Interview with Paul Huet, CEO of RNC Minerals (TSX: RNX).
RNC Minerals was perhaps the turnaround story of 2019. Huet has steadied the ship, brought about a gold focus to the company and got RNC into production. A steady 8,000oz+ per month has changed the company and de-risked the operation, as the team look to move forward, get the share price up and probably restructure the CAD$32M of remaining debt. AISC steadily heading down. We expect to see it get below $1,000 later this year.
Despite a positive year on the production/revenue front, RNC has struggled to get the share price up. It sits at CAD$0.43, with a market cap of c.CAD$260M. Huet explained the market situation clearly: RNC’s 28% “option on nickel” at Dumont has been valued at zero, and he feels the company continues to be undervalued. We were curious as to Huet’s plans would be for 2020, but before you ask, he wasn’t prepared to talk about the royalty arrangement with Maverix Metals just yet as they are mid-discussion. He’s keeping his cards close to his chest. Fair enough. We do however expect to hear something by the end of Q1/20. However, it obvious to all the chess game that is afoot. The Maverix Royalty is a large 6% on Gold and 1.5% on Nickel. Forget the nickel for now. If we were RNC, we would do the bare minimum of mining at Beta Hunt. Why would you if the only company making money if Beta Hunt gets mined is Maverix? Beta Hunt must be 25-30% of Maverix income. But not if RNC reduces production, which, reading between the lines, seems to be what RNC is doing. The two need to agree, and agree quickly. Shareholders on both sides will benefit. Morgan Stanley, seem to have been pragmatic. Will Maverix be as pragmatic. Our interview with them, they talked that language.
Huet has been on a roadshow to both institutional and retail investors. RNC recently issued a 2020 guidance: 90-95,000oz per annum, excluding the often discussed coarse gold. This figure is also without taking into account an ore sorter, and possible plant engineering modifications to increase efficiency. Huet is running a tight ship, and we would expect these numbers to be almost guaranteed for 2020.
RNC will fund exploration out of cash flow. The debt is due in June, but can be delayed, or restructured on more favourable terms, given RNC’s current position in comparison to where it was 7 months ago. RNC will be looking at a c. CA$50M standby facility.
A gravity survey has revealed interesting anomalies at RNC’s two new exploration discoveries: Higginsville and Baloo. A recent high-density gravity survey has delineated a new geological structure at Higginsville: a 5km strike zone. The Paleo channel potential will be explored (these typically can result in slurry pumping to by-pass front end ore-sorting and crushing and go straight into the back-end of the plant). Potentially an additional transformative item. Long way to go though. Permitting at Baloo is reaching a more advanced stage.
There has been discussion about an ASX listing and roll-backs in the chat rooms and on social media, but Huet remains tight-lipped. RNC is getting more and more access to institutional shareholders, and that can only be a good thing.
They did what they said. There is a clear plan. Sit tight and watch this unfold.
- Roadshow Experience and What They're Doing it for
- Release of Guidance: An Overview
- Cash Position and Prioritising Spending
- Options for Dealing with Debts and a Timeline for it
- The Re-Negotiation of the Morgan Stanley Royalty: Plans for it
- Building 24 months Worth of Ore
- The Mill: A Good Purchase?
- Lowering the AISC: What are They Doing?
- RNC Minerals: A Potential Take-Over Target?
- Specific Targets and Plan of Action for 1800km worth of Land
- News on Dumont
Link to transcription.
Company page: http://www.rncminerals.com
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