Mr. Mark Selby reports
RNC ANNOUNCES STRONG THIRD QUARTER 2018 RESULTS
Royal Nickel Corp. (RNC Minerals) has provided its financial results and review of activities for the quarter ended Sept. 30, 2018. All amounts are expressed in Canadian dollars, unless otherwise noted, and are based on the unaudited interim consolidated financial statements of RNC for the three and nine months ended Sept. 30, 2018.
Mark Selby, president and chief executive officer, commented: "The third quarter was transformative for both RNC and the Beta Hunt mine. The major high-grade gold Father's Day vein discovery generated sufficient cash to eliminate over $30-million in long-term and convertible debt and significantly improve the balance sheet. With cash and cash equivalents of $18.8-million as of Nov. 12, 2018, RNC has sufficient funds for near-term operational and exploration initiatives. The discovery, and a greater understanding of the pyritic sediment structures associated with the discovery, has resulted in extensive new insights into the significant high-grade gold potential of the mine. RNC generated more than $10-million EBITDA in the third quarter, and with less than half of the low-cost, high-grade gold production sold in the third quarter, we expect to realize significant additional EBITDA in the fourth quarter."
Consolidated third quarter of 2018
and recent highlights
- Record quarterly gold production: Third quarter 2018 gold production of 31,360 mined gold ounces set a new quarterly production record, representing a 199-per-cent increase versus the third quarter of 2017. Gold production for the first nine months of 2018 totalled 58,460 ounces compared with 24,305 for the comparable prior year period. The large increase in high-grade specimen and coarse gold production led to a 198-per-cent improvement in the mined grade for the quarter to 6.67 grams per tonne, as compared with 2.24 g/t in third quarter of 2017.
- Stronger balance sheet: All long-term debt and convertible debt with Auramet International LLC, Pala Investments Ltd. and YA II PN Ltd. of $11.4-million was eliminated during the third quarter of 2018. During the nine months ended Sept. 30, 2018, long-term debt and convertible debt totalling $33.5-million was eliminated. The cash and cash equivalents balance, including value of gold specimens held for sale (at gold content only with no premium), as of Nov. 12, 2018, was $18.8-million.
- Solid EBITDA (earnings before interest, taxes, depreciation and amortization) performance improvement: Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) improved to $10.8-million, three cents per share, in the third quarter of 2018, a $9.4-million increase from the comparable quarter of 2017, reflecting the impact of higher sales and revenue and lower production costs. These earnings also reflect less than half of the low-cost, high-grade coarse gold production which was sold in the quarter. The balance of this production is expected to be realized in the coming quarter.
- Improved production unit costs: All-in sustaining costs (AISC) were $1,013 (U.S.) per ounce sold for the third quarter of 2018, a 37-per-cent improvement compared with $1,609 (U.S.) in the prior year comparative period. Year-to-date 2018 AISC was $1,207 (U.S.), a 28-per-cent improvement over the same period in 2017. The mining cash cost was reduced to $325 (U.S.) per ounce mined, 66 per cent lower than the third quarter of 2017.
SUMMARY OF THIRD QUARTER 2018 FINANCIAL RESULTS
(in thousands of dollars except per share amounts)
Three months ended Nine months ended
Sept. 30, Sept. 30,
2018 2017 2018 2017
Revenue $43,397 $24,952 $96,694 $43,565
Production and toll-processing costs 29,060 20,775 73,305 34,195
(Loss) before income taxes (7,364) (12,018) (20,673) (17,790)
Net (loss) (7,510) (12,347) (21,190) (11,855)
Basic and diluted (loss) per share (0.02) (0.04) (0.06) (0.04)
Cash flow provided by (used in) operating activities 3,368 (3,624) (9,592) (2,134)
Cash investment in property, plant and equipment (291) (6,720) (605) (27,862)
SUMMARY OF THIRD QUARTER 2018 OPERATING RESULTS
Three months ended Nine months ended
Sept. 30, Sept. 30,
2018 2017 2018 2017
Gold (Beta Hunt mine)
Tonnes mined (000s) 146 146 447 371
Gold mined, grade (g/t gold) 6.67 2.24 4.07 2.04
Gold mined (ounces) 31,360 10,489 58,460 24,305
Recovery (%) 95 90 94 91
Gold sold (oz) 23,805 8,659 43,291 20,682
Average realized price (US$/oz sold) (1) 1,205 1,286 1,252 1,257
Mining cash cost (US$/oz mined) 325 963 526 1,074
Cash operating costs (US$/oz sold) (1) 962 1,480 1,155 1,602
All-in sustaining cost (AISC) (US$/oz sold) (1) 1,013 1,609 1,207 1,681
Nickel (2) (Beta Hunt mine)
Tonnes mined (000s) N/A 8.3 16.1 25.2
Nickel mined, grade (%) N/A 2.84 2.31 2.75
Nickel in concentrate (000s of tonnes) N/A 0.25 0.32 0.64
Average realized price (US$ per pound) N/A 4.48 7.13 3.95
Cash operating cost (US$ per pound sold) N/A 3.40 4.32 3.26
All-in sustaining cost (AISC) (US$ per pound sold) (1) N/A 3.45 4.34 3.61
Copper (3) (Reed mine)
Copper in concentrate (kilotonnes) 0.78 1.21 3.1 3.47
Cash operating cost (US$ per pound sold) 0.56 1.55 0.48 1.68
All-in sustaining cost (AISC) (US$ per pound sold) (1) 0.58 1.57 0.50 1.73
Adjusted EBITDA (1) $10,769 $1,352 $13,400 $3,190
Adjusted EBITDA per share (1) $0.03 $0.00 $0.04 $0.01
(1) Reference is made to the non-IFRS (international financial reporting standard) measures
section in RNC's management's discussion and analysis for the period ended Sept. 30,
(2) Nickel was not mined during the third quarter of 2018.
(3) RNC's share of production from the Reed mine was 27 per cent in the third quarter of
2018, 28 per cent for the nine months ended 2018 and 30 per cent for 2017 periods.
Beta Hunt mine
On Sept. 9, 2018, RNC announced a significant new high-grade gold discovery (Father's Day vein) at the Beta Hunt mine. RNC expects a minimum 27,000 to 30,000 ounces of gold will be recovered from the discovery area.
Highlights of quarterly results:
- Mined gold production at the Beta Hunt mine during the third quarter of 2018 was 31,360 mined gold ounces, representing a 199-per-cent increase compared with 10,489 ounces in the third quarter of 2017. Gold tonnes mined was 146,000 tonnes in the third quarter, flat compared with the third quarter of 2017 as operations concentrated on mining high-grade coarse gold and specimen stone discovered in September. Gold sales were 23,805 ounces in the third quarter, an increase of 175 per cent compared with 8,659 ounces in the third quarter of 2017.
For the third quarter of 2018, gold mining cash cost per ounce decreased by 66 per cent to $325 (U.S.) per ounce mined from $963 (U.S.) per ounce in the third quarter of 2017. On a cost per ounce sold basis, gold cash operating costs decreased by 37 per cent to $954 (U.S.) per ounce sold and all-in sustaining costs decreased by 36 per cent to $1,006 (U.S.) per ounce sold, compared with $1,609 (U.S.) in the third quarter of 2017, due to a significant increase in gold grades (in both mined and milled tonnes). Reference is made to the non-IFRS (international financial reporting standards) measures section of RNC's MD&A for the period ended Sept. 30, 2018.
Dumont nickel-cobalt project
Dumont remains one of the world's premier battery metals projects containing the world's largest undeveloped reserves of nickel and second-largest undeveloped reserves of cobalt. As one of the only large-scale fully permitted, shovel-ready nickel-cobalt projects globally, Dumont is ideally positioned to deliver the nickel and cobalt required to meet the massive demand growth expected from the electric vehicle (EV) market in the coming decade.
RNC remains focused on completing an updated feasibility study. RNC announced in September, 2018, that Ausenco Engineering Canada Inc. was awarded the contract for a feasibility study update for Dumont.
The results of the updated feasibility study are expected to be announced in the first half of 2019.
For the three months ended Sept. 30, 2018, RNC's 27-per-cent share of metal contained in concentrate production from the Reed mine was 780,000 t of copper. The all-in sustaining cost improved to 58 U.S. cents per pound of copper sold, compared with $1.57 (U.S.) in the prior year period. Costs improved in the quarter compared with the prior year primarily due to the effect of RNC electing not to finance its share of mining and general and administration costs.
The Reed mine ceased mining operations and completed processing of stockpiled material in the third quarter of 2018.
Orford Mining Corp.
The corporation also has a 35-per-cent equity interest in Orford Mining Corp. which holds the Qiqavik and West Raglan exploration projects (gold, nickel) in Northern Quebec and gold exploration properties in the U.S. Carolina gold belt. The Qiqavik project hosts several new high-grade gold discoveries along a mineralized trend in excess of 40 kilometres. In October, Orford announced completion the 2018 summer exploration program on the Qiqavik property. The Qiqavik program included eight drill holes totalling 1,211 m. The highlight of the 2018 drilling program results was the discovery at the Interlake area of a thick sequence of gold mineralized quartz-carbonate veining associated with sulphidic metasediments which was intersected in three diamond drill holes. This is the first time that thicknesses of up to 24.6 m of gold-bearing mineralization within a structural complex zone have been intersected on the property. The Interlake area has generated additional potential high-grade gold targets for 2019.
For the third quarter of 2018, revenue increased by $18.4-million, or 74 per cent, which was primarily due to increased gold deliveries from the Beta Hunt gold mine of $23.6-million. Partially offsetting higher gold revenue was a $3.4-million decrease of copper revenue from the Reed mine which ceased operations during the third quarter of 2018. Total operating loss for the period improved by $5.6-million which was also primarily due to the Beta Hunt mine which had operating earnings of $5.0-million during the period compared with a loss of $4.7-million for the prior year, a $9.7-million improvement. Furthermore, the Reed mine had higher operating earnings of $4.8-million which was partially due to a $1.9-million impairment recorded in 2017. The combined increase in operating earnings from Beta Hunt and Reed mine of $14.6-million was partially offset by a higher accrual for share-based payments. The share-based payments expense of $8.9-million in the period was higher than the same period of 2017 by an $8.6-million increase as a result of the mark-to-market adjustments relating to a higher market price for the corporation's common shares on Sept. 30, 2018, relative to the beginning of the period.
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 Nov. 13, 2018, and can be accessed as follows:
North American callers please dial: 1-855-859-2056; pass code: 7283426
Local and international callers please dial: 416-849-0833; pass code: 7283426
About Royal Nickel Corp.
RNC has a 100-per-cent interest in the producing Beta Hunt gold mine located in Western Australia where a significant high-grade gold discovery -- Father's Day vein -- was recently made. Beta Hunt gold resource potential is underpinned by multiple gold shears with gold intersections across a four-kilometre strike length which remain open in multiple directions adjacent to an existing five km ramp network. RNC also has a 28-per-cent interest in a nickel joint venture 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 in the world. RNC owns a 35-per-cent interest in Orford Mining Corp., a mineral explorer focused on highly prospective and underexplored areas of Northern Quebec and the U.S. Carolina gold belt.
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