There’s no shortage of opportunities with great potential in the junior mining space, but actually realizing that potential is exceedingly rare for most miners. One company that has bucked this trend is Rock Energy Resources (OTCQB: RCKE), a junior miner that is producing gold in Colorado.
RCKE is currently ahead of its previously announced production schedule, mining 232 tons and milling 70 tons of ore in the month of June, and is expected to become net operating income positive by the third quarter of 2012. Longer term, the Company is expected to be milling 50 tons per day by late 2013, which will represent only 25% of its current milling capacity.
Another compelling differentiator of RCKE among its junior mining peers is its strong financial position. Not only does the company benefit from growing cash flows from production, but it also maintains a $25 million credit facility, of which only $3.8 million has been drawn down. This should provide plenty of cash for RCKE to drill and expand its resource base moving forward.
The Company’s Red Arrow mine, located near Mancos, Colorado, is estimated to have potential reserves of 1.5 to four million ounces of gold, with silver, copper and platinum group metals as byproducts. Management believes further exploration of Red Arrow could lead to a much larger gold discovery. If the Company’s estimates about the potential are accurate, Red Arrow could eventually become a mid- to large-tier gold producer.
Recent assay samples from the current work area have averaged well over one ounce of gold and at least one ounce of silver per ton, with one of the samples containing 26.5 ounces of gold and 7.5 ounces of silver per ton.
RCKE’s cash EBITDA, exclusive of non-cash charges, is anticipated to turn positive in the third quarter of 2012. This combined with continued growth in production and a stock trading at a discount to its enterprise value of $67 million, makes for a highly compelling investment opportunity. Investors interested in learning more can view RCKE’s recent presentation from the June RedChip virtual conference.
Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.
