RNC will host a call/webcast on November 14 at 10:00 a.m.
(Eastern Time) to discuss second quarter 2016 results. North
American callers please dial: 1-888-231-8191, international
callers please dial: (+1) 647-427-7450. For the
webcast of this event click [here] (replay
access information below).
TORONTO, Nov. 14, 2016 /CNW/ - RNC Minerals ("RNC") (TSX:
RNX) (OTCQX: RNKLF) today reported its financial results and review
of activities for the quarter ended September 30, 2016. All amounts are expressed in
Canadian dollars, unless otherwise noted, and are based on the
unaudited financial statements for the quarter ended September 30, 2016.
Mark Selby, President and CEO,
commented, "RNC achieved a number of milestones during the quarter
with another strong quarter from the Reed Mine, exciting high grade
gold-copper discoveries at our Qiqavik project, and the replacement
of the Lascaux financing facility and its 3% NSR on gold production
from Beta Hunt with a comprehensive financing solution from Auramet
International LLC ("Auramet"). This financing provides near-term
operating flexibility (no repayments until February 28, 2017) and a low cost working capital
facility that will support our aggressive ramp-up of mine
exploration and production. Unfortunately, mined gold production
from Beta Hunt came in lower than expected during the quarter as
one-time issues in two stopes emerged late in the quarter and
resulted in lower grades and lower volumes than
expected."
Mr. Selby continued, "Management at the Beta Hunt Mine was
replaced in October and the new leadership has already accelerated
development to achieve targeted annualized gold production rates of
60,000 ounces per annum early in Q1 2017 and deliver gold
production in 2017 in excess of 60,000 ounces. RNC has also put in
place a $US2.5 million unsecured debt
facility to ensure the company has sufficient cash cushion until
the Beta Hunt Mine becomes cash positive, expected in early Q1
2017."
"The recent significant improvement in copper and nickel prices
has very positive implications for RNC and highlights the benefits
of our portfolio diversity. RNC has started to receive interest for
equity investment in the Dumont Nickel Project for the first time
since the decline in nickel prices in 2014. Once gold production
has successfully ramped up, RNC has the flexibility to increase
nickel production at Beta Hunt without having any negative impact
on gold production. Based on current metal prices and continued
strong performance of the Reed Mine, RNC now expects the
contribution and bridge loan balances (net of related receivables)
owed to Hudbay to be zero during the second quarter of 2017, rather
than the third quarter."
Q3 2016 – Summary and Recent Highlights
- Beta Hunt pre-commercial gold sales were 7,570 ounces, a 40%
increase from 5,402 ounces in the prior quarter as several tolls
were completed. Gold tonnes mined also increased by 10% versus the
prior quarter, but came in below expectations and gold mined
production declined by 7% to 7,094 ounces as one-time issues in two
stopes led to lower grades and lower volumes than expected. Nickel
in concentrate production from Beta Hunt declined as expected by
31% versus the prior quarter to 0.29 kt as the mine focused on gold
production due to a prolonged period of low nickel prices earlier
in the year.
- Kevin Small, who recently joined
RNC as Director, Mining Operations, took over leadership of the
Beta Hunt mine on October
3rd and will oversee the completion of the
initial ramp-up of the mine by the first quarter of 2017. The mine
has already taken several positive steps forward under his
leadership and gold mined production is expected to reach
8.5-10,000 ounces during Q4 2016 and achieve an annualized gold
production rate of 60,000 ounces during Q1 2017. Payable gold
production is expected to be in excess of 60,000 ounces during
2017.
- RNC's 30% proportionate share of copper contained in
concentrate production from the Reed Mine was 2.8 MM lbs (1.3 kt)
and gold in concentrate from the Reed Mine was 320 ounces, in line
with expectations. Operating costs remained low as the cash
operating cost (net of by-product credits) per pound of copper sold
was US$1.40 and all-in sustaining
cost was US$1.47 per pound.
- Cash flow from the Reed Mine during the quarter significantly
reduced the contribution and bridge loan balance owed to HudBay by
$3.6 million to $13.4 million. The
effective loan balance, which reflects the $5.8 million receivable balance due to the
approximate 100 day delay in the finalization of ore concentrate
sales, declined to $7.6 million.
- On October 3, 2016, the senior
secured Metal Prepay Agreement ("MPA") facility with LRC-SLM L.P.
(100% owned by Lascaux Resource Capital Fund I, L.P.) was fully
repaid as RNC closed a US$16.5
million senior secured gold loan and low cost US$6.5 million working capital facilities with
Auramet International LLC ("Auramet").
- Adjusted EBITDA for the quarter was $(0.6) million and adjusted loss was $4.3 million
Q3 2016 Operating Results and Outlook
The following is a summary of the 2016 Q3 production from the
Beta Hunt Mine:
Beta Hunt Mine Q3 Overview (100% basis)
Beta Hunt Gold and
Nickel Operation
|
Q3
2016
|
Q2
2016
|
Q1
2016
|
Gold tonnes mined
(000s)
|
105.0
|
95.4
|
66.2
|
Gold mined
grade1
|
2.10
|
2.481
|
2.41
|
Gold mined
(ounces)1,2
|
7,094
|
7,599
|
5,636
|
Gold tonnes milled
(000s)
|
140.0
|
80.4
|
43.1
|
Gold mill grade
(g/t)1
|
2.24
|
2.23
|
2.65
|
Gold sales
(ounces)
|
7,5705
|
5,402
|
3,416
|
Gold C1 cash
operating cost
(US$ per ounce
sold)3,4
|
$997
|
826
|
n/a
|
Gold all-in
sustaining cost
(US$ per ounce
sold)3,4
|
$1,305
|
1,269
|
n/a
|
Nickel tonnes milled
(000s)
|
13.3
|
19.2
|
29.7
|
Nickel mill grade (%
nickel)
|
2.48
|
2.34
|
3.04
|
Nickel in concentrate
tonnes (000s)
|
0.29
|
0.42
|
0.8
|
Nickel C1 cash
operating cost
(US$ per lb / tonne
sold)4
|
$5.90 /
$13,012
|
$3.67 /
$8,084
|
$2.63 /
$5,808
|
Nickel all-in
sustaining cost (AISC)
(US$ per lb / tonne
sold)5
|
$6.19 /
$13,637
|
$3.88 /
$8,555
|
$2.83 /
$6,229
|
|
|
1.
|
The June 2016
mineralization mine grade and ounces were finalized with the final
results from the Q3 2016 toll, which resulted in lower gold mine
grade (2.48) than previously reported (2.54). The September 2016
mineralization mine grade and ounces will be finalized with the
final results from the Q4 2016 toll. The Q3 numbers provided above
include preliminary estimates of the ROM grade.
|
2.
|
As of September
30, 2016, 5 kt of gold mineralization from September 2016
production remained on the ROM pad for tolling in the subsequent
quarter, compared to 39 kt of gold mineralization from June 2016
production as of June 30, 2016 and 23 kt of gold mineralization
from March 2016 production as of March 31, 2016.
|
3.
|
Gold operations in Q1
2016 were at the early stage of the ramp up towards commercial
production and operating and sustaining costs per ounce are not
comparable to Q2 or to other companies.
|
4.
|
Cash operating cost,
cash operating cost per tonne, and all-in sustaining cost, are not
recognized measures under IFRS. Such non-IFRS financial measures do
not have any standardized meaning prescribed by IFRS and are
therefore unlikely to be comparable to similar measures presented
by other issuers. Management uses these measures internally. The
use of these measures enables management to better assess
performance trends. Management understands that a number of
investors, and others who follow RNC's performance, assess
performance in this way. Management believes that these measures
better reflect RNC's performance and are better indications of its
expected performance in future periods. This data is intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
|
5.
|
Note that 1,730
ounces of gold remained in in-process inventory from the tonnage
milled during the quarter.
|
|
|
Beta Hunt pre-commercial gold sales were 7,570 ounces, a 40%
increase from 5,402 ounces in the prior quarter as several tolls
were completed. Gold tonnes mined also increased by 10% versus the
prior quarter, but came in below expectations and gold mined
production declined by 7% to 7,094 ounces as one-time issues that
emerged late in the quarter and early October in two stopes led to
lower grades and lower volumes than expected. Nickel in concentrate
production from Beta Hunt declined by 31% versus the prior quarter
to 0.29 kt as the mine focused on gold production due to low nickel
prices during 1st half 2016.
Three toll milling campaigns were completed with 139,963 tonnes
of gold mineralization being milled during the quarter. Tolling was
conducted through the FMR Investments Pty Ltd. Mill ("FMR") for the
second and third campaigns resulting in an increase from 89% to 93%
recovery due to the finer grind achieved at FMR compared to the
previous tolling arrangements.
Gold all-in sustaining cash costs increased by just 3% to
$1,305 per ounce despite lower than
expected grades as the increased scale of gold production partially
offset gold cash costs that increased by 21% to US$997 per ounce as lower grades were mined and
approximately 20% of the mill feed in the quarter was lower grade
development material at an average grade of 1.46 g/t. This lower
grade material diluted the average ROM grade material of 2.45 g/t
to 2.24 g/t. The ore grade had been expected to improve during the
quarter but the one-time issues in two stopes led to lower grades
than expected.
Nickel all-in sustaining cash costs increased by 59% to
US$13,637 per tonne (US$6.19 per pound) and nickel cash costs
increased by 62% to US$13,012 per
tonne (US$5.90 per pound) as the
company had deliberately scaled back nickel production due to lower
nickel prices earlier in the year, a focus on gold production, and
a decision to preserve the nickel resource for anticipated higher
nickel price periods. Both gold and nickel costs were also affected
by a stronger Australian dollar.
Beta Hunt Mine Guidance
On a 100% basis, full-year 2016 mined gold production is now
expected to be 29 – 30 koz and nickel production is now expected to
be 1.5 – 2 kt.
The gold production ramp-up at the Beta Hunt Mine is expected to
complete by Q1 2017 and gold mined production is expected to reach
8.5-10,000 ounces during Q4 2016 and achieve an annualized gold
production rate of 60,000 ounces during Q1 2017. Payable gold
production is expected to be in excess of 60,000 ounces during
2017.
Cautionary Statement: The decision by SLM to produce
at the Beta Hunt Mine was not based on a feasibility study of
mineral reserves, demonstrating economic and technical viability,
and, as a result, there may be an increased uncertainty of
achieving any particular level of recovery of minerals or the cost
of such recovery, including increased risks associated with
developing a commercially mineable deposit. Historically, such
projects have a much higher risk of economic and technical failure.
There is no guarantee that that anticipated production costs will
be achieved. Failure to achieve the anticipated production costs
would have a material adverse impact on SLM's cash flow and future
profitability. It is further cautioned that the PEA is preliminary
in nature and includes inferred mineral resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves. . No mining feasibility study has
been completed on Beta Hunt. Mineral resources are not mineral
reserves and do not have demonstrated economic viability. There is
no certainty that the PEA will be realized.
Reed Mine
RNC's acquisition of 100% of VMS Ventures, whose main asset is a
30% interest in the Reed Mine, closed on April 27, 2016.
Reed Mine Q2 2016 Production
For the three months ended September 30,
2016, VMS's 30% share of metal contained in concentrate
production from the Reed Mine was 1.3 kt of copper and 320 oz of
gold.
Reed Mine Q3 2016 Operating Review (100% basis)
|
Q3
2016
|
Q2
2016
|
Q1
2016
|
Ore (tonnes
hoisted)
|
112,929
|
114,452
|
111,461
|
Ore (tonnes
milled)
|
119,795
|
111,002
|
94,997
|
Copper (%)
|
3.59
|
4.87
|
4.38
|
Zinc (%)
|
0.59
|
0.45
|
0.82
|
Gold (g/t)
|
0.42
|
0.60
|
0.54
|
Silver
(g/t)
|
6.61
|
7.47
|
7.21
|
Mine unit operating
cost (CDN$/tonne)
|
$47
|
$44
|
$46
|
Reed Mine Q3 2016 Production and Costs (30%
basis)
|
Q3
2016
|
Q2
2016
|
Copper contained in
concentrate (tonnes)
|
1.3
|
1.5
|
Gold contained in
concentrate (ounces)
|
320
|
402
|
Copper operating cash
cost per pound sold 1
|
US$1.40
|
US$1.21
|
Copper all-in
sustaining cost per pound sold 1
|
US$1.47
|
US$1.35
|
|
|
1.
|
Cash cost and all-in
sustaining cost per pound sold, net of by-product
credits
|
|
|
Production declined as expected from 1.5kt of copper in
concentrate to 1.3 kt of copper in concentrate and cash costs and
all-in sustaining costs rose as average grades during the quarter
fell to 3.59% from 4.87%
Reed Mine 2016 Guidance
Hudbay has not provided production guidance for the Reed Mine.
The following information is RNC's management estimate of
production and costs and remains unchanged from our earlier
guidance. In 2016, RNC expects its 30% share of production from the
Reed Mine to be 4-4.5 kt of copper and 0.5-0.75 koz of gold.
Dumont Project
During Q3 2016, RNC continued its activities in support of the
evaluation of the Dumont Nickel Project. The work program focused
on the bulk test program including both a mineral processing pilot
plant and concentrate roasting, assisting with the EPC proposal
preparation, supporting and following up on the ESIA filing. The
following were the major activities and accomplishments during the
third quarter:
- Roasting Tests: Samples of the Dumont calcine
were sent to potential customers and testing was ongoing through
Q3. Initial feedback on pricing is exceeding expectations – further
feedback expected during the fourth quarter.
- Dumont Project Engineering: Two proposals were
awarded to advance the engineering on the Dumont Project. RNC has
begun preliminary trade-off studies in anticipation of completing
an updated feasibility study for the project when market conditions
are appropriate. These studies continued through the third quarter
and will be completed shortly.
The company continues to advance Dumont to position it to be
able to move forward when nickel market conditions permit. During
the quarter, the first significant investor interest in the project
emerged since nickel market conditions had improved from earlier in
the year. As well, discussions continued with RNC's financial
partners.
Unsecured Debt Facility
In order to provide additional cash cushion until Beta Hunt
becomes cash producing (expected early in Q1 2017), the Company has
entered into a US$2.5 million
unsecured debt facility arranged by Riverfort Global Capital
("Riverfort"). The facility bears 12% annualized interest.
Principal will be repaid, beginning four months after closing, in
eight equal monthly payments of US$234k (in months 4 to 11 following closing) and
a bullet payment of US$625k (in month
12 following closing). As part of the transaction, the Company will
issue 2.9 million 24 month warrants to the Lenders, exercisable at
a strike price of $0.50 per share.
Funding, which is subject to TSX approval and other closing
conditions, is expected to occur on or prior to November 18, 2016.
Financial Results
For the three months ended September 30,
2016, RNC incurred an adjusted loss for the period of
$4.3 million ($0.02 per share), and an adjusted net EBITDA loss
of $0.6 million ($0.00 per share), compared to a $1.6 million adjusted loss ($0.01 per share), and an adjusted net EBITDA loss
of $1.3 million ($0.01 per share) in the same period last year.
RNC incurred a net loss of $8.6
million ($0.03 per share),
compared to a net loss of $1.5
million ($0.01 per share) in
the same period last year. The net loss increase of $7.1 million is due primarily to higher other
expenses ($3.9 million), higher Beta
Hunt mine operating loss ($3.5
million) and higher general and administrative expenses
($0.5 million), partially offset by
Reed Mine operating income ($0.9
million).
The increase in other expenses ($3.9
million) is due primarily to the change in fair value
($2.2 million) and accretion
($0.5 million) of SLM's senior
secured facility, SLM finance costs ($0.5
million), and accretion of VMS's contribution loan from
Hudbay ($0.3 million).
The increase in general and administrative expenses
($0.5 million) is due primarily to
higher share-based payments ($0.3
million), acquisition costs ($0.2
million) on RNC's acquisitions of SLM and VMS, partially
offset by lower business development expenses ($0.3 million).
Highlights of RNC's financial position are as follows (in
millions of dollars):
|
|
|
|
|
|
September 30,
2016
|
June
30,
2016
|
March
31,
2016
|
December 31,
2015
|
Cash
position1
|
10.0
|
9.7
|
7.2
|
9.6
|
Working
capital2
|
(17.9)
|
(12.8)
|
(5.7)
|
7.8
|
Total
assets
|
168.9
|
166.8
|
124.9
|
82.6
|
Shareholder's
equity
|
97.1
|
94.0
|
77.8
|
68.3
|
|
|
1
|
Includes Cash and
Cash equivalents.
|
2
|
Working capital is a
measure of current assets less current liabilities
|
|
|
RNC's ability to operate as a going concern is dependent on its
ability to raise financing. While management has been successful in
securing financing in the past, there can be no assurance that
adequate or sufficient funding will be available in the future, or
available under terms acceptable to RNC.
Conference Call / Webcast
RNC will be hosting a conference call and webcast today
beginning at 10:00 a.m. (Eastern
time).
Live Conference Call and Webcast Access Information:
North American callers please dial: 1-888-231-8191
Local and international callers please dial: 647-427-7450
A live webcast of the call will be available through CNW Group's
website at: www.newswire.ca/en/webcast/index.cgi
A recording of the conference call will be available for replay
for a one week period beginning at approximately 1:00 p.m. (Eastern Time) on November 14, 2016, and can be accessed as
follows:
North American callers please dial: 1-855-859-2056; Pass Code:
11079022
Local and international callers please dial: 416-849-0833; Pass
Code: 11079022
About RNC
RNC is a multi-asset mineral resource company focused primarily
on the acquisition, exploration, evaluation and development of base
metal and precious metal properties. RNC's principal assets are the
producing Beta Hunt nickel and gold mine in Western Australia, the Dumont Nickel Project
located in the established Abitibi mining camp in Quebec and a 30% stake in the producing Reed
Mine in the Flin Flon-Snow Lake region of Manitoba, Canada. RNC also owns a majority
interest in the West Raglan and Qiqavik projects in Northern Quebec. RNC has a strong management
team and Board with over 100 years of mining experience at Inco and
Falconbridge. RNC's common shares
trade on the TSX under the symbol RNX. RNC shares also trade on the
OTCQX market under the symbol RNKLF.
Cautionary Statement Concerning Forward-Looking
Statements
This news release provides certain financial measures that do
not have a standardized meaning prescribed by IFRS. Readers are
cautioned to review the stated information and footnotes regarding
use of non-IFRS measures.
This news release contains "forward-looking information"
including without limitation statements relating to the the
liquidity and capital resources of RNC, production and cost
guidance, the potential of the Beta Hunt and Reed mines, and the
potential of the Dumont, West Raglan and Qiqavik projects.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of RNC to be materially different from
any future results, performance or achievements expressed or
implied by the forward-looking statements. Factors that could
affect the outcome include, among others: failure of the parties to
sign definitive agreements and satisfy conditions of closing;
future prices and the supply of metals; the results of drilling;
inability to raise the money necessary to incur the expenditures
required to retain and advance the properties; environmental
liabilities (known and unknown); general business, economic,
competitive, political and social uncertainties; accidents, labour
disputes and other risks of the mining industry; political
instability, terrorism, insurrection or war; or delays in obtaining
governmental approvals, projected cash costs, failure to obtain
regulatory or shareholder approvals. For a more detailed discussion
of such risks and other factors that could cause actual results to
differ materially from those expressed or implied by such
forward-looking statements, refer to RNC's filings with Canadian
securities regulators available on SEDAR at www.sedar.com.
Although RNC has attempted to identify important factors that
could cause actual actions, events or results to differ materially
from those described in forward-looking statements, there may be
other factors that cause actions, events or results to differ from
those anticipated, estimated or intended. Forward-looking
statements contained herein are made as of the date of this news
release and RNC disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or results or otherwise, except as required by
applicable securities laws.
SOURCE RNC Minerals