Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Rainy River Resources’ received a 3.2% bump on Friday after the Toronto-based company released a highly positive preliminary economic assessment of its property in Western Ontario. Friday’s move also came after Canaccord Genuity upgraded the stock to speculative buy. Rainy River is up more than 9% over the last two days and is worth some $600 million on the Toronto big board.
The study envisions an open pit and underground operation that would have life-of-mine average annual production of 329,000 oz of gold and 497,000 oz of silver. In the first four years of the 13-year mine-life, the average cash cost net of silver credits is estimated at $417/oz of gold generating over $1.6 billion free cash flow at current metal prices.
The best case scenario, with gold at $1,800 and silver at $40, would boost the net present value of the project to $2.66 billion and the internal rate of return to 45.0%. At current gold prices, RRGP has a pre-tax NPV of $2.5 billion and IRR of 42.5%. Raymond Threlkeld, Rainy River’s (TSE:RR) President and CEO said: “With the results of drilling we have seen in 2011 and the addition of this data to an updated mineral resource and PEA, we expect the project to get even better as we move toward the Feasibility Study stage.”
Image of Rainy River’s community involvement in the town of Emo is courtesy of the company.
Comments
Alex Bell
“as we move toward the Feasibility Study stage”
Get there and show me the NPV & IRR with a realistic gold price and then we’ll talk!
-Uncertain Investor