM:TSX.V) (KMKGF) and Endeavour Mining Corp. (EDV:TSX; EVR:ASX) (EDVMF) acquiring True Gold Mining Inc. Those are the big ones, but you have been watching some of the smaller ones as well. Can you tell us about one of them?

TL: Indeed. Last week, Rye Patch Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) announced it entered into a definitive agreement to acquire the Florida Canyon mine in Nevada from Admiral Capital, which seized the asset after the previous owner couldn't meet its debt commitments.

A new PEA on the property has outlined a mine plan in which more than 600,000 oz gold could be recovered at an all-in cost of less than $900/oz for an initial investment of less than $30M. More details will obviously emerge in the next few days and weeks but at first sight this seems to be a really good deal. Rye Patch will be paying $15M in cash and issue 20M shares for the initial purchase, followed by $5M in either cash or shares when the commercial production restarts (planned in H1/17). Based on the share price of Rye Patch before the deal was announced, this means the total consideration was less than US$25M, which is less than 0.25 times the after-tax NPV of the project at $1,200/oz gold.

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Disclosure: 

1) Patrice Fusillo compiled this interview for Streetwise Reports LLC and ...

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