Mr. Mark Selby reports

RNC MINERALS REPAYS HUDBAY DEBT TO PROVIDE EARLY ACCESS TO REED MINE CASH FLOW AND PROVIDES BETA HUNT MINE UPDATE

Royal Nickel Corp. (RNC) has signed and closed a $6.5-million (U.S.) secured copper prepayment agreement and $5-million (U.S.) copper purchase and working capital facility with Auramet International LLC. The arrangements have been entered into with respect to RNC's 30-per-cent share of the copper and other metals produced at the Reed mine operated by Hudbay and located in Manitoba.

"The copper prepayment agreement and working capital facility will allow RNC to quickly realize cash flow benefits from the current strong copper price environment. The early repayment of the Hudbay loans will allow RNC the benefit of access to Reed mine cash flow from copper production beginning in January, 2017, much sooner than our prior estimate of [the third quarter of] 2017 made when RNC acquired the 30-per-cent interest in Reed," said Mark Selby, president and chief executive officer of RNC Minerals.

Mr. Selby continued: "We expect that these transactions will attract market attention to the significant value of RNC's interest in the Reed mine at a time when copper prices are showing strong momentum. The transaction also allows RNC to opportunistically lock in favourable copper prices as we have forward priced an average of 700,000 pounds of production per month for December, 2016, and the first six months of 2017 at an average price of $2.49 (U.S.) per pound ($3.33 per pound)."

The structure of the transactions is similar to the refinancing of the Beta Hunt mine debt that RNC completed in early October, which comprised gold prepay and working capital facilities that replaced the prior nickel-weighted Lascaux prepay facility (see RNC's news release dated Oct. 4, 2016). Had the Lascaux debt remained in place, given the run-up in nickel prices during the past eight weeks, the dollar value of the refinanced Lascaux obligations would have been $1-million higher. Also noteworthy is that the dollar value of the gold obligations under the new Beta Hunt gold prepayment arrangements is $4.4-million lower than it was when the transaction closed in early October. Under that transaction, RNC also hedged 1,300 ounces per month of Beta Hunt gold production commencing in February, 2017, and expiring in April, 2018, at $1,728 (Australian) ($1,320 (U.S.)) per ounce.

$6.5-million (U.S.) secured copper prepayment agreement

The $6.5-million (U.S.) copper prepay will be repaid by the delivery of 2.8 million pounds of copper over a 12-month period commencing on Jan. 31, 2017 (200,000 pounds per month). RNC also granted call options to Auramet on two million pounds of copper with a strike price of $3.30 (U.S.) per pound ($4.42 per pound) and expiration dates from September through December, 2017 (500,000 pounds of copper per month).

The security granted to Auramet in connection with the prepay includes a pledge by RNC of its shares in VMS Ventures Inc. (RNC's subsidiary and owner of the company's 30-per-cent interest in Reed). The loan is repayable at any time without penalty.

$5-million copper working capital facility (U.S.)

Auramet has also agreed to provide a $5-million (U.S.) working capital facility (as part of a copper purchase agreement) bearing interest at a rate of LIBOR (London interbank offered rate) plus 4.5 per cent per year. Each month, Auramet will purchase RNC's share of the accountable metal content in the ore extracted from the Reed mine in the prior month and will advance to RNC 95 per cent of the purchase amount.

The closing proceeds from these transactions have been applied to repay all outstanding obligations owed to Hudbay under the construction and bridge loans entered into in connection with the financing of VMS's share of the construction and operation of the Reed mine.

Beta Hunt gold tolling agreement with FMR Investments Pty. Ltd.

Separately, Salt Lake Mining Pty. Ltd., RNC's wholly owned subsidiary, has signed a one-year tolling agreement with FMR Investments, with a minimum of 35,000 tonnes and flexibility to process up to 80,000 tonnes per month of tolling for RNC's Beta Hunt mine, providing sufficient capacity for the mine to ramp up. The FMR mill has achieved consistent gold recoveries of approximately 93 per cent during the three tolls that have been completed at the mill in 2016.

Beta Hunt mine update

Beta Hunt is continuing to meet expectations for the fourth quarter of 2016 with run-of-mine ore grades in line with expectations and mined gold production expected to be within the previously announced range of 8,500 to 10,000 ounces for the fourth quarter. RNC also continues to expect targeted annualized gold production rates of 60,000 ounces per year to be achieved early in the first quarter of 2017 and 2017 gold production in excess of 60,000 ounces.

Beta Hunt continues to make good progress developing the first large stopes to be brought on line. The first large Western Flank stopes, expected to yield in excess of 100,000 tonnes with grades expected in excess of three grams per tonne, will be brought on line during the second half of January, 2017. The first large A zone stope on level 14, expected to yield in excess of 170,000 tonnes at an expected gold grade of 2.6 grams per tonne, is scheduled to be brought on line by March, 2017. A number of smaller, higher-grade stopes also continue to be advanced.

The disclosure of scientific and technical information contained in this news release has been approved by Johnna Muinonen, vice-president, operations, of RNC and Kevin Small, director, mining operations, of RNC, both qualified persons under National Instrument 43-101.

About RNC

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-per-cent 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.

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