RNC Minerals (TSX:RNX) – The Dumont Nickel-Cobalt Project: An Exciting Option?

The RNC Minerals Company Logo.
RNC Minerals
  • TSX: RNX
  • Shares Outstanding: 608M
  • Share price C$0.31 (31.03.2020)
  • Market Cap: C$185M

Last week, Crux Investor explored the numbers behind gold-producer RNC Minerals’ encouraging Q4/19 results.

Now, fresh from an uplifting interview a few weeks ago with RNC Minerals’ CEO (TSX: RNX), Paul Huet, Crux Investor interviewed Johnna Muinonen, the President of Dumont Nickel (a subsidiary of RNC Minerals).

Nickel ore
Nickel ore

We were curious about how RNC Minerals’ former flagship project will be developed to add value for shareholders. RNC Minerals investors have been focussing on the company’s strong, stable gold-production, but have they been overlooking one of the most exciting elements of the story?

If RNC Minerals is a company that takes your interest, you may well want to check out our previous update from Huet. We’ve covered RNC Minerals with detailed investigative articles for much of the last year. Make sure you check them out.

Nickel, Nickel, Nickel

Muinonen is a nickel lifer. Her experience, expertise and enthusiasm was tangible during our interview. She has a similar level of passion and drive as her CEO, Paul Huet. That can only be a good thing.

RNC Minerals was originally known for its large nickel project, Dumont; it has the potential to be the 4th largest nickel sulfide project in the world (once ramped-up in a year 7 Phase II expansion). However, after RNC made its major gold discovery at Beta Hunt, the company moved its focus away from nickel towards consistent, cash generative gold. 51,090oz for 2H/19 at an AISC of US$1,144/oz is evidence this plan was prudent. While these results are strong, investors seem to have forgotten that RNC Minerals’ option on nickel at Dumont could potentially be a sizeable future value-generating event.

What are the key stats?

Potentially the 4th largest nickel sulfide project in the world, with a 30+ year Life-of-Mine

Scale is undeniably important, especially when it comes to Nickel investment

Nickel is the most important metal by mass in lithium-ion battery cathodes, which are commonly used by EV manufacturers. At present, nickel comprises a third of Nickel Manganese Cobalt (NMC) cathodes and 80% of Nickel Cobalt Aluminum (NCA) cathodes.

If the EV revolution is, indeed, to be a ‘revolution,’ the entire global automotive infrastructure will have to transform. This will require great change and great nickel demand, and this will only be satisfied by big projects. With the large scale of Dumont, RNC is priming itself to take advantage of nickel demand in the near future. In RNC Minerals’ Feasibility Study, released last year, initial nickel production in concentrate is projected to be 33ktpa ramping up to 50ktpa after the Phase II expansion. The estimated annual EBITDA ramps up from US$303M in Phase I to US$425M in Phase II: an average of US$340M.

Muinonen is very confident that RNC Minerals is well-positioned for when large strategic partners and operators come knocking on the door, as the +30-year LOM means that this project will produce through multiple nickel cycles.

Multiple EV Commodities In An Established Jurisdiction

The Feasibility Study states Dumont is the 2nd largest nickel reserve in the world, with 2.8Mt (6.1Blbs) contained nickel, and is the 9th largest cobalt reserve with 110,000t (243Mlbs) contained cobalt.

These are 2 EV-related commodities that have similar macro stories and fit into a coherent narrative. This makes the project easier to package and market. This diversification appears to de-risk the project, helping to avoid a reliance on a single commodity’s market conditions.

The project is located in the Abitibi region of Quebec, one of the world’s most reputable jurisdictions. This, again, de-risks the project.

Low-Cost Nickel Sulphide

Looking at the metallurgy of Dumont’s ore body, it is comprised of nickel sulphide, rather than nickel laterite.

Laterite ores require complex and extensive treatment: an extremely expensive HPAL process, whereas nickel can be extracted from sulfide ore by simple, cheap techniques, namely: pyrometallurgy.

Conversely, it should be noted that sulphide deposits are more expensive to find in comparison to nickel laterite deposits, because nickel sulphides are found deep in the earth’s crust. However, in the case of Dumont, this shouldn’t be a problem. Construction and operation of the mine and processing facilities could be made easier by the existence of excellent infrastructure, including roads, rail and access to low-cost power. It looks like a great setup economically.

The Feasibility Study places the initial CAPEX at US$1.0 billion. This no small figure, but for a project of this scale, it looks reasonable. In fact, the Dumont Nickel Sulfide project is in the low 2nd quartile of the cash cost curve.

Fully Funded Out Of Existing Cash Flow And JVs

RNC Minerals is currently churning out the cash, courtesy of its successful gold mining operations.

Adjusted earnings of US$13.7M for Q4/19 show just how far the company has come in record time. RNC Minerals has the cash to make things happen. We’ve already seen what having cash has allowed them to do. Expect more aggressive news soon.

In addition to the growing robustness of the company’s own cash situation, RNC Minerals is fully-funded at Dumont through to a DFS, FID, and construction, thanks to a JV with Waterton.

Fully Permitted

The Dumont Nickel Sulphide Project is ‘fully permitted’ and ‘construction ready’ courtesy of existing investment into the project. The Impacts and Benefits Agreement has been successfully negotiated with the local First Nation, and RNC Minerals appears to have avoided any of the typical hurdles mining companies have to face. This helps with costs and timing.

Bonuses

There are several additional optimisations that further transform the economics of Dumont for the better:

  1. Implementation of an autonomous truck fleet – This could increase efficiency and cut costs to a sizeable degree.
  2. Larger-scale initial project phase of 75ktpd – If RNC Minerals scales up this project from day 1, this will undoubtedly generate even more intrigue from nickel investors.
  3. Sale of magnetite by-product – Just like cobalt provides commodity diversification, magnetite does too. Magnetite has robust demand and monetising this by-product could make every metre of drilling much more profitable.
An open charging port on a dark grey electric car.

The last fact to remember, and this is perhaps the most important, is that the Dumont Nickel Sulphide Project is not even the primary focus of RNC Minerals anymore. The enormous potential upside is an undervalued and unappreciated nickel option that has yet to see any reflection in RNC Minerals’ share price. Should they consider spinning out the JV to get the market to recognise the value?

If retail investors are looking for exposure to the upside of the EV & battery revolution, RNC Minerals is definitely worthy of some attention.

Company Website: http://www.rncminerals.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The RNC Minerals Company Logo.

RNC Minerals (TSX:RNX) – The Dumont Nickel-Cobalt Project: An Exciting Option?

The RNC Minerals Company Logo.
RNC Minerals
  • TSX: RNX
  • Shares Outstanding: 608M
  • Share price C$0.31 (31.03.2020)
  • Market Cap: C$185M

Fresh off the back of our uplifting interview with the CEO of gold producer RNC Minerals (TSX: RNX), Paul Huet, Crux Investor interviewed Johnna Muinonen, the President of Dumont Nickel (a subsidiary of RNC Minerals).

You may also want to check out our last update from Huet. We’ve covered RNC Minerals with detailed investigative articles for much of the last year. Make sure you check them out.

RNC Minerals investors have been focussing on the company’s strong, stable gold-production, but have they been overlooking one of the most exciting elements of the story? The Dumont Nickel-Cobalt Project could offer investors exposure to the EV revolution, as nickel and cobalt demand are projected to swell. RNC Minerals will look to monetise these assets once the time is right, and nickel and cobalt markets are favourable.

Cobalt has some ethical concerns, and a contributor has covered these in detail on this platform.

Investors will be clamoring for information about Dumont, and Muinonen was happy to oblige, providing Crux Investor with plenty of nickel nuances and cobalt considerations.

We Discuss:

  1. Overview of Dumont Nickel
  2. The Nickel Market: The Impact of Covid-19 and What’s to Come
  3. Positioning and Differentiating Dumont in the Market
  4. Greener Mining Solutions Being Applied at Dumont
  5. Timing on Monetising Dumont: The Ongoing Conversations
  6. Fully Financed: How Long Will the Money Last?
  7. Feasibility Study: The Highlights

Company Website: http://www.rncminerals.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The RNC Minerals Company Logo.

RNC Minerals (TSX:RNX) – A Serious Opportunity?

The RNC Minerals Company Logo.
RNC Minerals
  • TSX: RNX
  • Shares Outstanding: 608M
  • Share price C$0.31 (31.03.2020)
  • Market Cap: C$185M

COVID-19 has negatively affected the share price of most companies. Even the historic safe haven of gold investment has suffered, with gold producers and gold explorers suffering universally.

We recently sat down with the CEO of gold producer RNC Minerals (TSX: RNX), Paul Huet. It was a candid, honest interview that should get gold investors feeling much more upbeat.

You may also want to check out our last update from Huet. We’ve covered RNC Minerals with detailed investigative articles for much of the last year. Make sure you check them out.

We took at look at RNC’s impressive Q4/19 results and discussed the fact that, very impressively, RNC Minerals’ 2020 guidance remains unchanged.

We Discuss:

  1. COVID-19: Its Impact On The Gold Price And Gold Companies
  2. Q4/19 Results: Encouraging Progress
  3. Delivering Results: Continuing To Impress With Robust Operations
  4. Getting The Share Price Back Up Where It Belongs

Company Website: http://www.rncminerals.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The RNC Minerals Company Logo.

Noun: #COVIDITY

USA, New Jersey, Jersey City, Businesswoman in front of computer, looking tired.

Noun: COVIDITY

(1) The state of being totally bored

(2) The study of a topic digitally

A Wild Week

I’ve seen some hilarious videos on social media over the course of the last week. The Italian pianist entertaining his neighbours from his balcony is my favourite so far.

As the coronavirus continues to dominate the news and the attention of our governments, many people are bored out of their minds in their state of isolation and are resorting to going online in search of distraction.

The government’s ‘social distancing’ request is being embraced by many and being ignored by an unthinking and reckless few.

Social Distancing

However, social distancing is what I’ve managed to do effortlessly with my mobile phone and tablet for so long I was getting good at it.

So, if you are anything like me right now, you are sitting on your sofa in your house reading this. You probably still have your morning coffee on your table staring at you, cold and like everything around you, static. There is nothing less inspiring than a cold coffee. You know that you need to take it to the kitchen and put it in the dishwasher, but given the lack of things to do, maybe save that for later. It’s not like you have to be anywhere…

A Still World – Get Online!

In this stationary world, it would be all too easy to slide into a holding pattern, putting decision making on the back burner. Looking out your window at an empty road may reinforce this mood. A still world creates a mob mentality: why bother moving when nobody else is? However, the reality is that the world of opportunity is right now, and it is all accessible online.

Crux Investor knows all too well about going digital. We can be at the office in London in the evening, interviewing an Australian CEO in the morning. We buy and sell shares on exchanges around the world, and we invest in mining companies with assets in countries many would struggle to pick out on a map. We have access to all the information we need, both via our own sources, and online media (not the fake news kind). There is very little we can achieve physically that we can’t achieve digitally. In reality, on a normal working day, in a non-COVID-19 world, we spend hours of it in an office, staring at a computer screen anyway. Has our daily working routine really changed that much? No. The only real difference is that, at present, some supply chains are disrupted, some demand is curtailed, and investor sentiment has been flushed down the toilet. A violent bear market takes no prisoners. I’m not enjoying not being able to buy any bread either…

Volatility is a perfectly good reason for nervous investors to steer clear; after all, why take an unnecessary risk? However, volatility brings with it an immense opportunity to experience some of the biggest returns in your investment career. Investors might feel they lack the knowledge to navigate volatile markets. However, it’s not like you don’t have a lot of free time on your hands to learn how…

Crux Investor is going to keep the content streaming out, so if you’d rather do something productive with your time, now is the moment to change your mindset: become digitally minded. On our website, you will find in-depth interviews, articles, company profiles, opinion pieces, podcasts and transcriptions. All our content should help turn the next few months from coma-inducing into profit-inducing.

It’s time to take advantage of your free time, even if you just use the time to learn and monitor rather than to invest.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

USA, New Jersey, Jersey City, Businesswoman in front of computer, looking tired.

The COVID-19 Crisis – The Inside Word From Goldman Sachs

A crowd of people wearing masks on a busy public street.

COVID-19 – The Reality

There is plenty of blatant fearmongering right now, be that from the media or from individuals. It has struck the heart of the business world, causing convulsions of panic selling to overwhelm international markets. Investors have seemingly lost their bottle, but that is hardly surprising when the ‘news media’ constitutes clueless, dramatic speculation, rather than cold, hard evidence. I recently penned a different article about COVID-19 that you may be interested in reading.

Investors need to cut through the misinformation that is currently thriving and hear what the big business institutions are actually saying. Who better to hear from than Wall Street powerhouse, Goldman Sachs Group?

In an emergency conference call on Sunday 15th March, Goldman cut through the palpable anxiety and explained the fundamentals of the COVID-19 situation in a pragmatic way to 1500 of its clients.

The Goldman Sachs logo on a wooden wall.

Even the most logical investors do not have their heads in the sand. This is a serious, worrying situation that will take thousands of lives. However, let’s hear how the market is reacting beyond sentiment. It would be ignorant and insensitive to have a ‘good’ and ‘bad’ category for the impact of COVID-19 on markets given the large number of deceased individuals. Let’s settle on reasons to be bearish, and reasons to be more bullish.

Bearish (1/2)

  • “50% of Americans will contract the virus (150m people) as it’s very communicable.”

This is an enormous number, and there is no getting away from the unavoidable impact that COVID-19 is going to have on investors and markets. The scale of the problem creates immense volatility and unpredictability. The scale of this number is likely one of the main drivers behind current investor sentiment.

Bullish (2/2)

  • “This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.”

This puts the Coronavirus situation into perspective. While nobody is pretending this is a normal flu situation, it is important for investors to avoid getting carried away. For the vast, vast majority of people, COVID-19 will exhibit either moderate or no symptoms. The elderly population and those with pre-existing conditions, especially respiratory, are at an increased risk, and this needs to be a constant consideration. However, let’s all calm down and take a breath before unnecessarily panicking.

Bearish

  • “70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be affected.”

This is an even more intimidating number than the figure for the U.S and is likely generated by the greater population density in Germany. The German economy is integral to international trade, especially the automotive industry. One of the most important global economies possibly descending into paralysis is a very persuasive factor behind the mass panic selling.

Bearish

  • “Peak-virus is expected over the next eight weeks, declining thereafter.”

Investors will be seriously considering why they should invest now in these unprecedented market conditions, rather than waiting several months to global markets to begin to recover and stabilise. The extended timescale of the virus makes a strong case of caution.

Bearish/Bullish

It Depends On The Geographical Location Of Your Investments!

  • “The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather.”          

If you are investing in mining companies that are listed on an exchange that either finds itself in the cold season, or operates in an environment that is currently wintry/cold year-round, investors should make this a consideration. The virus appears to flourish in colder environments, so it is likely that environment will play a large factor in national economic performance.

COVID-19 on a cell level.

The coming summer in the northern hemisphere should help. The virus is regarded by many experts as seasonal. Investors like myself are interested in the climate logistics: does this mean a gold mine in what is currently and usually a very hot country, such as in Northern and Central Africa, is a safer, more predictable investment than one in Canada?

Bullish

  • “Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.”

While this is devastating news, investors will hopefully be able to process these statistics for what they are. The majority of the workforce should be either unaffected or mildly affected. It is incredibly sad that the elderly people are suffering by far the worst, but investors will be aware that elderly individuals do not comprise a huge portion of the mining workforce. The lives of older people do not matter any less; that goes without saying. However, the logistics of this situation are clear.

Bullish

  • “Mortality rate on average of up to 2%, heavily weighted towards the elderly and immunocompromised; meaning up to 3m people (150m*.02).”

The mortality rate is a shocking figure but is relatively low. In addition, the mortality rate is based on total confirmed cases, when the true number may be much higher (but let’s not speculate). Again, the mortality rate is weighted towards the elderly, who play a reduced role in the world of mining and wider business.

Bullish (1/2)

  • “In the US about 3M/year die, mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3M new deaths from the virus, it means elderly people dying sooner due to respiratory issues.”

This further confirms the COVID-19 situation. COVID-19 is not usually the sole cause behind an individual’s demise. It often hastens the death of those already suffering from severe health conditions. That is not to say that all those suffering from these underlying conditions are usually in any mortal danger on a day-to-day basis.

Bearish (2/2)

  • “This may however stress the healthcare system.”

An overworked, possibly overwhelmed healthcare system is rarely an indicator of economic prosperity.

Bearish/Bullish

  • “There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow        the rate of transmission giving the healthcare system more time to deal with the caseload.”

How well your national economy is preserved depends on the competence of your government, the effectiveness of their coping strategy, and the actions of the populace. If Goldman Sachs is right on the ineffective nature of quarantine, which has perhaps been demonstrated by the situation in Italy, western investors seem to have a big reason to be concerned.

NYSE workers look stressed while talking over a headset.

A lack of national trust in the polarising Donald Trump and Boris Johnson could reduce the confidence of investors in their COVID-19 strategy, creating more volatility and leading to citizens refusing to heed advice. This could cause further deterioration to the situation.

Let’s hope the U.S and UK electorates have elected the right people for the job.

Bearish/Bullish

  • “China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.”

China’s economy is crucial to world economic health. The world relies on China for a huge amount of manufacturing. Disruption to the supply chain will create global uncertainty and this looks to be for an extended time period. This likely means more investors will be keen to sell and remain passive.

However, western investors will be hoping China’s economic frailties can be capitalised on by western businesses. Will western businesses be able to position themselves more strongly? Most of how this plays how depends on a company’s ability to mitigate losses from supply chain and demand disruption, in addition to ability of national governments to deal with this situation appropriately. This is far from a predictable outcome.

Bearish

  • “Global GDP growth rate will be the lowest in 30 years at around 2%. S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.”

Even the most ardent of contrarians will be aware this is likely to destroy investor sentiment for the foreseeable future and have a negative impact on growth.

Bearish/Bullish

  • “There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.”

This is encouraging for investors because, if Goldman Sachs is to be believed, it shows that markets should fully recover from the impact of COVID-19 by 2H/20. However, the impact on investor sentiment/market psychology will be much more long-lasting, insidious and damaging. 

Bearish/Bullish

  • “In the past week there has been a conflating of the impact of the virus with the developing oil price war between USA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.”

Whether this is a positive or negative for you depends entirely on which side of the investment aisle you are stood. Investors perhaps need to decide how they feel this geopolitical situation will develop and may need to adjust their position depending on their degree of confidence in their predicted outcome.

Bullish

  • “Technically the market generally has been looking for a reason to reset after the longest bull market in history.”

If Goldman Sachs is right, COVID-19 could have taken the form of any other catalyst. The message appears to be that this market reset was inevitable, but even optimistic investors will acknowledge the current market situation is far from routine or intentional.

Bullish

  • There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like ​9/11 than it does like 2008.

This is a very significant point. If Goldman Sachs it to be believed, the ferocity of the panic of investors is not fundamentally justified. There are obvious reasons for caution, but the risk appears more temporary than previous economic crashes, and the idea that markets are in dire straits appears to be exaggerated.

After reading this, I hope investors can at least feel more informed about the COVID-19 situation. I hope this article has brought some balance to the discussion, and investors now need to continue to go digital, research, and make their own minds up.

There are significant obstacles for us to overcome. However, this is no reason for people to switch off from investment entirely. Volatility brings risk, but it also brings opportunity. This situation will not last forever. In the meantime, take advantage of your free time at home as my country of residence, the U.K, edges towards what looks like an inevitable total lockdown.

Things will likely get worse before they get better. Stay safe, take care, and be selfless.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A crowd of people wearing masks on a busy public street.