Mr. Mark Selby reports
RNC ANNOUNCES YEAR END 2017 RESULTS
Royal Nickel Corp. has provided its review of activities and financial results for the year ended Dec. 31, 2017. All amounts are expressed in Canadian dollars, unless otherwise noted, and are based on the audited financial statements for the year ended Dec. 31, 2017.
Mark Selby, president and chief executive officer, commented: "RNC announced an important shift on March 22, that its central strategic focus going forward will be the advancement of the Dumont nickel-cobalt project, which is the largest undeveloped nickel and cobalt reserve in the world and one of the few large-scale shovel-ready projects positioned to deliver large quantities of nickel and cobalt to market in the next few years. This should allow RNC shareholders to participate in the excellent future for nickel and cobalt enhanced by the growth of electric vehicles over the next few years."
Mr. Selby also commented: "With the shift in focus, the Beta Hunt mine is considered to be non-core to RNC. A strategic alternatives process is under way, which may include the sale of all or a portion of Beta Hunt. Several parties have already expressed interest in participating in the process, which we expect to be completed by early Q3 2018. For accounting purposes, RNC has taken a non-cash charge to write down its investment in Beta Hunt based on the depletion of the historical resource estimate released in February, 2016. An updated resource including the drilling completed in 2017 is expected to be released shortly."
Mr. Selby continued: "Quarter-over-quarter production improvements at Beta Hunt are expected to continue during 2018. March, 2018, production rates of approximately 2,200 tonnes per day will drive record monthly production and a fifth consecutive quarter-over-quarter production increase in the first quarter of 2018. A further increase is expected in the second quarter with payable gold production expected to reach an annualized rate of approximately 63,000 payable ounces. Nickel production is also expected to improve during the second quarter to approximately 800,000 pounds as the first nickel from the newly developed 1826 area has been produced with grades in excess of 3.5 per cent, contributing to improved cash flows during the second quarter. In light of the strategic alternatives process under way for Beta Hunt, RNC will not be providing full-year 2018 production guidance."
and recent highlights
Gold sales were 33,578 ounces in 2017, up 60 per cent compared with 20,958 ounces in 2016, including 12,896 ounces in the fourth quarter. Commercial production of gold commenced on July 1, 2017. As previously reported, throughput levels and costs were adversely affected as slower than expected ramp-up in development activity and equipment availability issues delayed new production stopes. Reference is made to the non-IFRS (international financial reporting standards) measures section in RNC's management's discussion and analysis (MD&A) for the period ended Dec. 31, 2017.
Beta Hunt 2017 nickel in concentrate production was 800 tonnes. As previously reported, management reduced nickel production during the first half of 2017 due to depressed nickel prices and in order to focus on gold production.
Mined gold production at Beta Hunt during the fourth quarter was 12,722 ounces, up 21 per cent compared with 10,489 ounces in the third quarter of 2017. Gold tonnes mined were 160 kilotonnes (kt) in the fourth quarter of 2017, up 10 per cent compared with 146 kt in the third quarter of 2017. Gold sales were 12,896 ounces, an increase of 49 per cent compared with 8,659 ounces sold in the third quarter of 2017.
For 2017, gold mining cash cost per ounce decreased to $763 in December, 2017, and $882 in the fourth quarter of 2017 versus $1,347 in the first quarter of 2017 as throughput and grades improved during the year. All-in sustaining costs net of byproduct credits were $1,617 (U.S.) per ounce sold, compared with $1,608 (U.S.) in 2016 as lower average grades for the overall year largely offset higher production rates. Two thousand seventeen costs reflect the average grade milled of 2.16 grams per tonne and production rate of 1,400 tonnes per day which are much lower than the 2.39 g/t grade milled and production rate of 1,700 tpd in the fourth quarter of 2017 and the 2.7 g/t milled and 1,900 tpd production rate in December, 2017. Unit costs are expected to decline with higher production volumes and grades through 2018. Reference is made to the non-IFRS measures section in RNC's MD&A for the period ended Dec. 31, 2017.
Reed mine 2017 copper contained in concentrate production was 9.9 million pounds (4,500 t) (30-per-cent basis) compared with the 2016 period of 7.5 million pounds (3,400 t) (30-per-cent basis). Cash costs increased by 25 per cent to $1.75 (U.S.) per pound sold and all-in sustaining costs increased by 20 per cent to $1.79 (U.S.) per pound sold, compared with $1.40 (U.S.) and $1.49 (U.S.) in 2016. The corporation's share of gold in concentrate production for 2017 from the Reed mine was 1,194 ounces. Reference is made to the non-IFRS measures section in RNC's MD&A for the period ended Dec. 31, 2017.
On Oct. 30, 2017, the corporation reported that Orford Mining announced the results of a successful summer 2017 gold exploration program at its high-grade gold Qiqavik project. Drilling has supported the subsurface extent of the structures and the mineralization associated with the 2016 surface gold discoveries at Esperance, Esperance West and Aurora. Additionally, five new high-grade gold surface prospecting discoveries were made that remain untested by drilling.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the year ended Dec. 31, 2017, was a loss of $12.2-million or four cents per share compared with a loss of $4.5-million or two cents per share in 2016. Reference is made to the non-IFRS measures section in RNC's MD&A for the period ended Dec. 31, 2017.
Non-cash impairment charges of $59.4-million on Beta Hunt gold and nickel mines, and volcanogenic massive sulphide exploration properties, and one-time financing and restructuring charges of $9.5-million, contributed to the corporation incurring a net loss of $91.1-million (31 cents per share) for the year ended Dec. 31, 2017, compared with a net loss of $28.6-million (13 cents per share) for the same period in 2016. Included in the 2016 loss were $17.4-million non-cash impairment charges related to the acquisitions of SLM and VMS and the sale of 50 per cent of Dumont to Waterton (described below) in 2016.
The attached table is a summary of full-year and Q4 production from Beta Hunt mine.
BETA HUNT GOLD AND NICKEL OPERATION
Q4 2017 Q4 2016 YTD 2017 YTD 2016
Gold tonnes mined (000s) 160 104 531 371
Gold mined grade (g/t) (1) 2.47 2.26 2.17 2.30
Gold tonnes milled (000s) 158 90 507 354
Gold mill grade (g/t) (1) 2.39 2.26 2.16 2.29
Gold milled (ounces) 12,128 6,526 35.307 23,002
Gold mined (ounces) (1) (2) 12,722 7,553 37,027 27,882
Gold sales (ounces) 12,896 4,571 33,578 20,958
Nickel tonnes mined (000s) 8.6 11.7 33.8 73.3
Nickel tonnes milled (000s) 7.0 11.7 33.7 73.9
Nickel mill grade, nickel (%) 2.64 2.80 2.73 2.72
Nickel in concentrate tonnes (000s) 0.16 0.29 0.80 1.80
BETA HUNT GOLD AND NICKEL OPERATION (5)
YTD 2017 YTD 2016
Gold mining cash cost per ounce (US$ per ounce mined) $1,008 $1,190
Gold all-in sustaining cost, net of byproduct credits (US$ per ounce sold) (3) (4) (5) $1,617 $1,608
Gold C1 cash operating cost, net of byproduct credits (US$ per ounce sold) (3) (4) $1,520 $1,331
Nickel C1 cash operating cost (US$ per lb sold) (4) $2.98 $2.20
Nickel C1 cash operating cost (US$ per tonne sold) (4) $6,573 $4,854
Nickel all-in sustaining cost (AISC) (US$ per lb sold) (4) $3.27 $2.23
Nickel all-in sustaining cost (AISC) (US$ per tonne sold) (4) $7,202 $4,927
1. The difference in gold sales ounces and gold mined ounces is due to timing differences in receipt of gold
sales depending on completion date of tolling campaigns.
2. As of Dec. 31, 2017, 45.4 kt of gold mineralization from December, 2017, production remained on the run-
of-mine pad for tolling in the subsequent quarter, compared with 43,500 t of gold as of Sept. 30, 2017.
3. Gold operations declared commercial production in the second quarter of 2017 with effect on July 1, 2017.
Prior to Q3, gold operations were in the ramp-up stage toward commercial production and operating and
sustaining costs per ounce for those periods are not comparable with other companies.
4. All-in sustaining cost, net of byproduct credits, cash operating cost, net of byproduct 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 with 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. These data are
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. Reference is made to the non-IFRS measures section in RNC's MD&A for the period ended Dec. 31, 2017.
Two thousand seventeen was a period of transition for the Beta Hunt mine as it ramped up gold production in the first half of the year before declaring commercial production on July 1, 2017. Until declaration of commercial production, Beta Hunt gold cost of sales, net of gold revenue, was 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 minable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee 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.
RNC's acquisition of 100 per cent of VMS Ventures, the main asset of which is a 30-per-cent interest in the Reed mine, closed on April 27, 2016.
Reed mine 2017
For the year ended Dec. 31, 2017, RNC's 30-per-cent share of metal contained in concentrate production from the Reed mine was 4,500 t of copper and 1,194 ounces of gold.
REED MINE 2017 OPERATING REVIEW (100% BASIS)
Q4 2017 Q4 2016 YTD 2017 YTD 2016
Ore (tonnes hoisted) 102,229 104,719 460,413 443,561
Ore (tonnes milled) 102,436 123,596 442,269 449,389
Copper (%) 3.52 2.90 3.67 3.96
Zinc (%) 0.69 0.63 0.60 0.62
Gold (g/t) 0.51 0.44 0.47 0.50
Silver (g/t) 8.97 5.76 7.19 6.78
REED MINE 2017 PRODUCTION AND COSTS (30% BASIS)
YTD 2017 YTD 2016
Copper contained in concentrate (kilotonnes) 4.5 5.0
Gold contained in concentrate (ounces) 1,194 1,357
Copper cash operating cost per pound sold (1) $1.75 $1.40
Copper all-in sustaining cost per pound sold (1) $1.79 $1.49
(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 with 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. These data are 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.
The Reed mine is scheduled to cease mining operations in Q3 2018 with processing of stockpiled material expected to continue through December, 2018.
Reed mine 2018 guidance
Hudbay has not provided production guidance for the Reed mine.
With limited near-term exploration potential and an interest in maximizing cash flow from the remaining mine production, RNC has elected to allow its interest in the Reed joint venture to be diluted by not financing its share of the operating costs resulting in an estimated decline in its interest from 30 per cent to 26 per cent. Over the course of 2018, it results in a minor production loss of 9.4 per cent, or 0.3 kt, if it had retained a 30-per-cent interest in the mine. RNC will continue to pay 30 per cent of the closure costs. RNC's share of closure costs is currently estimated to be $900,000 less recovery for equipment and facilities.
The following information is RNC's management estimate of production and costs. In 2018, RNC expects its share of production from the Reed mine to be 2.25 to 2.5 kt of copper and 800 to 1,000 oz of gold. Although production at Reed mine is expected to end in Q3 2018, processing of stockpiled ore is expected to continue through December, 2018.
Extension of copper prepay
With the extension in production from stockpiled ore to year-end 2018, the copper prepay facilities with Auramet were extended on March 28
by adding back 700,000 pounds of the 900,000 pounds of the copper prepay facility that had been repaid during the first quarter, providing $1,925,000 (U.S.) of additional cash in exchange for the delivery of 50,000 pounds in July, 2018, 200,000 pounds in August, 2018, and three monthly deliveries of 150,000 pounds in each of September, October and November, 2018.
Dumont nickel project
On April 20, 2017, RNC closed a transaction under which Waterton acquired 50 per cent of RNC's interest in the Dumont nickel project for $22.5-million (U.S.) ($30.3-million (Canadian)) in cash. The corporation and Waterton contributed $17.5-million (U.S.) ($23.6-million (Canadian)) into a newly established joint venture vehicle that owns Dumont and will pursue other nickel opportunities. Five million U.S. dollars ($6.7-million (Canadian)) 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).
During 2017, the nickel JV continued its activities in support of the Dumont nickel project. The following were the major activities during 2017:
Continuation of environmental baseline samplings of on-site water quality;
Work continued on the closure plan for Dumont, providing updates to the government comments received back in March, 2017;
In May, 2017, the nickel JV entered into an impact and benefit agreement (IBA) with the Abitibiwinni First Nation (AFN). The IBA serves as a framework to govern the relationship with the AFN, provides for meaningful AFN participation in Dumont through training, employment, business opportunities and other means, and includes a mechanism by which the AFN will benefit financially from the success of Dumont on a long-term basis;
The nickel JV began evaluation of opportunity options related to Dumont to identify and prioritize future study options;
Continuation of marketing on the alternative roasting process for Dumont concentrate.
Orford Mining Corp.
RNC owns a 44-per-cent interest in Orford Mining Corp. Orford's main assets consist of exploration properties in Northern Quebec, comprising the Qiqavik and West Raglan projects, and the Carolina gold belt in the United States, comprising the Jones-Keystone/Loflin and Landrum-Faulkner gold properties.
On March 2, 2016, the corporation announced that its TNN subsidiary had discovered a new high-grade gold, silver, copper and zinc mineralized trend at its newly consolidated Qiqavik project in Northern Quebec. High-grade gold mineralization was found during the 2015 exploration season with several grab samples ranging from five grams per tonne up to 198 g/tonne over 15 kilometres of strike length, with several outcropping areas also containing high-grade silver, copper and zinc, representing a potentially important new discovery in an underexplored volcano-sedimentary belt within the Cape Smith belt.
On Oct. 30, 2017, Orford announced results from the 2017 exploration programs at its Qiqavik property in Northern Quebec. At Qiqavik, the 2017 field program began on July 19. This program consisted of diamond drilling of 2,723 metres in 23 holes, 721 line kilometres of airborne (drone) magnetic surveying and 105.6 line kilometres of Abitibi Geophysics ground OreVision IP surveying, prospecting, mapping, surface rock sampling and till sampling. This work led to better understanding of the occurrences discovered in 2016 and to the identification of many additional mineralized occurrences on the property, including two occurrences with visible gold. Work completed during the 2017 program demonstrates that gold is associated with secondary splay structures located along the district-scale Qiqavik break shear zone which extends the full 40 km length of the Qiqavik property. Geological data indicate that gold mineralization at Qiqavik is structurally controlled and associated with porphyry intrusions in places. Typically, in structurally controlled gold deposits, the intensity of mineralization varies along the length of the structures with ore shoots focused in zones of dilation. Orford is currently analyzing airborne magnetic and field mapping data collected during the summer 2017 program to identify and locate sites of dilation along structures that were active at the time of gold mineralization in order to target significant gold mineralization accumulations.
Carolina gold belt
RNC, through TNN, acquired options to earn a 70-per-cent interest in both the Jones-Keystone/Loflin and Landrum-Faulkner gold properties in the Carolina gold belt, home to the Haile mine. These options are now held by Orford Mining Corp., in which the corporation owns a majority equity interest. The current development of the over-four-million-ounce Haile gold mine in South Carolina by OceanaGold has refocused attention on the Carolinas as a highly prospective, underexplored and development-friendly jurisdiction.
RNC's net loss totalled $91.1-million for the year ended Dec. 31, 2017 (with basic and diluted loss per share of 31 cents). This compares with a net loss of $28.6-million (with basic and diluted earnings per share of 13 cents) for the year ended Dec. 31, 2016. The net loss increase of $70.5-million is due primarily to: 1) impairment charges of $59.4-million during the year ended Dec. 31, 2017, which were higher than the prior year's impairment charge of $17.4-million by $42.0-million; 2) an operating loss at the corporation's Beta Hunt gold mine of $11.4-million excluding impairment charges; and 3) other expenses of $19.3-million (inclusive of one-time restructuring charges of $9.5-million) for the year ended Dec. 31, 2017, increased by $14.4-million compared with the prior year. Partially offsetting was a decrease in general and administrative expenses of $3.6-million.
Highlights of RNC's financial position are as displayed in the table.
(in millions of dollars)
Dec. 31, 2017 Dec. 31, 2016
Cash and cash equivalents $24.4 $4.8
Working capital deficit (1) $(29.0) $(26.2)
Property, plant and equipment 23.5 66.0
Mineral property interests $49.0 $72.9
Total assets $109.0 $159.3
Shareholders' equity $10.9 $87.9
(1) Working capital deficit is a measure of current assets (including
cash and cash equivalents) 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 financing will be available in the future, or available under terms acceptable to RNC.
RNC will be hosting a conference call and webcast today beginning at 10 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 Cision's website.
A recording of the conference call will be available for replay for a one-week period beginning at approximately 1 p.m. Eastern Time on April 3, 2018, and can be accessed as follows:
North American callers please dial: 1-855-859-2056; pass code: 8849207;
Local and international callers please dial: 416-849-0833; pass code: 8849207.
About Royal Nickel Corp. (RNC Metals)
RNC is a multiasset mineral resource company with a portfolio of nickel, cobalt, and gold production and exploration properties. RNC has a 50-per-cent interest in a nickel joint venture with Waterton that owns the Dumont nickel-cobalt project located in the Abitibi region of Quebec which contains the second-largest nickel reserve and eighth-largest cobalt reserve (the largest undeveloped nickel and cobalt reserves in the world). RNC has a 100-per-cent interest in the producing Beta Hunt gold and nickel mine located in Western Australia. RNC has a strong management team and board with over 100 years of mining experience at Inco and Falconbridge.
We seek Safe Harbor.
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