RNC will host a call/webcast on April 3 at 10:00 a.m.
(Eastern Time) to discuss 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, April 3, 2017 /CNW/ - RNC Minerals (TSX: RNX)
("RNC") announces its review of activities and financial results
for the year ended December 31, 2016.
All amounts are expressed in Canadian dollars, unless otherwise
noted, and are based on the audited financial statements for the
year ended December 31, 2016, unless
otherwise noted.
Mark Selby, President and CEO,
commented, "RNC has been very active seeking to build shareholder
value by advancing our long-held strategy of building a
high-quality portfolio of precious and base metal assets. To this
end, RNC has completed and entered into a series of transactions
that will allow RNC to generate cash and unlock value from our
portfolio of production, development, and exploration assets as we
progress through 2017. As previously announced, production from our
Beta Hunt Mine fell short of our guidance during 2016. We
implemented a management change at the beginning of Q4 2016 in
order to get the mine back on track, and we expect to achieve our
initial goals for the operation by mid-year 2017. We are also
actively moving to create value from our other assets through: our
recent announcements of a first-of-its-kind 50/50 joint venture
with Waterton to build a nickel business through the continued
advancement of Dumont and the opportunistic acquisition of nickel
assets with a focus on unlocking value from roasted nickel
concentrate; and the spin out of highly prospective exploration
assets into a self-funded company to be listed on the TSX venture
exchange in the near future."
2016 and Recent Highlights
- As a result of two transactions announced in early 2016, RNC
transformed itself from a single nickel project development company
to a multi-asset producer of gold, nickel, and copper. To recognize
the evolution and better reflect its asset base, RNC began
operating under the name RNC Minerals in September 2016.
- Beta Hunt pre-commercial gold production was 27,882 ounces in
2016, including 7,553 ounces in the fourth quarter. Gold sales were
20,958 ounces in 2016, including 4,571 ounces in the fourth
quarter. Gold sales in 2016 were impacted by the completion of a
toll of material mined in 2016 that was not completed until early
2017. The mine remains in ramp-up phase. Commercial
production of gold is expected to commence during the second
quarter of 2017. As previously reported, Beta Hunt gold production
came in lower than expectations. New management was put in place on
October 1, 2016 to make the changes
required to achieve targeted run rates of in excess of 60 kilo
ounces per annum ("kozpa"). For 2016, gold cash costs net of
by-product credits were US$1,331 per
ounce sold and all-in sustaining costs net of by-product credits
were US$1,608 per ounce sold (see
note 5 to below Beta Hunt Gold and Nickel Operation table). As
previously reported, throughput levels and costs were adversely
affected by lower than expected development rates, which delayed
access to new stopes, and equipment availability issues, which
impacted both development rates and throughput levels.
- Beta Hunt 2016 nickel in concentrate production was 1.8 kt. As
previously reported, Management reduced nickel production due to
depressed nickel prices and in order to focus on gold
production.
- Reed Mine 2016 copper and gold contained in concentrate was 7.5
MM lbs. (3.4 kt) and 935 ounces (30% basis), respectively for the
April 27, 2016 to December 31, 2016 period. Cash costs were
US$1.40 per pound sold and all-in
sustaining costs were US$1.49 per
pound sold.
- On September 19, 2016, RNC
announced the discovery of two new high grade gold mineralized
zones at its TNN subsidiary's Qiqavik Project in Northern Quebec. Prospecting in 2016 resulted
in the discovery of two new intrusion-related high grade gold
occurrences, the Aurora and Esperance zones, yielding multiple
surface grab samples ranging from 5 to 189 g/t gold and up to 10%
copper. The new discoveries extended the district-scale mineralized
trend at Qiqavik to over 40 km, more than doubling the known extent
of the trend.
- RNC also successfully restructured the two financing facilities
it inherited when it completed the SLM and VMS acquisitions earlier
in 2016. RNC replaced the existing Beta Hunt credit facility with a
US$16.5 million senior secured gold
loan and a US$7 million working
capital facility entered into with Auramet International LLC
("Auramet"). RNC also replaced the Reed facility with a
US$6.5 million senior secured copper
loan and a US$5 million working
capital facility entered into with Auramet.
- Combined operating loss from Beta Hunt and Reed Mine was
$0.1 million for the year ended
December 31, 2016. Until commercial
production is declared, Beta Hunt gold cost of sales, net of gold
revenue, are capitalized to property, plant and equipment.
- Adjusted EBITDA1 loss for the year ended
December 31, 2016 was $4.5 million or $0.02
cents per share. RNC incurred a net loss of $28.6 million ($0.13 per share) for the year ended December 31, 2016, compared to a net loss of
$5.6 million ($0.04 per share) for the same period in 2015, due
largely to a number of one-time items and write-downs related to
the acquisitions of SLM and VMS (based on market and operating
assumptions on the date of acquisition, not current market and
operating assumptions) and the recent sale of 50% of Dumont to
Waterton (described below). These figures also include the review
and amendment of the method of allocation between nickel extraction
and gold operations ramp-up during the fourth quarter of 2016.
Subsequent to the end of the quarter, RNC announced the
following significant transactions:
- On February 13, 2017, RNC
announced it had reached a toll processing rights and asset
purchase option with Westgold Resources Limited ("Westgold"). Under
the agreement, in exchange for a tolling rights payment of
A$3 million (to be satisfied with RNC
shares), Westgold granted RNC access to 50% of its South Kalgoorlie
Operations ("SKO") plant capacity for a twelve-month period
commencing July 1, 2017. Upon
commencement of toll processing, RNC will pay Westgold processing
fees on a fixed plus variable arrangement on commercial terms.
Westgold also granted RNC a six-month option to purchase SKO,
including all existing mining, milling and infrastructure, for
A$80 million. RNC will pay Westgold
an option fee of A$4.0 million (5% of
the Purchase Price), also to be satisfied with RNC shares. This fee
will be deducted from the purchase price on an exercise of the
option. RNC will issue a total of 23.4 million shares to secure
these tolling rights and the initial option to acquire SKO. In the
event RNC elects to exercise the option, the remaining purchase
price would be satisfied with a combination of cash and RNC common
shares (with the share portion increasing Westgold's ownership
interest up to 19.9% of RNC).
- 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
("RTO") 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. Following completion of the RTO, the resulting issuer will
hold all of TNN's assets and conduct the business of TNN.
- On March 21, 2017, RNC entered
into a contribution agreement under which Waterton Precious Metals
Fund II Cayman, LP and Waterton Mining Parallel Fund Onshore
Master, LP (collectively "Waterton") will, subject to the
satisfaction of certain closing conditions, acquire 50% of RNC's
interest in the Dumont Nickel Project for US$22.5 million (C$30
million) in cash. RNC and Waterton will each also contribute
US$17.5 million (C$23.3 million) into a newly established joint
venture vehicle that will own Dumont and pursue other nickel
opportunities. US$5 million of this
amount will be allocated to Dumont-related carrying costs and other
expenses incurred over the next four years (expected to include the
cost of an updated feasibility study).
|
|
1.
|
EBITDA is a non-IFRS
measure. Please refer to "Adjusted EBITDA and Adjusted EBITDA per
share" section of RNC's Management Discussion & Analysis for
the period ended December 31, 2016.
|
|
|
2016 Results and Outlook
For the year ended December 31,
2016 the Beta Hunt Mine was not 100% owned until
May 31, 2016. The following is a
summary of the 2016 Production from Beta Hunt Mine:
Beta Hunt Gold and
Nickel Operation
|
YTD
|
Q4
2016
|
Q3
2016
|
Q2
2016
|
Q1
2016
|
Gold tonnes mined
(000s)
|
371
|
104
|
105
|
95.4
|
66.2
|
Gold mined grade
(g/t)1
|
2.3
|
2.26
|
2.102
|
2.481
|
2.41
|
Gold tonnes milled
(000s)
|
354
|
89.96
|
140.0
|
80.4
|
43.1
|
Gold mill grade
(g/t)1
|
2.29
|
2.26
|
2.24
|
2.23
|
2.65
|
Gold mined
(ounces)1,2
|
27,882
|
7,553
|
7,094
|
7,599
|
5,636
|
Gold sales
(ounces)
|
20,958
|
4,571
|
7,570
|
5,401
|
3,416
|
Nickel tonnes mined
(000s)
|
73.3
|
11.7
|
13.1
|
19.1
|
29.4
|
Nickel tonnes milled
(000s)
|
73.9
|
11.7
|
13.3
|
19.2
|
29.7
|
Nickel mill grade,
nickel (%)
|
2.72
|
2.80
|
2.48
|
2.34
|
3.04
|
Nickel in concentrate
tonnes (000s)
|
1.80
|
0.29
|
0.29
|
0.42
|
0.8
|
Beta Hunt Gold and
Nickel Operation
|
YTD
|
Gold all-in
sustaining cost, net of by-product credits (US$ per ounce
sold)3,4,5
|
$1,608
|
Gold C1 cash
operating cost, net of by-product credits (US$ per ounce
sold)3,4,5
|
$1,331
|
Nickel C1 cash
operating cost (US$ per lb. sold)4
|
$2.20
|
Nickel C1 cash
operating cost (US$ per tonne sold)4
|
$4,854
|
Nickel all-in
sustaining cost (AISC) (US$ per lb. sold)4
|
$2.23
|
Nickel all-in
sustaining cost (AISC) (US$ per tonne sold)4
|
$4,927
|
|
|
1.
|
The difference in
gold sales ounces and gold mined ounces is due to a delay in
reporting outturns from the Perth Mint in the last two weeks of
December 2016. The outstanding gold sales occurred in Q1
2017.
|
2.
|
As of December 31,
2016, 22 kt of gold mineralization from December 2016 production
remained on the ROM pad for tolling in the subsequent quarter,
compared to 5 kt of gold mineralization from September 2016
production as of September 30, 2016.
|
3.
|
Gold operations in
2016 were at the early stage of the ramp up 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 inventory adjustments of C$4.3 million as of December 31,
2016.
|
|
|
2016 was a period of transition for the Beta Hunt Mine as it
ramped up gold production and prepared for commencement of
commercial production expected by mid-2017. Until commercial
production is declared, Beta Hunt gold cost of sales, net of gold
revenue, are capitalized to property, plant and equipment.
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 Guidance
Full year 2017 gold production
is expected to be 65-70,000 ounces at an all-in-sustaining-cost of
$US900-1,000 per ounce. During 2017,
it is expected that costs will initially be higher and then
decrease as production levels rise. Costs will also be affected by
the level of nickel production which continues to be subject to
market conditions.
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 2016 Production
For the year ended
December 31, 2016, VMS's 30% share of
metal contained in concentrate production from the Reed Mine was
5.0 kt of copper and 1,357 oz of gold. Production from the mine
continued to be robust with mined tonnes consistent year-over-year,
grades 26% higher than 2015, and AISC cash costs per pound of
$1.49. Mined grades for Q4 were lower
as expected, than the record grades achieved in the second quarter
of the year, as the mine moved into lower grade production
blocks.
Reed Mine Q4 2016 Operating Review (100% basis)
|
Q4
2016
|
Q3
2016
|
Q2
2016
|
Q1
2016
|
Q4
2015
|
Q3
2015
|
Q2
2015
|
Q1
2015
|
Ore (tonnes
hoisted)
|
104,719
|
112,929
|
114,452
|
111,461
|
119,183
|
113,043
|
112,505
|
118,645
|
Ore (tonnes
milled)
|
123,596
|
119,795
|
111,002
|
94,997
|
114,835
|
115,741
|
109,429
|
122,609
|
Copper (%)
|
2.90
|
3.59
|
4.87
|
4.38
|
3.51
|
3.18
|
3.12
|
2.81
|
Zinc (%)
|
0.63
|
0.59
|
0.45
|
0.82
|
0.88
|
1.48
|
0.93
|
0.68
|
Gold (g/t)
|
0.44
|
0.42
|
0.60
|
0.54
|
0.49
|
0.50
|
0.59
|
0.60
|
Silver
(g/t)
|
5.76
|
6.61
|
7.47
|
7.21
|
7.56
|
6.55
|
6.21
|
6.68
|
Reed Mine 2016 Production and Costs (30% basis)
|
2016
|
Copper contained in
concentrate ( kilo tonnes)
1
|
5.0
|
Gold contained in
concentrate (ounces) 1
|
1,357
|
Copper cash operating
cost per pound sold 2
|
$1.40
|
Copper all-in
sustaining cost per pound sold 2
|
$1.49
|
|
|
1.
|
RNC closed the
acquisition of its interest in Reed on April 27, 2016. Production
figures are full year 30% share of production attributable to
VMS
|
2.
|
Cash cost and all-in
sustaining cost per pound sold, net of by-product credits. Costs
above are for the April 27 – December 31, 2016 period.
|
|
|
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 Project
RNC continues to explore all
financing and partnership opportunities to allow Dumont to advance
to construction when market conditions permit. As described above,
RNC recently announced that it had entered into a contribution
agreement under which, subject to the satisfaction of certain
closing conditions, Waterton will acquire 50% of RNC's interest in
Dumont for US$22.5 million
(C$30 million). RNC and Waterton will
each also inject US$17.5 million
(C$23 million) into a newly
established joint venture vehicle owned 50/50 by RNC and Waterton
that will own 100% of Dumont and have US$35
million in cash to continue to advance Dumont and pursue
other nickel opportunities. US$5
million of this amount will be allocated to Dumont-related
carrying costs and other expenses to be incurred over the next four
years and is expected to include the cost of an updated feasibility
study.
Financial Results
RNC incurred a net loss of
$28.6 million ($0.13 per share) for the year ended December 31, 2016 compared to a net loss of
$5.6 million ($0.04 per share) for the same period in 2015. The
net loss increase of $23.0 million is
due primarily to impairment charges ($17.4
million), higher general and administrative expenses
($5.7 million) and losses on retired
debt ($6.3 million).
Highlights of RNC's financial position are as follows (in
millions of dollars):
|
December 31,
2016
|
December 31,
2015
|
Cash
position1
Working
capital2
Total
assets
Shareholder's
equity
|
$4.8
$(26.2)
$159.3
$87.8
|
$9.6
$7.8
$82.6
$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 April 3, 2017, and can be accessed as
follows:
North American callers please dial: 1-855-859-2056; Pass Code:
93508509
Local and international callers please dial: 416-849-0833; Pass
Code: 93508509
About RNC Minerals
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 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 actual 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