Royal Nickel Corp. RNKLF

RE:Yes 3 gram ore can be profitable underground, $800s AISC

[goldhunter11]

Geodan2,
Eric Sprott would agree that 1.5-1.8 gpt would be marginal for a UG operation. He has been advocating looking for marginal operation with emphasis on majors under increasing PoG of potential to hit high-grades, since the profit would just explode. In fact, he does not have to go too far. He's got almost 10% of RNX and even though he did not seem to be too happy (to express in public) about some of the things Mark Selby has done ( bought the HGO Mill as an example). he has probably changed his mind somewhat based on the facts that you have brought out. After all, he an excellent analyst and shrew investor. Yes, increase on PoG and high-grade/coarse gold would send RNX SP through the roof.
GH11
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Geodan2 wrote:

TThere are people spreading rumors that 3 gram ore can not be mined underground at a profit. Here is why that is wrong. Gold is $2011 in Aus today, and the veins are wider than normal Canada mines. RNC has profitably mined 3 gram ore at Beta in recent past when gold was quite a bit lower than now. If you go back to Q1 2017 they were mining 1.7g gram a ton ore, paying $100+ per oz more for milling and about broke even:

Q1 2017 and Recent Highlights Gold material mined during the quarter was 1,133 tonnes per day, up 56% compared to the first quarter of 2016. Gold production rates have continued to increase during the second quarter of 2017 and have averaged 1,590 tonnes per day during the first two weeks of May 2017, up 40% versus Q1 production rates. Gold grades during the first quarter were adversely impacted by two one-time issues: (i) lower than anticipated grades from the initial portion of the first Western Flanks stope (approximately 1.5 – 1.8 g/t), which have subsequently improved in line with expectations of 2.5 g/t, and (ii) lower than expected grades from previously blasted material in the A Zone which largely averaged between 2 and 2.5 g/t when it was mined during 2016, but declined to 1.5 g/t during the first quarter (a decision was made to cease mining that area in February 2017 and focus on new stope development).

Since this material was previously blasted, grade estimates relied on sampling conducted at surface. During the second quarter of 2017, mine development reached sufficient levels for the first systematic development of a "HOF" type zone, the "404" Zone, in the Beta area of the Beta Hunt Mine. In April, the 404 Zone yielded 92 ounces of gold from less than 100 kg of hand-sorted material that was crushed and processed at the mine site (grade of approximately 2.9 percent gold) and a further 40 ounces of gold in specimen stone that were sold at a premium of in excess of US$300 per ounce to the spot price. This area continues to be mined during the current quarter. Beta Hunt first quarter 2017 nickel in concentrate production was 0.15 kt.

As previously reported, nickel production was reduced due to depressed nickel prices and to focus efforts on gold production. Beta Hunt pre-commercial gold production was 5,535 ounces in the first quarter of 2017 and gold sales were 6,132 ounces.

Commercial production of gold is expected to commence during the second quarter of 2017. For the first quarter of 2017, as gold grades and volumes were lower than expected, gold cash costs net of by-product credits were US$1,647 per ounce sold, and all-in sustaining costs net of by-product credits were US$1,685 per ounce sold. As production volumes ramp up and grades improve through the year, costs are expected to decline towards target levels.


Then as now they were mining nickel too. Mining costs have declined in Australia and the Aud is way down too hence $2,013 gold there now. Mining 3 gram ore versus 1.7 gram is nite and day difference. The truth is with nickel credits the Beta Hunt line is one of the lowest cost underground gold mines per gram of gold mined in the world. And the 3 gram ore bodies now are wider than the 1.7 gram ore of 2017, and gold price way up last month or so, amd milling cost are way down.

The reason they drilled so much in last 9 months is before they were mining without much drilling and did not really know where to mine, hence Q1 2017 problems with grade. Now they know where to mine, have richer ore that is in wider veins (cheaper to mine). Just going from 1.7 gram to 3.0 increases revenue by 75% and does not boost costs. So that means the AISC would have been $920 on 3 gram ore in 2017 not $1600, but then another $100 needs to be lopped off for HGO mill.

So that comes out about $820 a oz AISC cost for 3 gram ore today at Beta, just about what they have said with $800-900 range. That ignores the big money maker in 2018, high grade ore.

To all feel free to copy and past this elsewhere.

Cheers

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