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New look RNC Minerals continuing to deliver as it integrates Higginsville gold operation

Snapshot

The group was transformed with the Higginsville acquisition completed in the summer of 2019

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Price: 0.405 CAD

TSX:RNX
Market: TSX
Market Cap: $245.64 m
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  • New and experienced management

  • Increasing production at both gold operations 

  • Operating in mining-friendly jurisdictions

What RNC Minerals does:

The new-look RNC Minerals Corp (TSE:RNX) is a mining group focused on becoming a high quality, gold producer in Western Australia, following the transformational Higginsville acquisition in the summer of 2019.

The key recent focus has been the integration of its Beta Hunt gold mine with the recently acquired Higginsville gold operation (HGO) in Western Australia, which included a low-cost 1.4 million tonne-per-annum (tpa) processing plant.

The acquisition also brought with it a 367,000-ounce historical reserve within a 1.2 million ounce historical measured and indicated gold resource on a 386 sq km land package in the Kalgoorlie gold region. Exploration has been carried out and will continue at both Higginsville and Beta Hunt.

At Beta Hunt, the focus will continue to be finding gold and nickel drill targets based on historic (and current) drill holes. The project already boasts a measured and indicated (M&I) resource of 944,000 ounces of gold.

RNC also has a 28% stake in the joint venture that owns the Dumont nickel project, which is in the established Abitibi mining camp in Quebec. RNC also owns a 24% interest in explorer Orford Mining, which is focused on underexplored areas in northern Quebec.

How is it doing:

The acquisition of HGO completed in June this year, with a price tag of US$35 million (A$50 million) comprising A$25 million of cash and A$25 million in shares. The mill has a replacement value of US$100 million. There is an around a 2.3 year payback on mill-cost savings alone.

In August this year, the miner said it was already seeing a 25% reduction in processing costs from Beta Hunt material, due to the acquisition, as it posted second-quarter numbers. In the third-quarter to end-September, which included the first full three months of mill usage, saw a 35% cost reduction. 

In the same month, the firm revealed it had carried out the first mining at Higginsville’s Baloo open pit - a second source of mill feed. Baloo is expected to supply nearly 30,000 tons per month until the end of 2019.

RNC also hit a major milestone at the Dumont joint venture earlier this year, with an updated feasibility study outlining a large scale, low-cost operation with a US$290 million net present value (NPV).  Production is expected to be around 1.2 million tons of nickel in concentrate over a 30-year life with an initial capital expenditure of US$1 billion.

In October, the firm said that it thought it had found at Beta Hunt - where there is significant potential for resource expansion - a so-called pocket of 3,200 ounces of coarse gold. The discovery was made at the 15 Level A Zone at the mine, around 30 metres north of the Father's Day Vein discovery that was uncovered last year.

"These high-grade gold occurrences provide additional cash generation beyond what is forecasted by our steady-state mine model, which excludes these high-grade zones," the company said.

In the third quarter to end September, RNC produced a consolidated total of 24,216 ounces of gold at an all-in-sustaining cost (AISC) of US$1,183 an ounce.

That compared to 23,872 ounces in the same period of 2018 at an AISC of US$1,009 per ounce. Notably, in the whole first half of this year 13,946 ounces of the yellow metal were produced. Cash operating costs went down to US$938 an ounce versus US$955 an ounce a year ago.

The company also said that it was well-positioned to achieve its six-month production and cost guidance, which remains unchanged at 42,000 to 49,000 ounces of gold at an average AISC of US$1,150 to US$1,250 per ounce to-end December.

In addition, a maiden proven and probable Reserve estimate for Beta Hunt is on track to be published in the fourth quarter of this year, which will incorporate many of the identified bulk mining opportunities at the Western Flanks zone.

Inflection points:

  • Continued increase in output/reduction of costs
  • More exploration success
  • Maiden reserve estimate for Beta Hunt

What the boss says:

Commenting with RNC's third-quarter results, chief executive Paul Huet said that with a "significantly" strengthened balance sheet and quarter-end cash balance of $24.8 million,  RNC Minerals was now 'completely transformed'."

"In a very short time, RNC has evolved from a single mine producer subject to high-cost toll milling to a company with two producing mines feeding a low-cost centralized mill," he added.

"The results returned during the first 90 days following the acquisition of our mill are just the beginning of continued productivity and cost improvements underway across all of our operations."

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RNC Minerals undergoing a 40,000 meter drilling campaign on gold project

RNC Minerals (CVE: RNX) CEO Mark Selby spoke with Proactive Investors at the Prospectors & Developers Association of Canada in Toronto. The company has a 100% interest in the Beta Hunt gold mine located in Western Australia. RNC is currently completing a 40,000 metre drill program, the...

on 6/3/19

4 min read