Royal Nickel Corp. RNKLF

My Red Cloud RNC Minerals Presentation transcript

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Solid Red Cloud presentation by Paul Huet, CEO and Chairman of RNC Minerals, September 26th 2019. Video & my transcript.

Video: https://www.youtube.com/watch?v=4chEpsfZ6W4&feature=youtu.be+

Presentation: https://cdn.ceo.ca/1ep9u8b-RNC%20-%20Investor%20Presentation%2024-Sept-2019-FINAL_TOPRINT%20%281%29.pdf

My transcript:

Paul Huet: « Good afternoon everyone. Thanks for being here. I was listening to Eric this morning and I think I was one of those 20 guys. The first one 8 years ago. But it was on top of the LCBO building if I recall right so it worked out well at the end of the day that's for sure. RNC Minerals I have been here now for about just 60 days actually. So, it's been an exciting 60 days and I'm looking forward to talking to you about some of the changes that have happened in the last 60 days. This slide here actually I've been joking a bit about it all day long  actually. That a new high-quality company, just this slide alone I could talk about for 20 minutes actually. A company for the last 10 years has been a Nickel focus company. In the last 60 to 90 days as a Board we've made a decision to change our strategy and make sure that it's very well known, that we're in control and our strategy is going to be focused on producing Gold. We're going to focus on our Western Australian assets while we still own 28% of Dumont in Quebec. We think it's a great asset and let's face it Nickel has had a good run here. We're quite excited about it. There's no urgency for us to sell off Dumont. We should take our time and do what's best for our shareholders. But we don't know own it all. We're not in control of that asset, we own 28%. We own the rest of these assets in Western Australia and with the recent addition of the mill that I'll talk about. You'll see the change in focus and how the companies really set ourselves up for our future here.

Obviously myself as new CEO as I just mentioned, we've also put in a new Management team. I'll talk specifically about the Management team and who those people are. We're increasing production at both of our operations. We now have two operations in Western Australia. We've got the Higginsville asset which we acquired in June. But we've got Beta Hunt and Beta Hunt, a lot of people have been pretty excited. They've seen a lot of the specimens throughout the last year since the original discovery. I'm happy to report on the weekend again, we ran into some more of these specimens. They are really constrained by geology and we're mining along that geologic formation. We're drifting along it and we haven't taken any stopes out of those areas and again, we  encountered about 1750 ounces in half the time and so, you're talking about four and a half million dollars in half a tonne. So, it's quite exciting that the plan though, I will say is squarely focused on making sure that we can mine that deposit economically, at the average grade. This is really critical. It's very important to us. We've got to demonstrate that we can produce a mine plan, produce a Resource, a 2P Reserve and mine that asset economically, at the average grade and that's what we're actually in the process of doing.

We've got an improved balance sheet. We just did a financing of 18 million dollars. It was a bought deal. It was oversubscribed. There's predominantly five institutions carried that whole book and that's another change for this company. A lot of our shareholder base has been retail. We're excited that we've got five new institutions, new shareholders to our story that are long and believe in what we're doing. We're on the GDXJ, that happened at the end of June because of the amount of liquidity we got. We've been added to the GDXJ. That actually impacted us negatively on our close last Friday because of the rebalance. So, that has its up swings but it also has its down swings when your market cap drops. So, that was a negative impact that we had from it.

Our production, we're new into production. We just began production and it's about making sure we consistently sustain our production at this point. For the first month ever of owning our own mill, we did just under eight thousand ounces in the month of July. So, remember this is the company that didn't have its own mill. It was producing and using toll milling. In the first half of 2019, our production came from Beta Hunt alone. It was just shy of fourteen thousand ounces for the first six months of the year. Since owning our mill in July, we did just shy of eight thousand ounces seven thousand eight hundred and in August we did another 8100. So, a sixteen thousand ounces in two months compared to fourteen thousand in the first half of the year. So, you're seeing the change in focus from Nickel to Gold. But also, the change with the addition of the mill is hugely different in this company.

Some of the things that you can expect from us in the very near future, RNC has never put out guidance ever and not on production, not on all in sustaining costs ever. We're about  to.  But on our first 2P Reserve in Gold. We've had something in the Nickel obviously from Dumont. We're going to put out guidance here for the rest of the year than guidance for 2020 like the rest of the companies in the new year. But these are all they're big steps for this company who hasn't done it before. I'll talk about the cost-cutting measures. We should all be doing that. We have a lot of low-hanging fruit in my opinion and you'll see some of them here on one of my last slides and then, the ASX listing that's an opportunity we're assessing. Because we're located in Australia there's a lot of funds that want to participate in our financings or actually want to buy the stock. Forget the financings, we're done with the financings. We're happy about that. But people want to buy  our stock. There's funds that struggle to buy on the TSX that makes it more amenable to be listed on the ASX. So, something we're seriously evaluating.

So, as I talk about myself. I'm the former president and CEO of Klondex. I was there from 2012 to 2018. I had several different opportunities to look at and explore obviously, before I joined RNC. RNC I felt like was the one that I can make the most meaningful impact and where I can add the most value with my experience and throughout the day, at the hospital I bring a Canadian to Australia and that's a good question? Actually one of the first moves I did as CEO was hire Graeme Sloan. Graeme Sloan is an Australian. He's from the area. He knows the ground. He knows the district. He was actually the CEO of Perseverance. He built Fosterville. I don't think that needs an introduction. That's been discussed for the last while. Graeme has been phenomenal with it. But he was the CEO from 2002 to 2007 for Perseverance. He was also the CEO of Tanami and Herencia. He's got an excellent track record in Western Australia. The first thing that Graeme did was bring in two other people. He brought in two new GM's. We're already seeing some tremendous results from that very, very early on. We're seeing one metric alone, actually if I think of a turnover rate. Before Graeme and his team came along, our turnover rate in Western Australia was like a revolving door actually. We were having about 86 percent turnover rate. In all my career I've been running around for 33 years. I started in Timmins and I was a bad hockey player. So, I had to go to mining.

I've never seen turnover rates this high in my life. Since Graeme has been appointed Managing Director. He is responsible for Australia. We're already seeing that metric on its own drop down to below 19%. He's brought in a whole network. The whole group of people. He's surrounded himself by  including these two new GM's who also have a network. That makes it so much easier for us to be more effective in Western Australia.

In June we closed this deal on the Higginsville asset  and I just want to explain the Higginsville asset, I'll just flip between two slides here because that's picture of the mill. The mill was built in 2009. It was 100 million USD to build the mill. We paid 50 million dollars Australian for Higginsville, the mill and the mine. The mill is a 1.4 million tonnes per year. About 4,000 tons a day. It's at capacity already. We are one of the few mills in that area. It used to be doing some toll-milling. We don't have any room for toll-milling now. We're filling the mill at capacity. From the ore between Higginsville and from Beta Hunt. So, what did we get for the 50 million dollars? We didn't only get the mill, but we also got a really nice open-pit that was bought in 2018 by Westgold, the people who sold us the asset and they paid nine million dollars for this open-pit. It's called Baloo. The average grade of Baloo has been over 2.2 grams. Were in it, mining now. When Westgold bought it in 2018 they permitted, they put in a road. But they never got into production. Our timing was perfect for this asset. Our strategy was clear, our timing was good and then right after we got it obviously Gold did what it did. We're seeing the benefits. All of us are seeing it today. So, we got the Baloo open-pit We're presently mining 2.2 grams. We got the mill. We also got this large land package included in the land package is 1.9 million ounces of Resource at about 2 grams and then a Reserve of about three hundred and sixty seventy thousand ounces. That's going to be the use of some of our proceeds that we just did with the recent financing. We're going to be drilling at both Higginsville and Beta Hunt not to grow our Resource. We've got about in Measured, Indicated & Inferred over three million ounces in this district in about 16 square kilometres. What we're going to be doing is increasing our confidence in putting in a 2P Reserve and putting about two years of feed in front of the mill over the next while here. With that new drilling that we're going to be doing so, 1.9 million ounces from the land. If you assign 50% of the value of the purchase price towards the mill you get a mill that was 100 million dollars for 25 million dollars. You assign the other 25 million dollars for the ounces here. That's about $13 an ounce Australian per acquisition costs. We all know the cost to drill an ounce of Gold. Try to go drill it with a drill bit it was costing me anywhere from 35 to 45 USD an ounce to find an ounce of Gold.  All these acquisition costs of buying 1.9 million ounces plus the mill plus Baloo was very accretive for us and our shareholders. We're quite excited about what this unlocks for our future. It really sets us on a really clear path of being a producer. We're on a very good run rate here at the eight thousand ounces per month already.

Just like everyone else in the industry we're squarely, we're aggressively focused on reducing cost and we know that's a responsibility we have as an Executive team. How are we doing it, first and foremost, obviously the synergies with the mill.  I've talked about them but here are some of the numbers. It was costing us anywhere from 45 to 50 dollars a ton, we're paying right now twenty-nine dollars a ton to run the ore through our own mill. The recoveries we were getting while toll-milling were anywhere from at the best 90-91 percent. We're getting recoveries 93 and 94 percent. So, not only do we get a drop in the unit cost. But we get an improvement on recoveries that will flow into our AISC. We don't have any guidance on AISC. But we're going to be putting it out here in the very near future as part of the big changes that we're putting out. But we're certainly targeting below $1,000 an ounce. How are we doing it? Not only do we take advantage of the mill,  we're going to be aggressively looking at our top twenty vendors. This is something I've done four other times in my career where I approached the top twenty  vendors and we work a partnership with them and buy in bulk instead of buying for one asset, we're buying for two. It's important that we actually physically have that being with them and we actually come up with solutions to reduce our spending with them and have a longevity with them. Personnel I've talked about it myself, I'm the new CEO, new Management team, new GM's on the property. We're already seeing the benefits of it. Not only is turnover rate improving. Productivity rates have increased,  at least 30% under ground and it is also a function of having the same miners coming back day in day out. One of the other low-hanging fruits, we have at least is royalties. We have two large royalty holders, one at Beta Hunt which is Maverix and the other at Higginsville which is Morgan Stanley. We're opening discussions with them to see what we can come that's virtually beneficial for both companies that we can reduce some of these royalties that are quite extensive and then G&A.  G&A costs are something that I'm very focused on myself. But when I looked at and assessed, already identifies if there's an opportunity to reduce the G&A cost.

This is just a long section here of the actual location of where we had the discovery on the weekend. If you look at this long section and you look at the 16 and 15 level. The Fathers Day discovery which happened about a year ago yielded about 30,000 ounces. Directly below it 25 meters was that thousand ounces. In between Fathers Day and that thousand ounces is a drill hole that has over 1,400 grams.  I spoke to Graeme the Managing Director there and I said look we're going to likely pick this out of sequence and maybe put a bypass drift. Why aren't we taking this out and then, on the weekend we have this call? But I got a call on Saturday night that said we have another discovery further along strike and then its happy thinking. Why would we take them out of sequence. It's going to cost us more, drive the bypass and the upper level, the bottom level and then fill it with concrete. it's just gonna cost us more, increase our AISC. So, it makes sense to take a breath, step back and continue mining along strike because that's what we're doing right now. We're mining. We're drifting along strike within this geologic formation where we get the Fathers Day 30,000, the thousand ounces below. Just south of Fathers Day a hundred sixty meters fifteen hundred ounces. Another hundred sixty meters seventeen hundred 50 ounces. As I was mentioning before, we're making sure we focus at mining this at the average grade. These high-grade specimens and discoveries come right to the bottom line and that's going to be a game changer in what will separates us from the rest of the pack.

I feel I'm running out of time […]  in closing I just want to say, the company has gone through so much change in the first 60 days. I'm really looking forward to what we're going to do next in the next while. But it's really now about flattening down and doing what we do best in mining. »