- TSX: RNX
- Shares Outstanding: 608M
- Share price C$0.40 (14.04.2020)
- Market Cap: C$243M
Interview with Johnna Muinonen, President of RNC Minerals, Dumont Nickel (TSX:RNX).
RNC Minerals was originally known for it large Nickel project, Dumont, before their extraordinary gold find at Beta Hunt changed everything. As a consequence, investors have been looking towards Australian and consistent cash generative gold, and perhaps have forgotten that in Dumont they have a potentially large future value-generating event.
We spoke with Muinonen in early November to find out where they are in monetising this large Nickel asset. She gives us an update about the movement in the Nickel market and the completion of their Feasibility Study. Muinonen gets in to the detail. She describes Dumont as perhaps the most advanced large Nickel development project in the world. With a Life of Mine of +30-years it is certainly large scale. That also makes it attractive and it can operate through inevitable nickel cycles.
Clearly capable and knowledgeable, Muinonen, a Nickel lifer, appears to have the same energy and drive as her CEO, Paul Huet, and is keen to ensure Dumont is ready when large strategic partners and operators come knocking on the door. She doesn’t seem to think that is too far away. They are fully funded between now and that point, because of a JV with Waterton.
- Overview of Dumont Nickel
- The Nickel Market: The Impact of COVID-19 and What’s to Come
- Positioning and Differentiating Dumont in the Market
- Greener Mining Solutions Being Applied at Dumont
- Timing on Monetising Dumont: The Ongoing Conversations
- Fully Financed: How Long Will the Money Last?
- Feasibility Study: The Highlights
CLICK HERE to watch the full interview.
Matthew Gordon: Hello, Johnna. How are you?
Johnna Muinonen: I’m good, Matt, how are you doing?
Matthew Gordon: Not bad, not bad. I haven’t spoken to you since November. And I remember when RNC minerals used to be a Nickel company, so I thought I better get in contact. How are you?
Johnna Muinonen: I’m good. It’s a different days than the last time we were together, for sure. It’s a bit of a different world right now.
Matthew Gordon: Yes, it is. Obviously I think you’re referring to covid 19 impacting on the way people are doing business. But honestly, Minerals is a very different company too; you guys have done a great job on the Gold stuff, bringing in the cash. Nice and consistent. I think the market is saluting that. Well done to you guys. But the other big piece of this, which I think people have forgotten about, and I don’t think they should have because it’s potentially worth a lot of money, is the Nickel component – Dumont. What’s been happening since we last spoke? We’re about to find out. We’re about to find out, are we?
Johnna Muinonen: We are, I mean, the last time we were able to be together, now we’re doing it over video calls. So we’ve been busy with Dumont. If I look at where…first maybe I’ll get into a little bit about what Dumont is for your viewers.
Matthew Gordon: Please, just give us that one-minute overview again.
Johnna Muinonen: The one-minute overview: RNC owns the 28% interest in the Dumont project. The Dumont project is a Nickel sulphide project located in the Abitibi region of Quebec. We’ve completed an updated Feasibility Study back in 2019. We are fully both provincially and federally permitted. And so, really at this point we’re waiting, we’ve been waiting for a Nickel market, and if we look at where we were back in October, November, December, and even earlier this year, we were really starting to come along in terms of where the Nickel market was, and getting into a bit of a bull market there.
Matthew Gordon: Well, let’s talk about that. First of all, thanks for the summary; it’s a nice reminder to people of how advanced you guys are. And the Nickel market – let’s talk about it. I agree with you. I think there was a resurgence towards August, September last year, then as predicted, the scrap kind of came into the market effecting pricing but it was expected. And you would’ve thought that the price would have sort of recovered kind of mid-year this year, but COVID-19 comes along, what’s that done for you guys? What’s it done for the Nickel market, more importantly?
Johnna Muinonen: Exactly, we talked last October, early November and definitely, we thought the market had been a bit over-done in the summer of 2019, and Anesia announced they were going to pull forward that ore ban which is still in place. And on the back of that announcement, Nickel price took off, inventories fell down. But when you look at the stainless steel market, it definitely didn’t seem to be translating into demand on the day. It wasn’t coming from demand on the stainless steel side. So definitely thought there was probably going to be a bit of a weakness coming into Q1/20, Q2/20 of this year. Of course, with the impact of covid on top of that, obviously we’re definitely seeing that now, both in Nickel inventories as well as Nickel pricing. Nickel prices being held currently somewhere in sort of the USD$5lbs range.
We’ve got inventories that have increased over the last two to three months since January, into about 230,000t of Nickel on the LME. However, we look at that and there is definitely an impact from covid, but my personal opinion and, just when you look at this market, I think we will get past this. Fundamentally, the longer-term base, the basic fundamentals longer term remain strong. We have seen a deficit in the Nickel industry for the last four years, and that was even before the Indonesian ore ban. We’ll probably see a bit of a surplus this year, however, that’s directly related to this slowdown from covid and we will catch up to that.
Fundamentally there’s been a 10-year period of lack exploration in the Nickel sector. There really just hasn’t been anybody out there looking for Nickel. And there’s been a lack of investment in the Nickel junior side of things as well as even the major companies weren’t spending the money on exploration that historically they used to do. And really what that translates to is that we’re going to see a delay between finding new Nickel projects and being able to bring them on online.
Matthew Gordon: If I may just interrupt because I don’t want to forget to ask you, which is, if you stick around what the impact of COVID-19 is, now obviously, it’s impacting people’s ability to work now. People are being restricted to their homes. I think mostly, globally, most people are adhering to that. It’s affecting people: family businesses, small businesses, their ability to earn cash. And I think some governments are stepping in. Some governments are not. I mean surely that is going to have an impact on people’s buying behaviour, which is going to have a knock on effect into the metals market. But do you see that as a, again, I know you are used to dealing with tens of years for these types of large Nickel projects, but do you think that’s a kind of short-term impact, or do you see that not really affecting the way that large players like Nickel tend to want to plan their operations out?
Johnna Muinonen: Yes, I mean I think, I think definitely we’ll see obviously a short term drop in consumer demand: people aren’t shopping. I think I’ve seen some graphs which shows just the hugely dramatic drop in people’s buying and people shopping, which absolutely will have an impact.
The stainless steel market – most Nickel produced today goes directly into stainless steel. That stainless steel is generally used for infrastructure projects and things along those lines. So one of the things that I think will be interesting to see is, in terms of government infrastructure spending and stimulus packages, how will that really impact the Nickel market and the economy moving forward? , Nickel in the ramp up in 2007, most Nickel came out of the consumer goods space just because of the price of Nickel went up to USD$25lbs and it became too expensive.
So when we look at consumer buying – for sure – that will impact the demand on Nickel. However, I think I’m kind of interested to see what happens once we get out of this initial covid crisis, a month or two from now when governments really want to stimulate their economy. I think they’ve already talked about stimulation in China, and China has sort of come out of the initial covid lockdown and they’re starting to see manufacturing again. I think that would really help Nickel on the stainless steel side. And I think that could be a real positive as we move into Q3/20, Q4/20 this year and maybe into next year. And I think on top of that, the whole lithium battery growth sector and in the EV market and energy storage market on the battery side of things, I still think it’s a very exciting place coming forward.
And I also think that some of the interesting things that people have seen with this slowdown is really the improvement in the environment in cities; in the improvement in pollution and smog without all of the internal combustion engines driving around. So once we come out of that, I think people might look at how to do things differently, and potentially that could speed up that demand for electric vehicles as well as the demand for batteries.
Matthew Gordon: I love that argument. I think that’s so true. I think that’s so true. I think people will behave, think, act differently after this, because it’s going to affect people psychologically. We haven’t had anything like this since the Second World War: we haven’t been held captive, we haven’t been worried about food, toilet roll – had to throw that in there. Energy, seeing friends, all of all of those things you take for granted. And yes, some of the benefits, the main beneficiary here is the fact that the world is possibly a little bit cleaner as a result; we’re seeing rivers and waterways, the Thames included making a huge recovery there. So it is fascinating. I like that argument. Probably worth exploring more. But there’s, we want to talk about you today.
So given that world, that picture that you have painted for us, we have spoken to a lot of Nickel companies recently, they’ve all been telling us they are a top 10 Nickel company, definitely a top 10 at this, that or the other. How are you positioning yourself? Because you talked about the completion of the Feasibility Study in the last year, which is great. You have talked about having conversations in the past and obviously you’re working with Waterton there. So what are you doing? And I guess, what’s been happening since we spoke to advance things with Dumont?
Johnna Muinonen: Okay, there’s a couple of different questions in there; we can get to all of them. So I’m going to start looking at competition; how are we differentiating ourselves? Like you said, you’ve been talking to lots of Nickel companies with the sort of run up in Nickel there, and a bit of some tailwinds behind Nickel. We’re seeing more and more Nickel companies, or companies that were focusing on other things, now looking at their new Nickel assets.
For us, I think we have quite a few strengths, specifically around Dumont. One jurisdiction – we are in the active mining region of Quebec. We have an educated and experienced regional workforce for both construction and operation of the project. The project has amazing infrastructure. We have water, we have rail, a rail line that’s on the property. We have an all-weather highway right beside the property. And we have very competitively priced green hydro-power which is located 8kms away from the project. So that piece, that allows us to be structurally low cost just because we’re in the right region.
Our timeline to construction; I talked a little bit earlier there where I gave it a little bit of a blurb, the overview of Dumont, we are both federally and provincially permitted. We have a recently completed Feasibility Study and with those pieces we are ready to start construction. So for investors that are looking to hit the next step, sitting in the Nickel cycle, we are perfectly positioned for them.
The asset itself is a large scale, long-life assets. I’ve previously spoken about the Nickel market and how volatile it is. Dumont is a 30-year project that on average will produce 39,000t of Nickel annually. The long life of Dumont really allows investors increased certainty about hitting several price cycles over the life of project and maximizing their return. If you’ve got a 5 to 10 year Nickel project, you can theoretically build it and miss the price cycle at the time where you need it to pay back your investors. That 30 year life, and then plus upside after that, that really, I think, adds something to our story versus other stories.
And then finally, I think one thing that we don’t talk about enough that I’d like to start talking about with Dumont is really the green side of things. So not only will Dumont produce Nickel and Cobalt to supply the low-carbon energy storage industry it’s also a very low-carbon footprint project. 100% of our electricity is hydro sourced, and we actually increased the electrification of the project in the updated Feasibility Study to include trolley assist for our haul trucks. What that does is actually reduce our diesel consumption by over 500M litres over the life of the project, or by almost a third – this gives us the advantage. So when we’re talking to potential investors, many of these investors, especially those based in Europe have carbon footprint ESG requirements for some investments. So I really think that that helps us and that is definitely something that we can take and we can bring to the table over other projects.
Matthew Gordon: Now that stuck out: when you were talking about green hydro-power, I was going to ask you, it’s not something we’ve talked about before. We’ve looked at projects which are battery related, and you talk about, how do you get a truly end-to-end green solution here. And we’ve talked about, at the back end here, there’s a fantastic Australian company called Neo Metals, which is doing a battery recycling project, which is getting back a huge percentage of the commodities which have gone into the batteries and then recycling and reusing them. And we like that, but no one’s really talked about the front end, which is as you say, all of that diesel and that dirty power that’s used for mining, and the way that miners behave. Their ESG is not usually up to scratch. It is interesting that you’ve thought about that. And I agree, we’ve got some pretty big funds here in London who have pretty much changed their rationale for investing based on that. So I like that, that’s fascinating. Fascinating.
Johnna Muinonen: Yes, I know, and actually, one of the pieces of work that we’re talking about right now is looking at, we had to quantify our greenhouse gas emissions from the project for our environmental permitting process, through the province. However, looking at that life-cycle of including all of our reagents that we have to buy, including the transportation of those to site, as well as the fact that both our tailings and our waste rocks have the ability to sequester carbon passively, we are looking at trying to quantify the whole picture so that we have that for our potential investors. Because I do think moving forward that is just going to be a very important piece that we can bring to the table for various investors that are much more ESG focused today than they were five years ago.
Matthew Gordon: Well, let’s talk about that, and you’re going to need some point of differentiator, because according to a lot of companies we’re talking to, they’ve got fantastic projects as well. I don’t think they’re anywhere near as advanced as you, in all honesty. But nevertheless they’re going to be talking to the same people as you. So can you give us an idea of timing? Because again, you talked about being able to hit the cycle at the right time, being able to insert yourself to benefit from an uptake in price, et cetera. Where are you with regards to the conversations and the timing for actually monetising this? I’m not going to ask you too much about monetisation because I know you’re not going to tell us anything. You’re not going to give anything away there, but what are those conversations like? Let me put it like that as opposed to where are you with them?
Johnna Muinonen: Yes, no, absolutely. I mean, I think it’s been an interesting time in the last six to eight months, right up until PDAC in early March, we were seeing some significant positive overall market signs that definitely had us considering a much more focused marketing approach for 2020. And including that when we look at, and I want to be clear, I’m not talking about conversations specifically with us, but when we look at some of the major mining companies around the world, they’ve been publicly stating a shift of focus, and now are publicly stating that they want to look at Nickel sulphide resources, and they want to look to add those to their portfolios, or they’re looking at funding additional Nickel exploration projects.
I think in general, in the fall and early in the winter, Nickel was definitely starting to get some tailwinds. And while the short-term market is going to be a bit soft, many were starting to look at the medium and longer-term knowing that there’s a timeline to get these things into construction, to get them into production. And as we’ve indicated, as we said, we’re definitely further ahead than most Nickel companies. So when companies are looking at the space of Nickel juniors and Nickel projects, having one with a Feasibility Study, having one that’s fully permitted definitely ticks many boxes, more so than some of the projects that are earlier stage where they’re still drilling or looking to get into just starting either a PEA or a pre-Feasibility Study.
Also I think, some of them, I think for the last, earlier in the fall and early mid last year, people were still deciding how they want to divest in the battery space. I think there’s a lot of ways that people talk about the battery space. People are very excited about it. However, how do you want to invest in it? Are you looking at Lithium? Are you looking at Nickel? Are you looking at Cobalt or Copper? And I think, over the last six to nine months, we’ve really seen a couple of things: one is that almost all battery chemistries, especially for electric vehicles are trending towards more and more Nickel. As well as, when you look at major mining companies, most of them are very familiar with operating base metal assets such as Copper, such as Nickel as opposed to say, Lithium. So in terms of major mining companies that are looking around, Nickel would be familiar and in the real house.
So one of the main drivers for the timing for us to update the Dumont Feasibility Study was really around being able to come into what we saw as an upcoming bull market for Nickel with a current technical report so that we could go out and really start to market again. Now obviously, I think the COVID-19 pandemic has slowed everything down in the short term, but I really do feel confident that once we get through this I think we’re going to regain the momentum that we were seeing in the Nickel market that we saw earlier this year and late last year. The fundamentals remain strong, and the world does need more Nickel. Dumont is well positioned to weather the storm without any near-term financing requirements so then we will be well positioned to be able to emerge from the current economic crisis: the covid pandemic. We will be ready to hit the ground running when the markets return.
Matthew Gordon: Okay. I know you’re fully-financed. I know you don’t need to, although quite frankly you could these days, because I think the Gold business is throwing off so much cash at the moment, there’s no reliance to go and ask Paul for more money. You’re fully financed to take you through to…what? Until when?
Johnna Muinonen: Yes. So, I mean, I’ve talked about this a little bit before; we own 28% of Dumont. Dumont is 100% owned within the JV that we have with Waterton. And the financing for the Dumont work is contained within that JV. As part of the initial agreement back in 2017, the RMCs portion of that funding was provided by Waterton in a segregated account. We are well-financed to complete the work that we’ve planned for 2020. And then if things continue to slow, we are able to hold the project for another several years without any additional financing. And that includes maintaining the project team and all the brain trusts that sort of has worked for the last 10 to 12-years on Dumont so that we don’t have to lose that as we move forward. So in the medium to mid-term, there is no requirement for RNC to have to provide any additional financing.
Matthew Gordon: I think that’s interesting. Again, a lot of the juniors that we’ve been talking to have been cognisant of saying, we’re running out of cash but we can’t lose the, I think you just called them the brain trusts; the people with the knowledge here, because if we have to lay them off, we’re not sure to get them back on. It’s a real concern, for sure. Can we just finish off? Can you remind me of what were the highlights from the Feasibility Study with regards to the numbers -in terms of cost, returns, scale, et cetera?
Johnna Muinonen: Yes, absolutely. So we completed the Feasibility Study last year. It has an NPV8 of USD$920M, just over a 15% rate of return, 15.4% rate of return. We have an All in Sustaining Costs of less than USD$4lbs. The project itself will produce an average of, it’s a two-phase project approach. The initial phase, which is the first seven years will produce an average of 33,000t of Nickel per year and that will be expanding to 50,000t per Nickel annually after that for the next sort of, for the first 20-years. Overall the project itself is a 30-year life project. And the free cash flow once we’re an operation over the life of the project is around USD$200M per year.
Matthew Gordon: Wow. Okay. And what are you going to need to raise? I missed that number.
Johnna Muinonen: And the initial capital is USD$1Bn.
Matthew Gordon: Okay. So it’s not big by Nickel terms.
Johnna Muinonen: It’s not big by Nickel terms. I mean it’s very much, if we look at even by sort of larger scale Gold operations, if you look where we are operating in the Abitibi, it’s USD$1Bn to build a 50,000t per day plant. You look at Malartic, which is about 60kms south of us, it’s the large Gold mine that was built in 2009 for about USD$850M. If you look at Detour Gold, which is on the other side of the border from us in Ontario, again, that was more remote and needed a camp. However, it needed more power infrastructure, however, that was built for about USD$1.2Bn, USD$1.3Bn for about the same size mill.
So roughly within the area that we’re operating, we have people that are experienced in how to build these large mills, and recently. That is one of the biggest advantages with where the project is located. We get to take advantage of all of that experience.
Matthew Gordon: That’s fantastic. Well, Johnna, thanks very much for the update, and please stay in touch with us. Obviously, as we move through and sort of work out when we can get back to some sense of normality, or some semblance of normality, should I say, it would be good to sort of see how you’re getting on with regards to conversations in the market place, and can you move this forward. I mean, you are the most advanced Nickel company that we’ve spoken to, so I guess people are paying attention to you.
Johnna Muinonen: Yes, I mean I think right now we’re seeing a bit of a lull on the market side, but I do want to be clear that we’re actively working on items to move the project forward internally. So we’ve got a few things that we’re looking at this year. We have, since we last spoke, we did approve the 2020 work plan and that work plan really focuses on sort of three different things. One is maintaining our shovel-ready status. So that’s one thing we’re very proud of in terms of, we have permitting, we are ready to go into detailed engineering. With the completion of the 2019 Feasibility Study, we need to update some of our documents, which includes things like the closure plan, which is a critical element in finalising the mining lease and that goes towards maintaining our shovel-ready status. And also, we need to be able to communicate with all of our stakeholders what the results of the 2019 Feasibility Study were. That includes shareholders and obviously, we were on your show a couple of times, as well as just the local community, local governments, provincial governments. So we’ve been starting that and we’re going to work, continue to work through that in the next six months.
So we’ve been working on things like that where really we can take advantage of the time now to really reduce any sort of schedule or cost risk to the construction phase. And terms of, the Feasibility identified several opportunities to add value to the project so we are looking at several of those items, and we’re going to be looking at how we can add more information, add data, and bring some of those opportunities closer to fruition over the next few months.
Matthew Gordon: Fantastic. You sound as pumped up as Paul was when I last spoke to him. But what are you guys drinking?
Johnna Muinonen: We are pretty excited about the Nickel market in general. I mean, I think we need to get through this current period, but I think long-term, the fundamentals are good. I know I’m a Nickel bull but, definitely, definitely I think it’s an opportunity that Dumont has been waiting for in terms of the market, having one of the few Nickel projects that is able to be delivered and built in short order. Being able to take advantage of that. I think when we look at the world, there just hasn’t been enough exploration in Nickel over the last 10-years. So we’re able to really differentiate ourselves between us and other Nickel companies just because we do have a project that has a Feasibility Study, that is fully permitted, and we are ready go into engineering, detailed engineering and construction.
Matthew Gordon: You’re excited. I’m excited for you because I don’t think the market is giving you a credit for the Nickel component. I think that it’s all valued on what’s happening with the Gold. If you can move this thing forward this year, I hope you can, I’m referring to COVID-19, nothing else. If the market does recover and you are able to demonstrate to us and your shareholders exactly what it is worth, it’d be nice to see. I’m sure you’ll be delighted. I’m sure Paul will be delighted. We wish you will wish well with that.
Johnna Muinonen: Thank you so much, Matt, thank you very much for having me on. It was good to catch up with you again.
Matthew Gordon: Beautiful. Speak to you soon.
Company Website: http://www.rncminerals.com/
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