Red Eagle Moves to Production
I’m going to keep saying exactly what I have been saying for years about Red Eagle. They are financed, they are permitted and they will be in production in a year.
I wrote about a new gold mining company in Colombia over three years ago named Red Eagle (RD-V) that went public very near the top of the gold market. I visited their primary project in Colombia called Santa Rosa literally days after they went public.
The company has made amazing progress. From the 1st drill hole in a project that had never been drilled to the feasibility study took about three years. Red Eagle spent over $55 million in 45,000 meters of drilling. They applied for their mining permit and received it in August of 2014. They received their final environmental license in Q1 2015 and plan production in Q2 of 2016.
The company released an updated 43-101 feasibility study in October of 2014 showing some incredible numbers. With a base case of $1300 gold, they have an after tax NPV of $104 million, an eight year mine life at an average of 50,000 ounces per year and an IRR of 53% with capex paid back in 1.3 years. Total all in cost will be around $763 per ounce of gold.
Since the feasibility study the price of gold has gone down but the value of the Colombian peso has gone down a lot more. So the numbers are better today than they were in 2013. 50% of the Capex and 90% of the Opex is in the Colombian Peso.
The high-grade vein system at Santa Rosa has been mined for 400 years. Red Eagle has mapped over 2,000 individual adits. The San Ramon shear zone within the Santa Rosa project is up to 50 meters wide and extends over two kilometers in length. Red Eagle can and will add ounces on a constant basis once they begin mining.
According to their feasibility study, they will mine an average of 50,000 ounce for an eight-year mine life but those numbers are totally deceptive. Ian Slater’s goal has always been to get into production as soon as possible and expand mine life and production out of cash flow rather than to build as big a resource as possible by continuing to tap the market for exploration dollars. Given the disaster that has been the mainstay for exploration companies since 2011, this plan is brilliant.
While the plant is being constructed, the company is continuing to drill to expand the resource. Drill costs are half of what they were 3-4 years ago. Drilling companies are willing to work at cost or below just to keep their crews fed.
I’ve talked to Ian Slater, President of RD and visited the project several times. The Santa Rosa project is a standalone project with a mill coming and many years of future production. But the company fully intends to expand in Colombia. Five years ago there was a full court press to pick up a Colombian gold project. After all, under the Spanish, 55% of the gold produced came out of Colombia and Panama (that was part of Colombia.) Many of those juniors have blown up leaving their projects behind for real mining companies.
Red Eagle has a market cap today of about $27 million Canadian. According to their feasibility study, they anticipate after tax cash flow of $55 million USD. Between now and the first gold pour a year from now the market will begin to revalue the company. The closer they get to production, the higher the market will value them. That’s if gold remains where it is. Obviously if gold goes up, the revaluation will happen sooner.
One newsletter writer bailed out in Europe last November creating a fire sale that lasted for only about two weeks. The shares dropped to as low as $.175. Management and insiders bought shares with both hands. So did I. Those same shares rebounded to $.36 in January and have settled back down lately. The shares are cheap and reflect a lottery ticket where you already know most of the number and can guess the rest.
I own shares. I am biased. They are an advertiser and as always, please take some responsibility for your own due diligence.
Red Eagle Mining