No Respite For Revett Minerals

Oct.16.13 | About: Revett Mining (RVM)

Editors' Note: This article covers one or more micro-cap stocks. Please be aware of the risks associated with these stocks.

In December last year Revett Minerals (NYSEMKT:RVM) was forced to cease production at its Troy mine in Montana due to structural instability following an earthquake. We gave an account of the situation in this article and mused on the possibility of an investment opportunity arising in the near future. The thesis was to take advantage of the depressed share price and speculate on a significant increase when production could resume again.

As it happened, no news was released by the company for quite some time until a month ago the company finally announced indications of a breakthrough in revitalizing the mine. We followed suit with this article suggesting a speculative investment in Revett Minerals. Our thesis was based on the possibility of resuming production before the end of the year and we expected a healthy rise in share price resulting from this event.

Alas, this thesis was not to come to fruition. Today Revett Minerals announced the discovery of further instabilities rendering a major haulage way unsafe. The company now intends to construct a new decline and reach the undeveloped North C bed within twelve months. The deeper I bed can be reached about six months later. Construction of this decline will start as soon as permits are obtained.

Costs for this measure are estimated to be $12M and available funds are sufficient to start construction. However, the company will probably have to raise additional capital in order to be able to complete construction of the decline.

Shares dropped by 40% upon breaking of this news item and your humble scribe found himself selling at a hefty loss. Unfortunate as it may be, we do not anticipate a speedy share price recovery from present levels and have decided to secure remaining funds.

The situation as it presents itself at the moment would also allow for speculation on a takeover of the company by an entity interested to develop the company's other asset, the Rock Creek project.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.