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RNC Minerals announces Q2 2018 results

Mining News - Published on Fri, 17 Aug 2018

Image Source: newswire.ca
RNC Minerals announced its financial results and review of activities for the quarter ended June 30, 2018. All amounts are expressed in Canadian dollars, unless otherwise noted, and are based on the unaudited financial statements of RNC for the quarter ended June 30, 2018. Mr Mark Selby, President and CEO, commented, "RNC is focused on maximizing the value of the Dumont Nickel-Cobalt Project ("Dumont"). 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." During the balance of the year, RNC will aggressively advance Dumont on multiple fronts towards a construction decision in 2019."

Mr Selby said that "The Beta Hunt Mine, which is now considered non-core to RNC, had a strong second quarter with a 24% improvement in mined grade compared to the first quarter. Mined production was lower than in the first quarter due to a combination of focused mining on high-grade specimen gold in certain areas of the mine and delays in securing financing for the mine in May and June (which led to production constraints). We continue to make progress in the final phase of the sale process for Beta Hunt, which we expect to announce by the end of the month."

Q2 2018 and Recent Highlights
RNC had net earnings from continuing operations of $5.9 million ($0.02 per share) for the three months ended June 30, 2018, compared to net earnings from continuing operations of $5.9 million ($0.02 per share) for the three months ended June 30, 2017. RNC incurred a net loss from discontinued operations of $7.0 million ($0.02 per share) for the three months ended June 30, 2018, compared to a net loss from discontinued operations of $1.0 million ($Nil per share) for the three months ended June 30, 2017.

Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations for the three months ended June 30, 2018 was $9.3 million or $0.03 per share, compared to $3.5 million or $0.01 per share for the three months ended June 30, 2017. Reference is made to the Non-International Financial Reporting Standards ("non-IFRS") Measures section in RNC's Management's Discussion and Analysis ("MD&A") for the period ended June 30, 2018.

Continuing Operations / Projects
Reed Mine second quarter 2018 copper contained in concentrate production was 2.9 million pounds (1.34 kt) (27% basis) compared to the second quarter of 2017 of 3.1 million pounds (1.41 kt) (30% basis). Cash operating costs decreased by 73% to US$0.42 per pound sold and all-in sustaining costs decreased to US$0.44 per pound sold compared to US$1.58 and US$1.66, respectively, in the second quarter of 2017 due to a combination of higher copper grades, higher gold, silver, and zinc by-product credits and the elected dilutionary effect of not funding its share of mining and general and administration costs. If unfunded mining costs and general and administration costs were included, the second quarter cash operating cost and all-in sustaining cost would have been US$1.16 and $1.18 per pound, respectively. RNC's share of gold in concentrate production for the second quarter of 2018 from the Reed Mine was 603 ounces. Reference is made to the Non-IFRS Measures section in RNC's MD&A for the period ended June 30, 2018.

RNC's share of operating income from the Reed mine was $5.9 million for the three months ended June 30, 2018 (compared to $0.6 million for the three months ended June 30, 2017), and $8.1 million for the six months ended June 30, 2018 (compared to an operating loss of $0.6 million for the six months ended June 30, 2017) .

On June 18, 2018, RNC announced that in lieu of the previously announced debt extension and equity raise announced on May 31, 2018, RNC would withdraw US$12 million of its capital from the Dumont JV. The cash withdrawal avoided significant equity dilution at current market share prices, while allowing RNC to significantly reduce its debt and eliminate the majority of its 2018 debt payments.

In order to obtain the withdrawal of these funds, the Dumont conversion cap under the US$10 million convertible note (entered into by RNC and Waterton in June 2017) was removed. As a result, on a conversion of the full amount of the US$10 million convertible note into units of the Dumont JV, RNC's interest would be diluted to approximately 28% (as compared to 40% under the prior terms of the convertible debenture). On July 23, 2018, RNC announced it had received a conversion notice from Waterton for the full principal amount of the US$10 million convertible note. As a result, RNC's interest in the Dumont JV will be diluted to approximately 28%. After giving effect to the conversion, RNC retains its right to act as manager of the Dumont JV, but will no longer hold veto rights on certain fundamental joint venture matters or the ability to trigger certain exit rights included in the current joint venture arrangements.

Discontinued Operations
Mined gold production at the Beta Hunt Mine during the second quarter of 2018 was 13,320 ounces, up 60% compared to 8,281 ounces in the second quarter of 2017 and gold tonnes mined was 132 kt in the second quarter, up 7% from the 123 kt mined in the second quarter of 2017. Gold sales were 11,508 ounces in the second quarter, an increase of 95% compared to 5,891 ounces in the second quarter of 2017. Second quarter sales were adversely impacted by the timing of tolling schedules and above normal seasonal rains which limited mined material delivery to tolling mill service providers.

For the second quarter of 2018, gold mining cash cost per ounce decreased by 34% to US$682 per ounce from US$1,032 per ounce in the second quarter of 2017. On a cost per ounce sold basis, gold cash operating costs, net of by-product credits decreased by 30% to US$1,185 per ounce sold, and all-in sustaining costs, net of by-product credits decreased by 31% to US$1,230 per ounce sold, compared to US$1,687 and US$1,786, respectively, in the second quarter of 2017 due to a significant increase in gold grades of more than 50% (in both mined and milled tonnes). Reference is made to the non-IFRS Measures section of this MD&A.
Second Quarter of 2018 Results

Continuing Operations / Projects
Dumont Nickel-Cobalt Project
RNC remains focused on aggressively advancing Dumont towards a construction decision in 2019. During the second quarter of 2018, the Dumont JV continued its activities in support of the Dumont Nickel-Cobalt Project including the following activities:

1. Test work on sulphation roasting of Dumont nickel concentrate, which RNC believes has the potential to deliver a simpler, lower cost process to deliver nickel and cobalt to the EV market, began in the second quarter of 2018 and will continue through the third quarter.

2. CRU International Ltd. continued with their value-in-use study for roasted Dumont concentrate which RNC believes will deliver a much higher value for Dumont concentrate than traditional smelting and refining. The study is expected to be completed in the third quarter, with results to be included in a potential future technical report update.

Reed Mine Production
For the three months ended June 30, 2018, RNC's 27% share of metal contained in concentrate production from the Reed Mine was 1.335 kt of copper and 603 oz of gold. Costs improved during the quarter compared to the prior year primarily due to the effect of RNC electing not to fund its share of mining and general and administration costs.

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Posted By : Rabi Wangkhem on Fri, 17 Aug 2018
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