Several days ago, on November 27th, Rubicon Minerals Corporation (TSX: RMX) enjoyed some very good news concerning their flagship Phoenix Gold Project in Red Lake, Ontario. Since 2012, the aboriginal group in Red Lake, as represented by Wabauskang First Nation, had initiated a number of litigation attempts in response to the opening of Rubicon’s Phoenix Gold Mine. In August of this year, the Supreme Court ruled in favor of Rubicon. In turn, it was assumed that the First Nation would appeal the court’s decision. Community action groups can pose significant hindrances for mining interests. However, unexpected good news came on Thursday when it was publicized that the First Nation and Rubicon had come to an out-of-court agreement, an agreement that would allow Rubicon to continue the final development stages of its Phoenix Gold Project unhindered.
A quote from Rubicon Mineral Corp.’s CEO and President, Michael Lalonde:
These agreements are a huge step towards a respectful and mutually beneficial long-term partnership with the Wabauskang First Nation. We also look forward to finalizing a long-term benefits agreement with Wabauskang First Nation in the near future.”
This is certainly good news for Rubicon Minerals, a junior miner that since 2008 has transformed itself from an exploration and discovery miner to an advanced-stage, fully-funded, fully-permitted gold development company with a first gold bar expected to be produced from its Phoenix Gold Project by mid-2015.
For several reasons, some analysts have shied away from Rubicon stock over the past several months. However, Rubicon’s strong company economics, its record for keeping pace with its development schedule and the fact that the company’s 2013 preliminary economic assessment (PEA) of its Phoenix Gold Project was considered to be overly-conservative by some analysts are all bullet points favoring Rubicon, especially coming into 2015. Add the company’s recent settlement with the First Nation and what you have is a company that’s positioned itself to transition from development stage to full production of high-grade gold at its Phoenix Project.
“Most of the construction and development risk is behind us, as the project is well over half completed.” – Michael Lalonde, CEO and President of Rubicon Minerals Corp., September 17, 2014.
Rubicon’s Phoenix Gold Project – Where It’s At Right Now
As mentioned, Rubicon expects to begin production of its Phoenix Gold Project midway through 2015, or approximately in May. Rubicon began construction of a mill at Phoenix in 2013. As of October 2014, construction of the mill was approximately 21% complete, with the tailings facility expected to be finished in two to three weeks.
Finishing the construction of its mill is Rubicon’s largest ticket item and will most likely take up a majority portion of its $132 million in remaining capex that’s projected by the company.
In September of this year, Rubicon reported that its underground development and construction was also progressing on track, with 1,930 metres of a planned 8,023 metres of total underground development completed (or 24%) at the 685-metre level and above.
In May 2014, meanwhile, Rubicon initiated a 38,000 metre infill drilling program at its Phoenix Project to confirm the expectations it had of its F2 deposit. Approximately three months later, in September 2014, the company published a press release confirming that the results of their in-progress infill drilling program were in line with their expectations as far as mineralization and grade.
Indeed, the only minor cloud in an otherwise smooth development program for Rubicon at Phoenix Gold came in September 2014, when the company was two weeks behind its development schedule; a problem that Rubicon management subsequently addressed through a change in contracting staff.
Why Are Rubicon Gold’s Economics So Strong
Rubicon’s economics are particularly promising, as can be illustrated. First off, not only does the company have its Phoenix Gold Project, Rubicon also owns 100 square miles of exploration territory in the widely known Red Lake gold district.
Beyond that, in February of this year, the company successfully entered into a gold streaming agreement with Royal Gold Inc., which provided Rubicon with $75.0 million in cash to be used towards the Phoenix Gold Project.
The agreement signaled a strong vote of confidence for Rubicon’s mining ambitions and also helped further solidify the company’s financial standing.
Rubicon is now debt-free and as of September of this year has $156 million in cash.
Daniel Earle, who is Vice President and Director at TD Securities in Toronto, was the first analyst to launch coverage of Rubicon Minerals Corp. after their discovery at Phoenix Gold.
Mr. Earle has given a BUY recommendation on Rubicon throughout 2014 and had this to say about the company’s gold streaming agreement with Royal Gold: “The financing [agreement] is, in our view, another feather in the cap of a management team that has defied its critics and the odds in bringing a genuine grass roots gold discovery to within 12 to 14 months of production.”
Daniel Earle remains at a BUY for Rubicon and on October 10th reiterated his support for the company’s exploration and soon-to-be production efforts, “We have made no changes to our estimates and we maintain our SPECULATIVE BUY recommendation and $2.25 target price.”
What’s Expected to Happen in 2015
As mentioned, Rubicon is on schedule to begin production of its Phoenix Gold Project by May of next year. The Project is already fully permitted and once in production, it’s estimated that the mine could produce 165,000 ounces of gold a year at grades of 8+ g/t. The life expectancy of Phoenix Gold will be roughly 13 years.