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RNC will host a call/webcast on May 16 at 10:00 a.m. (Eastern Time) to discuss Q1 2017 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).
RNC Minerals (TSX: RNX) ("RNC") announces its review of activities and financial results for the quarter ended March 31, 2017. All amounts are expressed in Canadian dollars, unless otherwise noted, and are based on the unaudited financial statements for the quarter ended March 31, 2017.
Mark Selby, President and CEO, commented, "During the first quarter, we announced three significant transactions: offtake and option agreements with Westgold to acquire its SKO mining and milling operations with significant synergies to our Beta Hunt Mine; the formation of a first-of-its-kind 50/50 nickel joint venture with Waterton containing the Dumont project and US$35 million in cash; and the planned spinout of our TNN exploration assets."
Mr. Selby continued. "At Beta Hunt, we are now beginning to see the results of the investments made in mine development over the past year with increasing mine production from new stopes in both the A Zone and Western Flanks. Mining rates in May have averaged 1,590 tonnes per day of gold material, up 38% from Q1 levels. These mining rates represent 70% of our mid-year target to achieve an annualized rate of 60,000 ounces of gold and are on-track to achieve commercial production during the second quarter. As previously disclosed, the Beta Hunt ramp-up was slower than expected during the first quarter due to temporary equipment availability issues and lower than anticipated grades from the initial portion of the first Western Flanks mining stope. This has resulted in lower than planned production in the first quarter and a reduction in our 2017 production guidance to 50-60,000 ounces. To ensure sufficient capital to complete the ramp-up, RNC has agreed to terms for a US$10 milli on four year convertible debt facility, which we expect, subject to closing conditions, to complete by the end of May 2017. With a sufficient level of development now in place, we look forward to successfully completing the ramp-up and a long, profitable future for the Beta Hunt operation."
Q1 2017 and Recent Highlights
-- Gold material mined during the quarter was 1,133 tonnes per
day, up 56% compared to the first quarter of 2016. Gold
production rates have continued to increase during the second
quarter of 2017 and have averaged 1,590 tonnes per day during
the first two weeks of May 2017, up 40% versus Q1 production
rates.
-- Gold grades during the first quarter were adversely impacted by
two one-time issues: (i) lower than anticipated grades from the
initial portion of the first Western Flanks stope
(approximately 1.5 - 1.8 g/t), which have subsequently improved
in line with expectations of 2.5 g/t, and (ii) lower than
expected grades from previously blasted material in the A Zone
which largely averaged between 2 and 2.5 g/t when it was mined
during 2016, but declined to 1.5 g/t during the first quarter
(a decision was made to cease mining that area in February 2017
and focus on new stope development). Since this material was
previously blasted, grade estimates relied on sampling
conducted at surface.
-- During the second quarter of 2017, mine development reached
sufficient levels for the first systematic development of a
"HOF" type zone, the "404" Zone, in the Beta area of the Beta
Hunt Mine. In April, the 404 Zone yielded 92 ounces of gold
from less than 100 kg of hand-sorted material that was crushed
and processed at the mine site (grade of approximately 2.9
percent gold) and a further 40 ounces of gold in specimen stone
that were sold at a premium of in excess of US$300 per ounce to
the spot price. This area continues to be mined during the
current quarter.
-- Beta Hunt first quarter 2017 nickel in concentrate production
was 0.15 kt. As previously reported, nickel production was
reduced due to depressed nickel prices and to focus efforts on
gold production.
-- Beta Hunt pre-commercial gold production was 5,535 ounces in
the first quarter of 2017 and gold sales were 6,132 ounces.
Commercial production of gold is expected to commence during
the second quarter of 2017.
-- For the first quarter of 2017, as gold grades and volumes were
lower than expected, gold cash costs net of by-product credits
were US$1,647 per ounce sold, and all-in sustaining costs net
of by-product credits were US$1,685 per ounce sold. As
production volumes ramp up and grades improve through the year,
costs are expected to decline towards target levels.
-- Reed Mine first quarter 2017 copper contained in concentrate
was 1.9 million pounds (0.85 kt) (30% basis). Grades during the
first quarter were lower than planned and, as a result, cash
costs were higher than expected at US$2.06 per pound sold and
all-in sustaining costs were US$2.10 per pound sold. Production
and costs are expected to be in line with 2017 guidance for the
balance of the year. RNC's share of gold in concentrate
production for the first quarter of 2017 from the Reed Mine was
283 ounces.
-- Combined operating loss from Beta Hunt and Reed Mine was $1.4
million for the three months ended March 31, 2017. Until
commercial production is declared, Beta Hunt gold cost of
sales, net of gold revenue, are capitalized to property, plant
and equipment.
-- RNC incurred a net loss of $4.4 million ($0.02 per share) for
the three months ended March 31, 2017, compared to a net loss
of $1.6 million ($0.01 per share) for the same period in 2016,
due largely to losses from derivative instruments due to
increases in gold and copper prices relative to RNC's
outstanding forward sales contracts.
-- On February 13, 2017, RNC announced it had reached a toll
processing agreement and asset purchase option with Westgold
Resources Limited for its South Kalgoorlie Operation.
-- On March 7, 2017, RNC announced that it had agreed with Focused
Capital Corp. to spin out True North Nickel ("TNN") into a
public entity via a reverse take-over of Focused. RNC also
announced that TNN had entered into an option agreement with
Carolina Gold Resources in respect of two U.S. gold properties,
which will be included in the spun-out TNN assets. The
transaction is expected to close during the second quarter of
2017.
-- On April 20, 2017, RNC closed a transaction under which
Waterton Precious Metals Fund II Cayman, LP and Waterton Mining
Parallel Fund Onshore Master, LP (collectively "Waterton")
acquired 50% of RNC's interest in the Dumont Nickel Project for
US$22.5 million (C$30 million) in cash. RNC and Waterton
contributed US$17.5 million (C$23 million) into a newly
established joint venture vehicle that owns Dumont and will
pursue other nickel opportunities.
-- On May 2, 2017, RNC announced the signing of an Impact and
Benefit Agreement (IBA) for the Dumont Nickel Project with
Abitibiwinni First Nation (AFN). The IBA serves as a framework
to govern the relationship with the AFN and lays out the
commitments of the parties regarding the impacts and benefits
of the Dumont Project.
Convertible Debt Facility
RNC has agreed to terms on a US$10 million convertible four-year debt facility (the "Facility"). The Facility will: (i) bear interest at a rate of 10% per annum payable quarterly; (ii) be subject to a one-time 2% structuring fee to be paid at closing; (iii) subject to certain limitations, be pre-payable by RNC (with the payment of applicable pre-payment penalties); (iv) subject to certain limitations, be convertible at the election of the lender into shares of RNC (at a 25% premium to the RNC share price over the applicable VWAP period); and (v) be fully repayable at expiry of the four year term (subject to pre-payment, conversion or other early termination).
Closing of the Facility, which is expected to occur by the end of May 2017, is subject to TSX approval and other specified conditions. Proceeds of the Facility will be used to fund the completion of ramp-up of the RNC Beta Hunt gold mine and for general RNC corporate purposes. RNC will confirm closing, and related material details, by news release once completed.
Q1 2017 Results and Outlook
The following is a summary of Q1 2017 Production from Beta Hunt Mine:
Beta Hunt Gold and Nickel
Operation Q1 2017 Q1 20166
------------------------- ------- --------
Gold tonnes mined (000s) 102 66.2
----------------------- --- ----
Gold mined grade (g/t)(1) 1.69 2.41
------------------------- ---- ----
Gold tonnes milled (000s) 69.2 43.1
------------------------ ---- ----
Gold mill grade (g/t)(1) 1.62 2.65
------------------------ ---- ----
Gold mined (ounces)1,2 5,535 5,636
---------------------- ----- -----
Gold sales (ounces) 6,132 3,416
------------------ ----- -----
Nickel tonnes mined (000s) 6.8 29.4
------------------------- --- ----
Nickel tonnes milled (000s) 6.8 29.7
-------------------------- --- ----
Nickel mill grade, nickel (%) 2.51 3.04
---------------------------- ---- ----
Nickel in concentrate tonnes
(000s) 0.15 0.8
---------------------------- ---- ---
Beta Hunt Gold and Nickel
Operation Q1 2017
------------------------- -------
Gold all-in sustaining cost,
net of by-product credits
(US$ per ounce sold)3,4,5 $1,685
---------------------------- ------
Gold C1 cash operating cost,
net of by-product credits
(US$ per ounce sold)3,4,5 $1,647
---------------------------- ------
Nickel C1 cash operating cost
(US$ per lb. sold)4 $2.97
----------------------------- -----
Nickel C1 cash operating cost
(US$ per tonne sold)4 $6,541
----------------------------- ------
Nickel all-in sustaining
cost (AISC) (US$ per lb.
sold)4 $3.00
------------------------- -----
Nickel all-in sustaining
cost (AISC) (US$ per tonne
sold)4 $6,618
--------------------------- ------
1. The difference in gold sales
ounces and gold mined ounces is
due to the receipt of gold sales
in January 2017 from ore milled
in December 2016.
2. As of March 31, 2017, 33 kt of
gold mineralization from Q1 2017
production remained on the ROM
pad for tolling in the
subsequent quarter, compared to
22 kt of gold mineralization
from December 2016 production as
of December 31, 2016.
3. Gold operations in the first
quarter of 2017 were in the ramp
up stage towards commercial
production and operating and
sustaining costs per ounce are
not comparable to other
companies.
4. All-in sustaining cost, net of
by-product credits, cash
operating cost, net of by-
product credits, cash operating
cost, cash operating cost per
tonne, all-in sustaining cost,
and all-in sustaining cost per
tonne 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. Excluding in each case typical
inventory adjustments of C$1.6
million as of March 31, 2017.
6. In the quarter ended March 31,
2016 the Beta Hunt Mine was 66%
owned during the fifteen day
period commencing March 16,
2016. The table is a summary of
the Q1 Production from the Beta
Hunt Mine reported on a 100%
basis.
The first quarter of 2017 continued to be a period of transition for the Beta Hunt Mine as it ramped up gold production and prepared for commencement of commercial production expected during the second quarter of 2017. Until commercial production is declared, Beta Hunt gold cost of sales, net of gold revenue, are capitalized to property, plant and equipment. As previously disclosed, the Beta Hunt production ramp-up was slower than expected due to temporary equipment availability issues and lower grades than expected from the initial portion of first Western Flanks mining stope resulting in lower than planned grades and lower than planned gold production in the first quarter of 2017. Subsequent to the end of the first quarter, grades from the first Western Flanks stope have shown significant improvement and development rates, mine output and grade all continue to improve and are expected to continue to improve quarter-over-quarter for the remainder of 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. 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.
Beta Hunt Mine GuidanceDue to slower than anticipated ramp-up in the first quarter, full year 2017 gold production is now expected to be 50-60,000 ounces at an all-in-sustaining-cost of US$1,100-1,200 per ounce. During 2017, it is expected that costs will initially be higher and then decrease as production levels rise. Target all-in-sustaining cost levels of US$900-1,000 are expected to be achieved by the fourth quarter of 2017. Costs will also be affected by the level of nickel production which continues to be subject to market conditions.
Reed MineRNC'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 Q1 2017 ProductionFor the three months ending March 31, 2017, VMS's 30% share of metal contained in concentrate production from the Reed Mine was 0.85 kt of copper and 283 oz of gold. Grades were lower than expected as lower grade production blocks came on plan slightly earlier than expected. Guidance for the full year remains unchanged.
Reed Mine Q1 2017 Operating Review (100% basis)
Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
------- ------- ------- ------- -------
Ore
(tonnes
hoisted) 119,534 104,719 112,929 114,452 111,461
-------- ------- ------- ------- ------- -------
Ore
(tonnes
milled) 108,139 123,596 119,795 111,002 94,997
------- ------- ------- ------- ------- ------
Copper
(%) 2.96 2.90 3.59 4.87 4.38
------ ---- ---- ---- ---- ----
Zinc
(%) 0.67 0.63 0.59 0.45 0.82
---- ---- ---- ---- ---- ----
Gold
(g/
t) 0.44 0.44 0.42 0.60 0.54
---- ---- ---- ---- ---- ----
Silver
(g/
t) 5.64 5.76 6.61 7.47 7.21
------ ---- ---- ---- ---- ----
Reed Mine Q1 2017 Production and Costs (30% basis)
Q1 2017
-------
Copper contained in
concentrate (kilo tonnes) 0.85
-------------------------- ----
Gold contained in concentrate
(ounces) 283
----------------------------- ---
Copper cash operating cost per
pound sold (1) $2.06
------------------------------ -----
Copper all-in sustaining cost
per pound sold (1) $2.10
----------------------------- -----
1. Cash operating cost per pound,
and all-in sustaining cost per
pound, 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.
Reed Mine 2017 Guidance In 2017, RNC expects its 30% share of production from the Reed Mine to be 4-5 kt of copper and 0.8-1.1 koz of gold. Hudbay Minerals (the operator) has not provided guidance for the Reed Mine. The above guidance is RNC management's estimate of our expected 30% share of 2017 production.
Dumont Nickel ProjectOn April 20, 2017, RNC closed a transaction under which Waterton Precious Metals Fund II Cayman, LP and Waterton Mining Parallel Fund Onshore Master, LP (collectively "Waterton") acquired 50% of RNC's interest in the Dumont Nickel Project for US$22.5 million (C$30 million) in cash. RNC and Waterton contributed US$17.5 million (C$23 million) into a newly established joint venture vehicle that owns Dumont and will pursue other nickel opportunities. US$5 million of this amount is allocated to Dumont-related carrying costs and other expenses incurred over the next four years (expected to include the cost of an updated feasibility study).
Financial ResultsRNC incurred a net loss of $4.4 million for the three months ended March 31, 2017 (with basic and diluted loss per share of $0.02). This compares with a net loss of $1.6 million (with basic and diluted earnings per share of $0.01) for the three months ended March 31, 2016. The net loss increase of $2.8 million is due primarily to an increase of other expenses totaling $2.4 million year over year.
Highlights of RNC's financial position are as follows (in millions of dollars):
March 31, 2017 March 31, 2016
-------------- --------------
Cash position(1) $3.6 $4.8
Working capital deficit(2) $(41.6) $(26.2)
Total assets $161.9 $159.3
Shareholder's equity $83.8 $87.9
-------------------- ----- -----
1 Includes Cash and Cash
equivalents.
2 Working capital deficit 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 May 16, 2017, and can be accessed as follows: North American callers please dial: 1-855-859-2056; Pass Code: 21761124Local and international callers please dial: 416-849-0833; Pass Code: 21761124
About RNC MineralsRNC 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 gold and nickel 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 contains "forward-looking information" including without limitation statements relating to the liquidity and capital resources of RNC, production guidance and the potential of the Beta Hunt and Reed mines as well as the and the potential of the Dumont development project and Qiqavik, West Raglan, Jones-Keystone Loflin and Landrum-Faulkner exploration properties.
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: 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 actu al results to differ materially from those expressed or implied by such forward-looking statements, refer to RNC's filings with Canadian securities regulators, including the most recent Annual Information Form, 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
View original content: http://www.newswire.ca/en/releases/archive/May2017/16/c5807.html
SOURCE: RNC Minerals
Rob Buchanan, Director, Investor Relations, T: (416) 363-0649, www.rncminerals.com;
Melanie Corriveau (French contact), Community Relations Coordinator, T: (819)
727-3777
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