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Florida Canyon - 7 Site Visit Takeaways - Macquarie Research über Rye Patch Gold - Ziel 0,65 CAD

Florida Canyon - 7 Site Visit Takeaways - Ziel: 0,65 CAD

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Event

 Buy RPM after our May/16 site visit to its 100% owned, flagship Florida Canyon mine (NV, USA). RPM is sequentially de-risking the ramp-up at Florida Canyon and recently improved financial position via the US$5m sale of the Rochester NSR on May/15. This is our second visit to the project (first visit Apr/2016 pre-construction. At 0.36x NAV (Macq deck) RPM is in the rerating sweet spot with prod ramping-up in Nevada (jr producers at ~0.7x P/NAV).

Impact

 Incremental positive – many insights gained from the Florida Canyon mine including mining and processing operations, expansion opportunities, resource performance and upside opportunities.

Our seven takeaways are:

 #1 – Crusher performing well (so far) & potential to deliver even better throughput, at 20-25% above design (provided there is sufficient mine feed) plus potential low capital intensity improvements to increase by another 20%.

 #2 – Mining rates nearing design levels and plans in place drive throughput higher, via accelerating the purchase of two trucks to augment the fleet & utilize excess loader capacity. Throughput expected to increase to ~60ktons/day (53ktpd design), which will help feed the outperforming crusher for increased production & lower costs via economies of scale.

 #3 – Block model reconciling well (so far) at ~2% higher ounces.

 #4 – Near-term ore throughput bump expected, over next 2 benches via mine plan modified for pad construction delays by prioritizing waste stripping.

 #5 – Unit costs likely approaching design levels, due to throughput performing strongly and several input costs better than plan (although likely only until recently due to 1Q17 adverse weather).

 #6 – Leach kinetics encouraging & potential for near term FCF (closely monitoring). The weekly dore pour implied production of ~95-110ozAupd. With irrigation commencing recently (Apr/12), we see production continuing to ramp up and estimate ~130ozAupd is required to achieve breakeven FCF.

 #7 – Belt Consolidation = Multiple exploration and development opportunities for greater production scale. The near-term management focus is the ramp-up; however, there is significant near-mine and Oreana Trend exploration potential. RPM is targeting drilling to commence in 4Q. Earnings and target price revision

 2017E EPS now -2c (was -3c). No change to target price. Price catalyst  12-month price target: C$0.65 based on a DCF methodology.  Catalyst: Ramp-up execution (ongoing) Action and recommendation  We re-iterate our Outperform, C$0.65 target and Top Pick status. RPM is an emerging Nevada producer and potentially an attractive target.

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Swiss Resource Capital AG will use the information you provide in this form to keep in touch with you and to provide you with updates and marketing information. To receive our news, you still have to give us permission to send you E-Mails below.

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