Helen Baud - Wall Street Analyst Forum
Bill Howald - President and CEO
Rye Patch Gold Corp. (RPM) Wall Street Analyst Forum September 9, 2008 10:30 AM ET
Good morning, everybody. My name is Helen Baud from the Wall Street Analyst Forum, and I am your host in this room today. (Host Instructions).
The company presenting now is Rye Patch Gold Corporation. Rye Patch Gold Corporation is a Nevada-focused and discovery-driven Canadian exploration and development company focusing on gold in Nevada, USA. The company is building a sizeable inventory of gold assets through exploration and acquisitions. Rye Patch’s seasoned management team is engaged in acquisition, explorations and development of quality resource-based gold deposits. Rye Patch Gold currently trades on the Toronto Venture Exchange under the symbol RPM.
Here is Bill Howald, the company’s President to give you an overview of Rye Patch.
Thank you, Helen. Good morning and its real pleasure to be here today and presenting to the Wall Street Analyst Forum.
As Helen mentioned, Rye Patch Gold is the name of the company and we are building a sizeable gold, silver resource in Nevada. This is just the Safe Harbor statement and also a statement that I am also the company’s qualified person under National Instrument 43-101, which is a Canadian regulatory.
Just little bit about gold, probably not you probably know more about gold than I do as far as the markets are concerned but obviously we have seen a lot of volatility in the markets over the last years since the credit crunch, and gold seeing that volatility as well as the inflation creeping into the market have kept gold at its current prices of around $800.
Again, we supply and demand the BRIC countries; Brazil, Russia, India and China. I do not see demand there decreasing. Obviously, Russia and China are certainly coming on to the market and gold demand and supply is shrinking with South Africa declining, so those supply/demand curves are going to stay [unequally] for a while no doubt.
Why should you work in the junior market? Here is just a comparison graph from last the five years from September of ‘03 to August of ‘08. We can see, if you were playing gold, actual physical gold, you got a bump of about 120%. If you reclaim the gold, sure would help your index, you got 100%. If you had stock in Barrick, you made a 125%, about the same as gold price. If you did new marts, you did not do quite as well, was only 30% and you can see new marts maybe just slightly beat the SMT because the SMT had about 28% increase over that same period.
If you went to the next tier down, the mid-tier gold producers like the Yamanas, Agnico-Eagle’s Gold Corp. in Kinross, you can see a significant difference in what their value accretion is. Yamana had about 380% increase, Kinross had about 160%, but if you go look at the junior market something like a (inaudible) which just got fixed up by Kinross, for that same time period they had touched 2000% increase in their value.
Same thing with Keygen, which has a resource in (inaudible), they had about 1100% increase. Seabridge which has resources in Canada, the U.S. and Mexico, they had about a 400% increase. Rye Patch Gold, we have been about for about a year. What will that be?
This is basically the value curve for junior companies, so you can see in the lower left hand corner, and that is really where you want to get started. It is really the reason people get into junior mining stocks as they want that rock ride to the top when a company makes the discovery. So if you in at the bottom there on the lower left hand side, you have the opportunity to ride that to that rocket up to the top of what we will call say feasibility or pre-production. Unless somebody starts to build the mine, people have to go out and acquire capital or do an equity financing or a debt financing, and that value curve gets destroyed a bit. So when you are building the mine, there is a lot of capital cost associated with that. Mines can go anywhere from about $300 million up to, what we have seen up to $1.5 billion in costs. That is what reminds us reducing that value curve which starts to increase again, because you are actually generating revenue of that gold in the ground.
Right now, Rye Patch Gold is in that lower left hand corner sending opportunities to get that rocket running. I borrowed this from some past analysts, this the 70s, and I think as you will see from some of the democratic running mates this year that you know innovation is great but [play grade] in its faster, so I pull this right this from some past workers, that is really the 70s and its about people projects potential, way of working, what money you need and where is your share price. I mean I think you will see when we go through this that Rye Patch has the 70s and it is a good quality opportunity.
First the people, I would like to say, we have large cap management in a small cap company. We have got a first rate discovery team and the projects, we have taken a little different stand than most other junior companies. In that, we are not looking at two dimensional resource opportunities. We actually have gold assets in the ground and we are standing and building it on those.
Progress, we have got results driven and results of success driven with model and a prudent business model. Again, we are not being a joint venture type opportunities. We are actually adding value to physical gold assets in the ground. Potential, you will see that there is lot of potential in these projects. We are in the bad atmosphere, with great mine friendly state, finally after, we have been out of the shoot about one year, and we have got $3 million of cash on hand and our share price, right now, we are at our 53 week low, so its [miraculous].
If we talk about the management, Joe Kajszo, he was a former Co-founder of a company called Nevada Pacific. He also worked for Robert Friedland's Ivanhoe Capital. He was involved in things like Voiseys Bay, Fort Knox, Diamond Field and some stuff in Africa.
Myself I worked for Placer Dome for the last sixteen years until the Placer Dome was there and I have intimate knowledge about pipeline [Pueblo Viejo]. A lot of number of other current mining current operations in Nevada, I also worked in Europe and South America exploration manager so I am very familiar through all the Americas with a lot of the development projects that are currently in the pipeline.
Our CFO is Mark Brown, he is a Vancouver financer, and he has a small finance company. He is actually our part time CFO. In that position we do not need a full time CFO yet. As soon as we come to a stage where we need a full time personal involved obviously will ask someone to do that in more specific type.
Jonathan Challis he is one of our independent Director, he is the former mining analyst for Barclays and he is the current President for Solex Resources. So well know in the mining sector and Rusell another well know individual in the mining sector. He was actually President of Voiseys Bay during the takeover of Diamond Field.
Just a little about our technical team. Dr. Radu Conelea, he is a well-know geologist in Nevada and for those of you, who maybe covering Newmont's and companies like that, if you have ever been to the Twin Creeks Peak in North Winnemucca. There is a geologic feature in the bottom of the pit called the Conelea Anticline and he has been in search of that Conelea Anticline. He is an a ore finder he goes out everyday to find gold that is what his job is that is what he believes geologist do. So he is intimately involved and very curious individual that goes out and has a lot of success. He has got a lot of success in the past and has a lot of success today.
On Marcio, he and I worked together through the America's probably the last 12 to 15 years in Brazil, Chile, Venezuela and also in Nevada. He is a very smart man and he recently did some work for Barricks in which Barrick announced some more ounces Pueblo Viejo Deposit in the Dominican Republican that was Ronaldo's drill program which would. In addition he did came over from Agnico-Eagle to work with us and he was very intrigue in the Pinos Altos deposit in Mexico for Agnico-Eagle.
Company's probably have enough gold and what everybody is working towards and just a right tactics working towards. We want to have 5 million ounces of gold in Nevada over the next three years.
Now why do we want to do that? If you go to Nevada and just look around what you see is Newmont', Barrick, Kinross, Yamana, Gold Corp they are all working in Nevada. Nevada is in fact Newmont' and Barrick that is where the flagship operations are going. So why do you want build more gold ounces in Nevada. Well these guys right now are chewing through their reserves and they are trying to replace their ounces. Barrick has to replace 800 million ounces of gold a year, Newmont' have to replace about 6 million ounces of gold every year so they are going be looking for companies that can supply them new resources. That is where Rye Patch is positioning itself, is to be the [quotient] company for those resources. This is our private portfolio, we currently have four projects in the state of Nevada, we control all over 30 square miles and we have three resource areas and those resources are currently building.
Our flagship property is the Wilco property, squares about 14 square miles in West Central Nevada.
Where are the other strategies right through that cap and I just drew out here a point this is the Interstate 80. This is the main transportation, [East West] transportation already through the state of Nevada. If you are really going to Nevada, you will probably see these large 40 ton green trucks going across the interstate and those trucks are holding order from recalling to win it up here and back.
Now what Newmont does is they have a program, they call the optimizer, where they try to optimize all their process facilities. If you remember in the 80s, there was build of mine, build of mill. Build of mine, build of mill so that has tons of mills and exhausted resources. So what Newmont tried to do is use that capital that they have already invested and run their oar around the state to optimize those process facilities. Having projects there right or in that main transportation orders given a little laid out in that. They are not out in the middle of nowhere, there is good infrastructure here.
If these properties work out as they feed into Newmont for various operation. They are right on the transportation order. So we are going [up also]. It about a 100 mile Northwest of Reno, along Interstate 80 as we mention within what we call the Fumble Trend, which is a trend of gold deposits from sleeper to the North through Sandman through (inaudible) and Coeur Rochester, control all over the 14 square miles and there are two resource areas on the project.
The deal with Wilco’s apartment from Newmont mining, where Rye Patch is actually earning a 100% interest by the expenditure of $3 million over five years. We spent about $2 million of that to date and we will likely spend the rest of it in the coming year and half.
Newmont has one time backing options to come back in at 70% they need to spend $20 million over that same five year period. If they decline then the project is available for Rye Patch to buy for $2 million in a shared cash configuration and Newmont would retain a small [royalty].
Just a little bit about the history of the property, mainly gold, silver producer in the turn of the last entry. In the mid-50s produced antimony, and then in the late 80s early 90s there was a heap-leach operation on the property run by what is in say. In that 80s and 90s Amex got involved because they liked the geology a little bit similar to the Sleeper gold mine to the North and John Wood came and he discovered the Collateral Resource.
Because of the Newmont buying out of Santa Fe the property went to Newmont and then Newmont had a drill program and then released the property for joint venture.
Rye Patch Gold acquired the rights to the property in 2006 and that is what happened. I came out of Placer Dome in 2006, my partner Joe Kajszo came out of Nevada Pacific in 2006 because of the U.S. gold takeover and this property was available and that is how the company Rye Patch was formed.
So let’s just look at these resource areas, as I mentioned there is two resources they are open. There is potential for hard (inaudible) and we will just have a look at that.
One other thing that we did when we got the project was Radu went out and he started to map in great details the projects and in past years or in past Nevada everybody keys on these North South structures. One other things when we started to do a detailed mapping that we noticed is a lot of the high grade mineralization appeared to be paying along this web structures. That was really what was new on the property. Everybody had looked at this property over and over again and continued to focus on those North-South structures. When we got there and saw this, there was a slightly different control we decided to capitalize on that and we put together a drill program where we drilled about 45,000 feet. From that we were able to redefine the resource and we came up with our resource classifications. Here where we have about 800,000 ounces in the measure in indicated category at about 1.1 million in the inferred.
We just wanted to measure it and indicate it. This is the measure in indicated component of that resource which have is about 150,000 ounces in measures and about 500,000 ounces in the indicated. As a result of that about 90% of those measured indicated ounces are in the offside domain of the deposits. So we are really quite excited about that and it goes back some of the old documents that was going around in Nevada at the time and we will just look that frequent.
Here is our 2007 drill program, okay well you will just have to trust whatever I say is that going to be the chemistry but we had 48 reverse circulation drilled hole, 38 of which we have put in the world resource, remember, I mentioned there are two resource there, the 38 of we put in the world resource area because we actually drilled in an area and had a brand new discovery and that is what really had a significantly to the resource area at Wilco.
Had additional work in Colorado, which really interesting to me and we do not see there is a lot of and I challenge anybody in this room to go back and look at any of the other junior gold companies that follow. We had about 83% success ratio in that drilling and I would, like I said, I would challenge anybody in this room to go back and look at some of the other juniors that are having that success. I do not think there are many.
The additionally put portfolio then in the section line discovery to come back and look at some of the characteristics of metallurgy and various other variables that we will need to do the resource exactly and the program was really put together to texture these East-West high gauge structures. We wanted to test the system high grade to treat these structures with clearly this high grade really hung along we wanted to try to expand the word in Collateral Resource areas. We wanted to make a new discovery and I believe from this program, all these objectives were achieved.
So we are just going to look at the world mine area to start of with. This is part of the old Western State, heap-leach operations and that is very important as I mentioned that this was a heap-leach operation in the late 80s, early 90s.
One of the things that you will know from that time period is when you are joined for heap-leach, you want a red rock. As soon as you hit black or grey rock, you stop the drill because you only want the rock that leaches gold so great black rock is probably not going to leach so you stop drilling.
In our program, we actually went a little bit deeper and what we saw was immediately underneath a lot of those pits between 10 and 30 feet beneath those pits the rock went red again. We have a whole new offside zone that we discovered underneath those pits. Had western states not have the mentality of heap-leach only or it maybe a little more curiosity about what was going on geologically they may have drilled some deeper holes, but every one of their holes stopped 10 feet as soon as the rock turned black or grey.
So here is just some of the drilling that we performed and you can certain significant inner holes 100 feet hopefully 8 ounces, 100 feet or . All we got to a 176 feet of  and again majority of that is offside and it is sitting 10 to 30 feet beneath those pits that we see actually [the right of this pit].
This is what our drilling defines than from the results and what we have there, that gold there is basically (inaudible) they were big holes. So you got some rocks that are folded like this and on the North side, where we have got the East-West structural zone coming out and you can see the pits or even into East-West. So I just [fairly] why people are so focused on North-South there were even when they were mining the higher grades were all associated with these East-West structure.
Those higher grades then has not come out and cross the (inaudible) that is where you start to build your timings because you got the (inaudible) localizing the gold and the high angle structures feeding the gold. So you got a geometry that looks like that.
When we came up with this between 30 and a 100 feet pits that averages about 75 feet pit its two parallel zones, the grades in the zones between ’05 and between 08 that is what we know today its mineralization. New oxide mineralization and its still open to the West and to the South West, we are going to look at a long section East-West out here.
So this is a composite section of our drill and in purple is the original 43101 that we completed in '06 to go public so that is what we knew at the time. In red it is what our drilling added and based upon our understanding now in orange is where we think it is going. The interesting thing is the mineralization starts directly beneath these pits just to the East and just off to the West. As we go off to the west, the zonal start to stack one on top of the other and we are seeing that in the drilling there as the part of whereas go, the more repetition you are getting in those mineralized zones. So you can easily see if you just use the eye effect on the slides that it would be fairly easy to just have a check at something like that. The body and as you go to the West, you are adding more zones that are higher up in the sections and they cost in.
Unidentified Company Representative
Each stage should be in opposite line item?
That is correct. Now we are going to look at the Colorado Resource again is this let me just go back this is a pediment discovery which you can see as you are standing on the Pedi rack you are looking up to South-West in the far background there that is [lovelock]. You can see here is that 80 about 2 miles away, miles and half away. So we completed 10 holes in the Colorado resource and we have to find some additional areas and one area in particular was this Area 46. Mainly we call it Area 46 because it was pierced by drill hole number 46 so not plain figure there. That significant result from this area, you can see, it has sincerely consistent fixed zone, 70 feet 014, 75 feet 05 so that really peaked our interest in Area 46 if we go back to that initial launch section. It is exactly along strike of the end point. Well, so if we go back about a mile to the East, we would be at the collateral or the lower discovery, and when we are out on the pediment to West. Why do you want to strike at that [anneklein] when we are starting to pick up the mineralization out here. So it confirms that as we go high in the section, we are starting to pick up more and more zones and that this thing could be just one long zone, along that [anneklein] with an East structural zone.
So this is the target map if you will so we brought that in the world resource area and the collateral resource area. Right now, we are currently drilling the world of station, the Area 46, the (inaudible) zone which is another new therapies structural zone and the old mill at mine zone which was being that was mined historically but really no one has ever looked at the vein, it would crosses some of these truck features and old features so that is that will be some new targeting in drilling and that is happening right now.
Our second resource property is called the Jessup property. This is a project that like as (inaudible) a 100% as you picked it up from another company called Midway Gold just after they acquired Pan Nevada this is Midway just support this effort on its Midway project and the Pan project and this was an orphan project that was left over so we picked it up and owned it a 100%.
What we have here is again located about 60 miles North East of Reno, Nevada. It is within 5 miles of again Interstate 80. It has a 200,000 ounce gold resource that is 42101 certified. There are high grade controls where we gone out and basically we have gone out and just on the basic work again we have dug out a map and try to understand what controls gold and the property. What we have found is again we start to see the, East-North-East trading structural zones that could have high grade on it and in this particular state if there is something that looks to be aligned to the North-West and but in this case none of the resources are connected along that North-West zone. Again if you start to put the geology together and you start looking at the past drilling what you find is that those three zones potentially fit connect up along this North-West driving structure.
This is a down faulted piece of rock that contains the mineralization, over the top of that are some younger volcanic. Those volcanic’s have never been drill tested through. So the reason that there is gas so because you have got these younger volcanic’s over lasting and no ones gone on and drilled through so that is what we are doing right now.
In addition, we have got these East-West structural zone and we go out mapping and sampling we have been able to get gold values up to 16 grams or half ounce at the surface never been drilled there is nobody has ever gone out and looked at these North-East structural zone. They are wane zones, they are quite narrow but they are quite hydrated. When those things all trend into the Jessup resource area, so its really that combination of North-West and North-East and where they intersect strongly and that where they hydrate. You can see some of the inter sections are 110 feet of 085, 80 feet of 049, 55 feet of 05, third significant intersections of both [strictness] and grades.
So now if we put all the resources together and you can see that Rye Patch has about 800,000 ounces of gold in the measured and indicated category and about 1.1 million in the inferred category. So again we are building towards our goal of having 5 million ounces for the next three years, 5 million ounce resource. We hope to get it all in the measured and indicated category right.
Last year targets we will talk about there slightly earlier stage but in the case of Lincoln Hill/ Gold Ridge property we really like it because there was a back of an active resource done in. Literally back of an active where it shot about 200,000 ounces of resource on the property so nothing that was complied with any regulation but just an indication that there was some grades that held together.
If you follow Midway Gold and their Spring Valley discovery, they are in the upper right hand corner of this slide. [Background] consist of claims that were at stake by Rye Patch and an option agreement that was picked up from the local prospectus so Rye Patch controls a 100% of this. There are various high grade gold and there is historic mining on the property from the Lincoln Hill area and a lot of that gold was fairly spectacular and ended up in Stanford University's gold museum. You can go there and look at the Lincoln Hill gold section.
The project near Coeur Rochester and the Packer's mine so there is a fairly large silver component through the mineralization. Just from underground sampling and again cutoff on that side, but you start to see here some bulk tonnage sickness in grade. You get 28 say 15 to 30 meters of both tonnage interval with grades up between a half gram and maybe up to two grams so.
In addition, there is a surface that normal that is about 3000 feet long, 300 feet wide and we get up to about 6 grams gold and about 400 gram silver. Those are some of the higher values, and that really has not been drill tested.
So we just recently completed plus 8,400 feet of drilling and on the two target zones, one was up on the hill looking at that anomaly that was 3,000 feet by 300 feet and a second area that was down at the base of the hill, so we just completed this drilling, as the results are pending at this time but we really liked what we saw and in fact, the initial drill program was for 6,500 feet. We hit a lot of observation than we thought our deeper observation than we thought we were going to hit and we did some alteration that we like so obviously the program, a little over at 6,500 foot proposed, the planned budget.
Last project, we were talking about is a simple budget. This is a really, really simple project. Just went way outside. Last project we tried the location of it and the true logic idea behind this make it a really good exploration that we planned.
Probably located within the [forecast] and we have to understand the [forecast] a little bit and had it which is gold sooner or later, there will be a two main stands here all the time, (inaudible)
At the (inaudible) we know it’s approximately there is about a 180 million ounces of gold in that stream. (inaudible) record significant simply because people have not found the $189 million ounces of gold if we start to look in for discoveries there, our mountain gold stay a little less ten to twenty years. Things like pipeline at a 20 million ounce deposit.
Towards those sales there is probably going to be a 40 million ounce deposit. There are other significant new discoveries happening in this property happens to be in the trend and we really like what we see geologically and remember they all came out of Placer zone, so a lot of people talked about the dream team and the Coeur Rochester quarter we have actually made Coeur Rochester enable. So we really know what is going on here, again in the upper left hand corner you have got things like pipeline and Coeur Rochester and to the South you got [thousand] spring and as people top you have got a lot of the same things exactly that you see at pipeline. You have got a underlying flood system. You have got a West North West, structurally controlled and (inaudible) the right age. You got gold anomaly it is a covered, buried so we have blind discovery but it really has a potential so. If those springs they all come together and it is like profits just to be another pipeline scenario if you will.
The property was picked up from Barrick. We are earning 60% by selling 1 million over four years, Barrick has no backing right at the end of the four years and the $1 million expenditure Barrick has to pony up their 40% or dilute actually 2% royalty. So there is no backing or anything like that, I would really like the geology here and that is the key here so.
Just our 2008 program we have planned presentation we are currently drilling at Wilco our Phase 2 program. So we have got about 25,000 to 30,000 feet for that. That is up drilled currently at that project again at 10,000 foot program which is quite in there.
Gold (inaudible) as I mentioned we had a 6500 foot program we just but we actually something we like so we added an extra 2000 feet drilling there and East-South we are working on the finance some of the drill targets in the (inaudible) and again we are in that and that we have worked out towards having some drill targets throughout by this fall.
So there is about 1.8% falls [million dollars] by the end of this year. What we are trying to build a resource inventory in Nevada, we are looking to acquire other resource based projects, we have got a lot of irons in the fire right now. Some very early stage, some very advance stage discussions but it will be additional resource project.
I like to put this slide up here because I kept the slide going since we have started the company in 2006 and initially with just that top bullet but what I would like to say is every milestone that we put out there we have achieved to date. We do not believe that that is going to change any time soon so when we say we are going to drill or we are going to do this then we actually are going to do those things. If you see our January to December, we have completed resource update while we are currently drilling. We are defining additional resources that is in progress and we have got some other acquisition right there.
So all that towards building in a Gold Silver resource in Nevada, that is all happening. Again our objective to have this 5 million ounces of resources are within the next three years. Little bit about Nevada, I do not know how familiar you are with Nevada but honestly a fairly significant gold producer in its own right, it produced a little over 6 million ounces in 2007 which was 7%-8% of the U.S. gold production and 8% of the world production.
Nevada as a country if it was own country would rank 4th right behind China, South Africa and Australia as a gold producer. So like to mine gold in Nevada and they do not mind having big open fist there.
Little bit about the business model for Rye Patch, as you can see in the junior market there is really about two kinds of business models if you break it down you got the junior JV explore private property joint venture it off to somebody else. Or you got the other resource development groups that are buying the projects the build resource build up a bulk of resources like in the case of Seabridge and then eventually liquidate the Company to a major force for those assets. You can see if your, just like market cap, if you are really good joint venture guy, you can may be get a market capital up 40 million.
If you are a little lousy resource development company, you might get a market capital of 60 million and here is the lousiest of them all right past because we are sitting here with a market capital of about $5 million.
So let’s just look at how we are going. We have got 2 million ounces of gold Nevada. We have got $3 million in the bank so its two plus three must be five and that is how the junior market’s been dyed and so, yes we are going up that is a bit of serve heavily so right now, we are real golden opportunity.
So that is all of you to when you are driving home tonight, and look at your tachometer on your dashboard and you will see RPM’s times to thousand and that is what Rye Patch is all about so hopefully you can rev up your portfolio with some Rye Patch Gold. I would like to thank you for your attention and I would be happy to take any questions.
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