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Rye Patch Announces Lincoln Hill Preliminary Economic Assessment

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Rye Patch Announces Lincoln Hill Preliminary Economic Assessment

 

 

 

 

 

Rye Patch Gold Corp (TSX-V:RPM) (OTCQX:RPMGF) (FRANKFURT:5TN) is pleased to announce the results of a Preliminary Economic Assessment for its 100%-owned Lincoln Hill Gold and Silver project located in Pershing County, Nevada. A technical report compliant with NI 43-101 is being completed by Metal Mining Consultants Inc. and will be filed at www.sedar.com within 45 days. The PEA confirms that the Lincoln Hill represents a robust economic opportunity in the current gold price environment.
 

PEA Highlights:

 

 
 
--  Base Case Pre-tax IRR of 76.5% and NPV (5% discount rate) of USD$64.2M; 
--  Average annual production of 33,000 Au ounces and 753,000 Ag ounces per
    year with a peak annual production of 63,700 Au ounces and 1,011,000 Ag
    ounces; 
--  Life of Mine ("LOM") cash cost of USD$575 per Au equivalent
    ("AuEq")1ounce, and total costs of USD$759 per AuEq1; and 
--  Drilling on the Independence Hill and Roosevelt targets has potential to
    expand the resource and enhance the project economic model.
 

 

 

The Company cautions that the PEA is preliminary in nature in that it is based on Inferred Mineral Resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
 

Commenting on the results of the PEA, Rye Patch Gold Corp. President and CEO William Howald stated, “We are extremely pleased with the results of the Lincoln Hill PEA. MMC brought their depth of experience from economic assessments on similar deposits in Nevada to produce a top-notch PEA of the Lincoln Hill deposit. This PEA is an important milestone in showing the positive economic viability of projects along the Oreana trend. As mandated in the market place, stakeholders are looking for projects with low estimated start-up capital and unit operating costs, and robust economic returns. This makes Lincoln Hill an attractive investment opportunity in the current gold and silver price environment.”
 

“In addition, the exploration potential at Lincoln Hill remains very attractive,” Mr. Howald continued. “This PEA is based on drilling within an 800-metre zone. Adjacent to Lincoln Hill, the Independence and Roosevelt targets contain 1,300 metres of similar alteration and surface gold and silver geochemistry to Lincoln Hill. The Independence Hill and Roosevelt zones are highly favourable for expanding the resources and enhancing the project economics. Our drilling program has started and will address the upside potential at Independence Hill and Roosevelt. The Company has an excellent future with cash in the bank, a royalty revenue stream, and a robust economic project.”
 

MMC has concluded that the most attractive development scenario for Lincoln Hill consists of an open-pit mining operation with a heap leach processing plant handling both oxide and sulphide material, and producing a gold-silver dore. A “heap leach only” base case scenario was developed for the project with production of 1,584,000 tonnes per year, resulting in a projected 5 year operation with average annual production of 33,000 ounces of gold and 753,000 ounces of silver. Projected life-of-mine average cash operating costs are US$575 per ounce of AuEq1 recovered. Start-up capital costs for this project scenario are estimated at US$26.2 million. The total cost of AuEq1 production (including cash operating costs and total capital and contingency costs over the life of the mine) is estimated at US$759 per AuEq1 ounce.
 

At a gold price of US$1350 per ounce and a silver price of $22 per ounce, the base case has a US$78.4 million pre-tax net cash flow, a US$64.2 million net present value at a 5% discount rate, and an internal rate of return of 76.5%. At US$1450 gold and US$25 silver, the total pre-tax net cash flow increases by 22% over the base case to US$95.1 million, the net present value increases to US$78.6 million and the internal rate of return improves to a robust 90.7%.
 

Base Case Assumptions

 

 
 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                      Summary of Base Case Assumptions                     
---------------------------------------------------------------------------
Gold Price (USD$)                                                    $1,350
---------------------------------------------------------------------------
Silver Price (USD$)                                                     $22
---------------------------------------------------------------------------
Average Annual Gold Production (ounces)                              33,000
---------------------------------------------------------------------------
Average Annual Silver Production (ounces)                           753,000
---------------------------------------------------------------------------
Peak Annual Gold Production (ounces )                                63,700
---------------------------------------------------------------------------
Peak Annual Silver Production (ounces )                           1,011,000
---------------------------------------------------------------------------
Pre-Production Capital Costs (USD$)                                 $26.2 M
---------------------------------------------------------------------------
LOM Sustaining Capital (USD$)                                        $4.0 M
---------------------------------------------------------------------------
Pre-Production Period (years)                                             1
---------------------------------------------------------------------------
Mine Life (years)                                                         5
---------------------------------------------------------------------------
Cash Cost per AuEq.1 Ounce (USD$)                                      $575
---------------------------------------------------------------------------
Cash Costs and Sustaining Cost per AuEq.1 Ounce (USD$)                 $759
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
---------------------------------------------------------------------------
---------------------------------------------------------------------------
PRE-TAX                                                                    
---------------------------------------------------------------------------
Life of Mine NPV at 5% Discount Rate (USD$)                         $64.2 M
---------------------------------------------------------------------------
Internal Rate of Return                                               76.5%
---------------------------------------------------------------------------
Payback Period (years)                                                  1.3
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
---------------------------------------------------------------------------
---------------------------------------------------------------------------
AFTER-TAX                                                                  
---------------------------------------------------------------------------
Life of Mine NPV at 5% Discount Rate (USD$)                         $40.9 M
---------------------------------------------------------------------------
Internal Rate of Return                                               53.0%
---------------------------------------------------------------------------
Payback Period (years)                                                  1.6
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 

1 AuEq. means gold and silver equivalence at a gold-silver ratio of 1:67 based on price and recovery.
 

At a gold price of US$1250 per ounce and a silver price of $20 per ounce, the project remains robust with a US$63.8 million pre-tax net cash flow, a US$51.5 million net present value at a 5% discount rate, and an internal rate of return of 63.7%.
 

PEA Overview
 

The PEA was prepared as an open-pit mining project based solely on the resources reported by the company on September 17, 2012. Wheel loaders and trucks will be used to access mineralization. Material would then be transported to a heap leach facility and processed as run-of-mine ore. Metal would be recovered onsite and sold as gold-silver dore.
 

The average annual production is 1,582,000 tonnes at a contained AuEq1 grade of 0.89 grams per tonne. On an annual basis, 33,200 ounces of gold and 753,000 ounces of silver will be placed on the leach pad. Based on gold and silver recoveries, the metal produced and sold will be 106,000 ounces of gold and 2,222,000 ounces of silver.
 

Mineral Resources
 

In September 2012, Scott E. Wilson Consulting, Inc. completed a National Instrument 43-101-compliant global resource estimate for the Lincoln Hill project titled “Technical Report – Rye Patch Gold Corp., Lincoln Hill Property, Pershing County, Nevada” dated September 17, 2012. In their analysis, SEWC estimated mineral resources for oxide and sulphide material separately, and reported these resources at various cut-off grades. The resource estimate prepared by SEWC, in the form of the resource block model, was used as the basis for determining potentially mineable mineralization in the PEA.
 

National Instrument 43-101 compliant global mineral resources estimated by SEWC at a cut-off grade of 0.1 grams of gold per tonne for oxide material and 0.2 grams of gold per tonne for sulphide material were as follows:
 

 
Mine Planning
 

A Preliminary Economic Assessment provides a basis to estimate project operating and capital costs and establish a projection of the potential mineable resource including measured, indicated and inferred categories as permitted under National Instrument 43-101. A Whittle pit optimization was performed using estimates of operating costs typical of operating surface mines using heap leach processing in northern Nevada, and using estimates of metallurgical recovery based on test work performed on samples from Lincoln Hill drill samples. The ultimate pit shell was determined using a gold price of $1,350 per ounce. In-pit resources used for production scheduling are as follows:

 

 
 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                           Mineralized    Gold      Gold   Silver    Silver
                              Material   Grade    Ounces    Grade    Ounces
Classification         (Tonnes X1,000)     g/t  (X1,000)      g/t  (X1,000)
---------------------------------------------------------------------------
Measured                         1,567    0.62        31     12.9       648
Indicated                        5,250    0.69       116     13.7     2,311
---------------------------------------------------------------------------
Measured & Indicated              6817    0.67       148     13.5     2,958
---------------------------------------------------------------------------
                                                                           
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Inferred                         1,092    0.53        19     23.3       819
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 

 

 

The estimated strip ratio for the economic pit is 0.54 tonne of waste for every tonne of ore.
 

Metallurgy
 

Based on bottle roll testing and capital economic considerations, a run of mine (ROM) heap leach process has been selected as the best processing method. A heap leach pad, capable of holding 8 million tonnes of leach material at a loading rate of 4.4 thousand tonnes per day, will be the basis for recovering metals from the Property. Run of Mine gold recovery is expected at 64% of total placed and silver at 59% of total placed. Recovery is expected over two years from date placed on a declining curve. The pad will remain open for two years from final leach material placed before final reclamation begins.
 

Capital Costs
 

Capital costs were developed based on scaling costs from similar facilities for production rates and from design basis assumptions including a contractor operated mining fleet. The estimated life of mine capital costs for the base case are summarized as follows:
 

Life of Mine Estimated Capital Costs

 

 
 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Description                                                   US$(millions)
                                                    -----------------------
  Initial Capital                                                      14.2
  Working Capital                                                       4.0
  Indirect, Sustaining, Owner and Royalties                            12.0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total                                                                  30.2
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 

 

 

Operating Costs
 

Operating cost assumptions were based on similar scale surface mining operations using heap leach processing in northern Nevada, and process cost estimates for key consumables based on the available metallurgical test data, power consumption data and prevailing costs for key materials in similar Nevada mining operations. Operating cost assumptions per tonne of material processed are summarized as follows:
 

Unit Operating Costs

 

 
 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                       US$s
                                                                 (Per Tonne
Cost Category                                                    Processed)
---------------------------------------------------------------------------
Waste Mining Cost                                                     $2.50
Ore Mining Cost                                                       $3.10
Heap Leach Processing                                                 $3.60
General and Administrative                                            $1.50
Reclamation                                                           $0.76
---------------------------------------------------------------------------
Total                                                                $11.46
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 

 

 

Economic Analysis
 

MMC chose US$1350 for gold and US$22 for silver as the base case economic scenario. The base case pre-tax economic results for the metal price assumptions are as follows:
 

Pre Tax Projected Economic Results (US$)

 

 
 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                  Base Case
---------------------------------------------------------------------------
Gold Price per Ounce                                                  $1350
---------------------------------------------------------------------------
Silver Price per Ounce                                                  $22
---------------------------------------------------------------------------
Net Cash Flow                                                 $78.4 million
---------------------------------------------------------------------------
NPV @ 5% Discount Rate                                        $64.2 million
---------------------------------------------------------------------------
Internal Rate of Return                                               76.5%
---------------------------------------------------------------------------
Operating Costs per Ounce of Gold Equivalent Produced (Life-               
of-Mine)                                                               $575
---------------------------------------------------------------------------
Total Costs per Ounce of Gold Equivalent Produced (Includes                
all Capital)                                                           $759
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 

 

 

Infrastructure
 

There are currently no infrastructure facilities located at Lincoln Hill. Lincoln Hill is accessible from Lovelock, Nevada and near Highway Interstate 80. The Project is accessed via the Lovelock-Unionville Road, the same road used to access Coeur Mining’s Rochester Mine. There is ample electric power available. Water is available. Two nearby operations, Pershing Gold’s Relief Canyon and the Coeur Rochester Mine are currently in operation. With proper permitting, Lincoln Hill could become an operating Nevada mine. Lovelock, Winnemucca, Fallon and Fernley are close enough to support an experienced mining staff.
 

About the Lincoln Hill Gold Silver Project
 

The Lincoln Hill resource estimates are based on 100 exploration drillholes. There were a total of 5,495 three-metre-length composites used in the estimation of gold and 5,495 three-metre-length composites used in the estimation of silver. The results were calculated using Vulcan software and stored in a Vulcan block model. SEWC used Inverse Distance Cubed as the preferred estimation technique for the Lincoln Hill resource.
 

Mineral resources are not mineral reserves and do not have demonstrated economic viability.

About Rye Patch Gold Corp.

 

Rye Patch Gold Corp. is a Tier 1, well-funded junior mining company with a royalty revenue stream from the operating Rochester silver mine and significant gold and silver resources, all located in the mining friendly state of Nevada, USA. The Company’s seasoned management team is engaged in the acquisition, exploration, and development of quality resource-based gold and silver projects. Rye Patch Gold US Inc. controls over 75 square kilometres (30 sq. miles) of land, and has a 3.4 % Net Smelter Return (NSR) royalty from the Rochester silver mine along the Oreana trend located in west-central Nevada. The Company is aggressively developing gold and silver resources along this emerging trend, utilizing existing funds and cash flow from the NSR royalty which is fully leveraged to the price of gold and silver. In east central Nevada, Rye Patch Gold US Inc. is exploring 66 square kilometres of exploration land along the prolific Cortez trend contiguous to Barrick’s new Goldrush deposit. The Company has established gold and silver resource milestones and time frames in order to build a premier resource development company.

Posted May 21, 2014

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