5 Things You Need to Know about Class 1 & 2 and Intermediate Nickel (Transcript)

Nickel ore

Interview with Industry Commentator Mark Selby, CEO of Canada Nickel Company.

We catch up again with Mark Selby to get his take on investing in the Nickel market view our previous interview here. Fans of investing in the Electric Vehicle Revolution thesis will find this interesting. Some battery metals are on the up and others are not, why is that?

We discuss the Class 1 and Class 2 Nickel debate as well as the intermediate Nickel, and the amount of Nickel units required in the market. Investors new to Nickel may find the discussion around how to identify good investment vs. a lesser investment fascinating.

Do you know the difference between Laterite Nickel and Sulphide Nickel and why some investors won’t touch Laterite Nickel? And what HPAL plants actually cost and why some companies pushing that agenda may be about to fall off a cliff? As an investor you need to know what that entails.

Interview highlights:

  • 2:06 – Class 1 & Class 2 Nickel: Differences and Investor Concerns
  • 8:56 – HPAL Plants: Why Can’t They Be Built for Less Than $1B?
  • 12:39 – Red Flags and Differences in Grades: What to Look for When Investing in Nickel
  • 17:39 – Nickel Sulphate: What Should You Know?

Click here to watch the interview.


Matthew Gordon: I just wanted to say thank you very much for the piece you did last year, end of last year. We’ve had amazing feedback on that because it has helped clarify and expand people’s understanding of the Nickel markets and thanks for that, and you are probably seeing lots of different pieces of that now going out to the market too. I appreciate that. One thing we didn’t cover though was this Class 1, Class 2 debate. We said we would talk about it a little bit further. You kindly said yes to speak today. Why don’t we kick off – what is Class 1 and Class 2?

Mark Selby: Yes, so Class 1 and Class 2 refers to the type of Nickel product that gets produced. So, a Class 1 Nickel tends to be LME deliverable and meet a purity standard of 99.8%, or better. It gets used, you need it in applications like alloys, alloy steels, plating products, and then increasingly, that purity of Nickel will be required for Nickel sulphate into cars. Again, the key is the product, it doesn’t necessarily have anything to do with where it comes from, and I think that is one of the places where people get trapped up.

Class 2 is basically a Nickel-containing product that is less than 99%. That can still be used by a consumer and it doesn’t have a terminal market so the issue with that is, with an LME-deliverable product, if you can’t sell it to a customer, you can always drop it off at the LME and get the ‘LME  price’ that day for your product. Class 2 has to go to a consumer and so those products tend to have much more volatile premiums because there is not that terminal market like you have.

Matthew Gordon: So what do you mean by consumer? Because again, terminology in the industry is different.

Mark Selby: Sure, generally, Class 2 gets used in stainless steel and alloy steel applications where those processes have a robust refining step in the process so they can take materials that are less pure, or they are quite happy to have the iron that comes along with Ferronickel because they need iron to make stainless steel or make an alloy steel, anyways.

Matthew Gordon: Got it. So now we understand what they are, there’s a lot of conversation online and I think you alluded to the fact that perhaps people shouldn’t be expending as much energy worrying about whether it is Class 1 or Class 2, why do you think people are concerned first of all?

“The frustrating part for me is that there has just been so much air time on this Class 1 versus Class 2, and there are some really bad, to me, pieces of thinking that happen and get people distracted. What I think is the real issue is we need to make sure we have enough Nickel units, period, to meet the growth for stainless steel and to meet the growth for electric vehicles, going forward”

Mark Selby: Yes, I think where it has come down to is; yes, we will need lots of new Nickel to make Nickel-Sulphate batteries. And the Nickel that needs to go into those Nickel Sulphate, or the Nickel sulphate that comes with it, needs to have a very high Nickel purity to it.  That is true, but where people get tied up is that they then project that all the way back to that, okay, these types of deposits are only good for this type of application. At the end of the day, there’s basically three types of Nickel sources: there’s limonite ore, there’s saprolite ore, and then there is Nickel Sulphide ore. Limonite is what goes into the HPAL stream typically, Saprolite is used to make ferronickel and NPI, and then most sulphite ores, they make a Nickel concentrate and that then gets smelted and refined. The key piece of it is that each of those steps makes an intermediate product which can be smelted or refined into a whole range – it happens today and will happen even more so in the future because we are going to need a lot more Nickel Sulphate, so the Chinese are going to build way more capacity than the market needs, just like they do for every other product, and so there will be all this capacity to take an HPAL Intermediate, to take a Pyro-ferronickel Intermediate mat, or take Sulphide concentrate and turn it into 99.9% metal. Turn it into high-purity Nickel Sulphate. Turn it into Ferronickel if they need to, you know, again, you need to completely decouple the ore source discussion from the end product discussion.

Matthew Gordon: Right. Okay, so when I’m reading about people having discussions, debates, sometimes heated, online, about well; ‘I won’t invest in Laterites, I’ll only invest in Sulphites’, what you’re saying is that it doesn’t matter.

Mark Selby: Yes. It does not matter. There are today, more natural homes, and today, Nickel Sulphide processing has actually been a bit of an oligopoly between the very small number of Nickel smelters that exist, but the Chinese will build lots of capacity. Again, I’ve talked about, again, real world examples; in the Cobalt space, in 2003, China was 3% of finished Cobalt production. In 3 years, they were 30% of production, and in 5 years, they were 50% of production and that was basically taking bags of Intermediates and dirt, sometimes dug by children in the Congo, and turning it into a usable Cobalt product. It was a various range of Cobalt salts. And again, people get all excited about this Nickel salt premium, well, in a Cobalt market, because there is so much capacity to make salts in China, salts tend to trade at a discount to the metal, not a premium.

Matthew Gordon: That’s fantastic. That’s helped me understand it, certainly. There have been in the past, discussions about premiums on one versus the other, but you are saying, the way the market is setting itself up means that that is going to take that issue away as a concern.

Mark Selby: Yes, yes. And part of the reason that got some traction was because about 18 months ago, 2 years ago, yes, Nickel Sulphate prices at that time were trading at a about a USD$2,000 tonne premium to metal in China because, again, you had this surge in demand that started and the supply just hadn’t had chance to get going, you know?  Today, Nickel Sulphate premiums are recently, I haven’t looked this week, but Nickel Sulphate premiums in China were 0.  And that’s where I encourage investors again, don’t get caught up; if something is trading at a short-term very high premium or a short-term big discount, don’t extrapolate 3 months or 6 months and say that’s the long-term sustainable value for that premium discount.

Matthew Gordon: Well, hence, talking to people like you; you have been through a couple of cycles and understand the machinations of the sector, I appreciate that. Can we talk about HPAL? We’ve had so many people come back about your comment around HPAL, okay? Because some companies set themselves up and say we are HPAL ready – to use that term. You made a comment to us that the cheapest, well, the only and therefore the cheapest builder of an HPAL plant – it has cost them over USD$1Bn. So anyone who is telling you that it has cost them less to build than that, they need to have a pretty good reason as to how they justify that going forward, right? So that has obviously been what some companies, a handful of companies are saying about the market. It’s quite a big statement from you, and people have asked; where’s your certainty coming from? Why are you so confident that going forward, people aren’t going to be able to deliver a HPAL project cheaper than, say, USD$1Bn? 

Mark Selby: Sure. Okay. So where this comes to is, if you think about it, this is about USD$40,000 per tonne of installed capacity. So that is…the only company that has successfully done two HPAL plants is Sumitomo Metal Mining, and their costs to build those plants were between USD$30,000 and USD$40,000 per tonne of capacity, just to make an intermediate product that they shipped to their existing factory in Japan. So they are not going all the way to a pure Nickel Sulphate or a pure metal or a pure briquette, which is just additional costs that have to be built into it.

So this is the best case performer – number 1.  Number 2 -they are building these in the Philippines which is about, you know, lots of companies build modules in the Philippines because the construction work there is the highest productivity, lowest cost place in the world to build those things. So again, relative to Australia, relative to Europe, relative to Canada, the Philippines is a very low-cost place to build these types of operations. Unless the operation has higher grade than the operations that Sumitomo Metal Mining have built which is, you know, in the 1.3 to 1.4% range. And the reasons they built those ones were because the grade was pretty good. Two – unless it’s in a place that’s cheaper to build stuff than the Philippines, then, or that they have way more infrastructure, that may be one thing that may exist in those places relative to Sumitomo Metal Mining built their operations. But, that’s what you need to ask yourself to say, okay, do I believe this company’s capital cost number or not?

Matthew Gordon: Okay. That’s fair enough. What you have said to me and what I have heard there is that; don’t worry about Class 1 or Class 2, there’s an intermediate solution which is going to be coming into the market, it’s coming thick and fast. You are saying, worry about Nickel Units: there’s not going to be enough Nickel to cope with the demand for Nickel. So that’s a selling message. I want to help retail investors understand what are their red flags: so there’s a lot of…come on – mining is mining – people go around: there’s promoters and brokers and intermediaries, and they all go and loudly trumpet their story around the marketplace and it’s not always true and it doesn’t always come to be. So, what are the red flags around Nickel? What do companies need to have, or need not to have in place, because not all Nickel stories will work out. They are not all going to be economic. So, what do you look out for as an investor?

Mark Selby: So yes, as an investor, I think you know, one of the key things is scale and grade; you need, ideally, if you have got both those are fantastic.

Matthew Gordon: So what does scale mean? What do you mean by scale?

Mark Selby: That you can produce a sizeable amount of Nickel for a reasonable period of time, say, 20,000 to 30,000 tonnes minimum for at least 10 to 20 years. You know, that very quickly gets rid of a bunch of potential opportunities. You need to have, because again, there is the rare project that is at an extremely low capital cost, but at the end of the day, there is a chunkier enough amount of capital that is required to get into these operations. Now, if the grade is high enough, you can get away with smaller operations; so that’s the thing you need to look at. If you have both, so things like Nova-Bollinger, that was why it got acquired for USD$1.5Bn.

Matthew Gordon: Right.

Mark Selby: That’s why Voisey’s Bay was acquired for USD$5Bn. Because it was a big deposit that had a very high grade.

Matthew Gordon: So let’s talk about grade; you talked in the previous discussion about what is grade. What is low grade, what’s okay and what is high?

Mark Selby: Yes, so again, you would have to split that between underground and open pit. For underground, you know, 2 to 3% plus would be high grade and anything less than that would be low grade. For open-pit, high grade would be anywhere from 0.7 to 1%. Again, it depends on the strip ratio, anything lower than that would be lower grade.

Matthew Gordon: But lower grade can work if there’s enough scale to it?

“That’s what you need to ask yourself to say, okay, do I believe this company’s capital cost number or not?”

Mark Selby: Enough scale to make it work; which is what Dumont and then what we have at Crawford, that’s the key there, that there are just very large deposits in places with lots of infrastructure.

Matthew Gordon: So what else makes you nervous? You’ve got scale, you’ve got grade, what else is there?

Mark Selby: Yes, so the nature of the deposits – one. The other in terms of part 2 – the location of the project, so you know, again, political risk and infrastructure, right? Again, it is much easier and faster to build the mine if all the infrastructure you need to build it is actually already in place. So,   there are a lot of locations that are very remote that you have to spend money and time building the infrastructure before you can start building the mine. So that’s where you look at big Copper projects in the Andes, they cost USD$3Bn to USD$4Bn because you have to spend USD$1 to 2Bn to out in all the infrastructure and then you spend another USD$1 to 2BN just to build the plant, in places where there is infrastructure in place. So the benefit in a place like Dumont, or what we have at Crawford is that all the infrastructure is in place so you can just build the plant and the mill.

Matthew Gordon: Right. Without promoting your own company too much, just more generally, what do you think investors, when they are looking at the Nickel market, when they are hearing this EV story, what else should they be looking to avoid or what should they look for?

Mark Selby: Again, I think the market today is still tough for exploration and development stories. You really do – like where you are getting the premium valuations, if you look at some of the companies in Copper and Gold, in Columbia and Ecuador, is that they have this scale that will attract, that the Majors are willing to bid for, right? So they are really breaking out as a value category so again, as I think that investors are looking for opportunities as you want to look at, is it of a scale that is going to attract the bug guys that are going to write the big cheques that are going to make you, as an investor, a lot of money, right? That, I think, is key as you are looking for opportunities. If someone has been around for 30 to 40 years, unless there’s a really new take on it, again, the Majors probably looked at 10 years and then 20 years ago, 30 years ago, and they didn’t but it then.  So unless there is a really compelling reason as to why they should buy it now, they are really, probably not going to get there.

So that would be number one and then number 2, again, I think there is low capital, low, very quick kind of restarts, kind of Brownfield things, that you know, again, there was a track record of prior action, you don’t have to worry about, will the mine work? It’s worked a bunch of times before. And again, with the right team that has the experience to actually deliver it and has delivered it in the past, because they can generally get to free cashflow and use that to build the business as well. Those, to me, those are the two real paths to have a look at.

Matthew Gordon:  That’s really interesting. We have spoken to a few Gold companies, a few Silver companies, even a few Uranium companies who are employing that model. So you have got to have been there and done that before, as is the case in all of these individuals, but they are looking to get into production early.

Mark Selby: One of the things that again, in terms of this Class 1 and Class 2 and really around Nickel Sulphate, I think what investors need to be careful about is, you know, there is a lot of this talk about, ‘Oh, we’re just going to make Nickel Sulphate.’ I think there are a couple of important characteristics of Nickel Sulphate that people really need to be conscious of: so, Nickel Sulphate, you take a product, even that’s only 22% Nickel, so a lot of producers are taking a pure product and then making Sulphate which is a 22% product, or even most Nickel intermediates have a Nickel content that’s higher than 22%. So, you are downgrading the Nickel content and what you are shipping is a bunch of Sulphate molecules and some water. So, do you really want to do that 4,000 miles away from your nearest customer, right? Because all you are doing is you are adding a whole pile of costs to transport that material to the battery consumer.

Matthew Gordon: Okay. So you are saying –

Mark Selby: It’s better to ship the Intermediate closer to the market, and then process it close to where it is going.

Matthew Gordon: Got it. So it is Sulphates that are not necessarily as cost efficient, people may say. You need that all-in cost, as it were?

Mark Selby: Yes. Exactly. And so, and the other part of it too is that when you make Nickel Sulphate, one of the biggest cost components is to take the Sulphate molecules that are in solution and dry out the solution so that you crystallise it. So that requires a lot of energy, and again, in a lot of locations, energy is not cheap. Particularly because the first step, when you send it to the person that is going to upgrade it and turn it into a usable battery product, the dissolve it again. So, in terms of the overall value chain, it is a pretty stupid process to crystallise it, ship it and then re-dissolve it again. I mean, that’s what Nickel Iron integrated Stainless Steel was all about; they used to make Ferronickel, they would cool it, ship it, and the first thing the stainless-steel plant would do it melt it again, right? So the Chinese said, oh, that’s stupid. And I think you are going to see the same thing happen in the EV space; a lot of the downstream players are going to find a way and I know because we had discussions with them when I was at  RNC, they are going to look for ways to build onto their front-end plant so they can take a Nickel Intermediary directly into their plant, dissolve it once and make a final product that goes to the battery maker, car consumer who or however far down integrated they are.

The only time it really makes sense to make Sulphate is if you are already getting it in to solutions. So in an HPAL project, if you have leeched it, you haven’t built your plant yet to make it a high-grade product, in that case, maybe, if you are close enough to somebody, that might make sense to make Sulphate rather than a pure product. The other piece that all of these companies are going to deal with is that the purity restrictions on Nickel Sulphate are going to get stricter and stricter because all the car companies want to use more Nickel, because that’s what gives it the energy density. That’s what gives it the range.

Matthew Gordon: Right.

Mark Selby: The problem is that the Nickel is also the thing that makes the battery, in combination with a couple of other things, catch fire.

Matthew Gordon: Combustible, yes.

Mark Selby: So they are pretty concerned about catching fire. And so they have a bunch of systems that doesn’t happen. If you have random iron atoms or cobalt atoms, or other elements that are in the product, that complicates things. So, as we go from 33% Nickel to 50%, 60%, 80%, 90%, 95% Nickel, they want stuff that is as pure as possible into the process. So do you as a mining company want to continue to invest to meet the increasing quality standards that are going to exist going forward, and I think the answer to that is no. So there is Terrafame in Finland, they leach Sulphide ore and make a profit, and they were shipping an intermediate, for them to make a Nickel Sulphate plan to supply battery manufacturers in Europe – excellent idea, right? They have already got a very complicated chemical planet, making a chemical product out of the complicated chemical plant, that is okay because you need that expertise. For that scenario that made sense, but there are literally tens of other things I have heard of that just make zero sense to me. And again, to underscore with real world, not just Mark Selby’s opinion on stuff. Glencore runs Murrin pressure leach plant, you know, it’s an option for them and Glencore hasn’t talked to them about making Nickel Sulphate directly. They are quite happy to ship 99.8% briquettes to the end consumer who pays the premium for the briquette and then they don’t have to worry about the rest of the downstream process.

Matthew Gordon: I’m going to pick you up at a later date to talk about when you see things or companies that will worry you. I won’t get you to name names but I want to understand more about those. But, Mark, thank you very much for going through that with us. We have been reading with interest, people’s responses to your last piece. Thanks for that and thank you for today. Stay in touch. We should catch up soon about Canada Nickel because that is…when is that actually going to hit the market?

Mark Selby: Yes, we are in the final stages of the regulatory approvals.

Matthew Gordon: That’s always fun.

Mark Selby: We should be – oh yeah – we should be, we’re looking at hopefully the end of next week.

Matthew Gordon: Okay. Soon?

Mark Selby: We’ll be in a position to do that. We are in the final stretches there so next week or the week after, and again, we still need the very final from the regulators, but we are making good progress on that front. So hopefully, sooner than later.

Matthew Gordon: Well, we will look out for it; I’m sure there will be a press release on it and people will be able to start trading Canada Nickel in the next couple of weeks by the sounds of it.

Mark Selby: Yes. It will be a very exciting point in time.

Matthew Gordon: Well, come and give us an update. Sounds like a great project. I’d love to hear more. And thanks very much for your insight. Beautiful.

Mark Selby: Thank you, Matthew, glad to talk about Nickel.


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.

Nickel ore

Nickel Class 1 & Class 2 – Why Does It Matter For Investors?

Nickel is a commodity that has got investors raising their eyebrows. Diverse properties like a high-melting point (1453°C), resistance to corrosion and oxidisation, ductility, usability in alloys and an increasing significance to the EV market have turned nickel into one of the most fashionable investment opportunities. Investors in the nickel space likely already know about the two classifications nickel can find itself falling into, especially given the massive amount of coverage it has had from investment news outlets and individual strategists. However, for those who haven’t had access to the right information yet, here’s a quick breakdown.

Class 1

Nickel products that fall into Class 1 comprise of electrolytic nickel, powders and briquettes, as well as carbonyl nickel. These products are typically LME deliverable and have a nickel purity of a minimum of 99.8% Roughly 55% of total nickel mining output relates to Class 1 products.

Class 2

Nickel Class 2 is a group that comprises of less ‘pure’ nickel products. Examples of these are nickel pig iron (NPI), a version of nickel created using low-grade laterite ores and blast/electric furnaces, ferronickel, nickel oxide, utility nickel, Toniment, mixed hydroxide  and other <99.8% products. Both have a reduced nickel content and are often utilised in stainless steel and alloy steel production, where a high content of iron becomes beneficial. Class 2 products contribute the remaining 45% of total nickel mining output.   These products are not LME deliverable and must be sold to an end customer

So, what’s the history?

SOURCE: Trading Economics

After looking at the behaviour of nickel’s spot price, it is not hard to see why it has been branded as a boom/bust metal that moves in giant super-cycles.

The reasons behind this were touched upon in a recent article by a Crux contributor, stating that a primary factor behind nickel’s ascension to a high of $54,000/t in May 2007 was the rapid expansion of Chinese demand in the 2000s. However, this soaring price, driven by the need to ration available supply to meet demand, resulted in nickel becoming a victim of its own success. As prices rose, China began seeking more affordable options, thus turning to 200-series stainless steel (1-2% nickel) rather than 300-series stainless steel (8%) nickel.  As well, it began to pursue alternative sources of supply leading to the widespread production of nickel pig iron (NPI) in China using ore imported from Indonesia and the Philippines.  With this compression of demand and new source of supply, spot prices fell through a trap door.

Class 2 nickel rose to prominence at a time nickel was performing well in the market, but the consequential oversupply generated by tonnes and tonnes of NPI flooding the market created a supply/demand imbalance, crippling the spot price for many years. Nickel ore export bans from Indonesia, and proposed bans from the Philippines, didn’t help in the price discovery department.

Nickel’s most recent low was in February 2006 (do you mean 2016 ?); (NTD: there was one in last 5 years that got pretty close to the price of US$8000/t left 80& of the industry in a negative cash flow.

There has been a reduction in supply of over 200,000tpa (primarily Chinese NPI) in the last 3 years, and an increase in worldwide demand, driven by the EV narrative, has aided the nickel market in its recovery.

What does all this mean for you NOW?

If you have already settled on nickel as a potential investment opportunity, you likely have a bounty of good reasons, be that a projected 782,000t per annum increase in total nickel demand by 2030, or LME forecasts placing nickel’s spot price at US$17,000/lb (in constant terms) by 2024.

I think it’s very important for investors to not get caught up in that [Class 1 Vs Class 2] particular discussion.

The truth of the matter is that Class 1 and Class 2 nickel, as concepts, are mere distractions for investors, because laws of supply and demand and the Chinese ability to quickly respond to any market arbitrage opportunities,  will render the chemical differences fairly irrelevant in an investment context. Instead, total tonnage of nickel should be what investors are looking at today. The division of Class 1 and Class 2 simply doesn’t matter that much to investors anymore.

It’s important for investors to understand why and how Class 1 and Class 2 nickel have found themselves conglomerating into a singular quantity of nickel supply. In a recent interview with Crux Investor, nickel market commentator, Mark Selby, weighed in.

Class 1 & Class 2 Debate. Should It Matter To Investors?

Mining

There are two primary types of nickel deposits:

Nickel Sulphide

Expensive to mine, cheap to process.

Historically, mining nickel sulphide required underground mining in increasingly deep (and more expensive) mining operations . Nowadays, even deeper underground mines are utilised, with only a handful of open pit operations , but these are typically expensive to construct and operate. In 2018, 2 new projects were commissioned – Glencore began construction on their Onaping Deep operation which will cost $US[800] million and won’t fully ramp up until 2023

However, producers then make a concentrate from the sulphide ore,  upgrading the material from anywhere from 0.3-3% nickel to 10-15+% nickel for relatively little additional cost. This process is relatively uncomplicated and inexpensive; it needs to be smelted, refined, and then the process is complete.

Nickel Laterite

Cheap to mine, expensive to process.

Laterite projects are much easier to mine because the material itself is rock that has been converted to dirt over time, and as part of the process nickel and cobalt becomes concentrated in the soil. All mining companies have to do is dig up dirt and ship it off; this is a ubiquitous practice in Indonesia, amongst other regions.

However, this is where the simplicity ends. The processing of a material with complicated mineralogy requires significantly more time, technology and money. Costs include the large amount of electricity to melt the laterite to create NPI, or energy in the form of acid to break bonds, liberate the nickel/cobalt and create a US$1Bn+ HPAL process.

Reality

Individual nickel classes aren’t the main thing investors should be focussed on.

  • Companies can take intermediates of nickel sulphide and create a wide range of products, such as NPI and ferronickel (exemplified by the roasting process at RNC Minerals’ Dumont asset).
  • Nickel sulphide can also create finished nickel products via a smelter and refinery
  • EXACTLY the same can be said of nickel laterite. While the majority of it is currently used for NPI, there is no reason the material can’t be processed, refined and used for a wide range of alternative purposes. Specifically, laterite can be converted into finished nickel and cobalt products that can be used for the battery sector. Several companies are doing this right now, and as the industry evolves, we only expect to see this cycle grow.

Therefore, it is crucial for investors to avoid allocating too much focus to this debate. Chinese companies will likely build many facilities to process intermediates, while junior mining companies may also go down the same route, by having their own processing facilities on location to process products.

As we continue down the road of the EV revolution and the quantity of nickel in batteries increases, the specification for the sulphate will continue to become stricter. Therefore, building a processing plant to create sulphates appears to make little sense, because it would require continual improvements in order to keep up with progressively restrictive customer requirements.

Instead, it is likely companies will focus primarily on making high-quality intermediates, because the market will exist in the future for such materials as the nickel processing infrastructure continues to develop. This is further evidenced by the value of nickel sulphate premiums falling from c.US$2,000 two years ago to zero today. There are always lots of moving parts to different investment classes and commodities, but the message from industry insiders appears to be clear. Investors need to keep their eyes on the prize and view the market holistically the majority of the time. Reviewing things in microscopic detail may sometimes become more obstructive to gaining an overall view of a situation.

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.

Nickel – 5 Things You Need to Know Before Investing (Transcript)

Interview with Industry Commentator Mark Selby, CEO of Canada Nickel Company.

Is Nickel the new gasoline?

Selby does a great job in this interview of shining a light on the key drivers for Nickel. And interestingly we discuss financing HPal operations and how to pick Nickel juniors.

After touching on his soon-to-be public project, Canada Nickel Company, Selby delves into the nitty-gritty details of the nickel market. During his nearly 20-year tenure as a nickel market commentator, he has seen a few Super Cycles in the Nickel market. We ask about some of the lessons that investors can learn from. Nickel is a particularly volatile commodity in comparison to other base metals that moves in sweeping super-cycles. Traditionally, this volatility comes from the pricing model of stainless steel, the historical primary driver of nickel use.

Selby discusses issues pertaining to over-supply from low-quality Chinese pig-iron courtesy of rising nickel prices earlier this year. He predicted last month that year year and half of next year to be a tale of two halves. Prices are likely to fall further while the scrap inventory comes into the market, but once it is out of the way, restocking will occur and nickel should rise again.

Selby also touches on the specific geological conditions that nickel necessitates and how Indonesia’s recent halt on exports has affected the market.

He then moves into exploring the exponential nickel potential of the inevitable EV revolution and talks us through the specific structural components a junior nickel company needs to survive in a world of large Nickel producers.

Lastly, Selby moves into the field of mineralogy and gives us an insight into nickel types and classes.

What did you make of Mark Selby? Are you excited by the Nickel thesis? Is talk of the EV revolution cheap or it is going to make you a fortune? Comment below and we may just ask your questions in the near future.

Interview highlights:

  • Overview of Canada Nickel Company
  • Understanding the Nickel Market: Before and Now
  • What are Super Cycles? Where are We Now and What to Expect From Prices
  • What Drives Volatility?
  • Stainless Steel & OPEC Affecting Nickel Prices
  • Geopolitics of Nickel: On Indonesia and China
  • HPLC Projects: Who Can Actually Put Them Together?
  • Influencers of Supply to the Nickel Market
  • Demand: Past and Present
  • Junior Companies: Have They Got Any Chance of Surviving? What Experience do They Need? What Defines a Winner?
  • Nickel Types and Classes: How They Differ and What Investors Should Know

Click here to watch the full interview.


Matthew Gordon: Hi Mark. So why are you in London?

Mark Selby: With Nickel being a metal that’s on investors’ minds, we’re getting lots of attention.

Matthew Gordon: It very much is. And what sort of people are you seeing?

Mark Selby: The full range of high net worth investors, institutional funds. And even corporates who are looking for new projects to invest in.

Matthew Gordon: Please give us an overview of what Canada Nickel is. It’s a relatively new company.

Mark Selby: We are advancing the Crawford Nickel Project. It’s a brand-new discovery. Nickel has very few new discoveries. And it’s very similar to a project called Dumont, which in my previous life at RNC Minerals, we advanced from a Resource, all the way to a fully permitted, full Feasibility Study (FS), construction ready project. And I will be able to take all the learning from Dumont and apply it to this deposit and advance it, we hope quite quickly.

Matthew Gordon: You have quite kindly said you’d give us a bit of time to understand the Nickel market. You’ve been in the Nickel market a long time.

Mark Selby: Yes. I was head of market research at Inco in 2001. And continued to be a commentator on the Nickel market now for nearly 20 years.

Matthew Gordon: We’re starting a series where we’re helping people understand various commodities as they hit certain points in the cycle. Nickel is complicated. So why don’t we talk about some of the background to that prior to 2001. And then we’ll get into some supply demand type conversations.

Mark Selby: I literally joined Inco within a few days of the trough of the Nickel price in October 2001, it hit about $2 a pound or $4,400 per tonne.

Matthew Gordon: The reason I ask is, because people need to understand the cycles to understand how commodities behave. You came in at a particularly interesting time. Was that tough?

Mark Selby: Oh, it was. I knew what I was getting into. I got into mining at that time, because I saw the rise of China and that it was going to transform metals demand and we were going to go through a Super Cycle. I quickly realized when I got in that role how important China was going to be.

Matthew Gordon: You mention a phrase, Super Cycle. It’s a phrase quite commonly associated with Nickel. Can you explain to people what that means and maybe give examples of some of those Super Cycles?

Mark Selby: Nickel is a metal that has always been more volatile than a number of the other base metals. It’s big, but not very big relative to say, copper and aluminium and zinc and so forth. The other part of it is there are some real structural issues in the market that have come to bear over time. If you go back in history, Nickel has gotten to very high prices. In the late 1960s, Nickel got to the equivalent of $50 a lbs in today’s dollars. We went through another Super Cycle in the late 1980s and again in the mid-2000s, so with Electric Vehicles (EV) and everything like that and a decade of under-investment in new supply, we’re on the verge of a new Super Cycle in Nickel, sometime during the early to mid 2020s.

Matthew Gordon: You mentioned another word there, volatility. What has traditionally driven that volatility? And is it something that you see happening going forward? People talk about the EV revolution solving a lot of problems for a lot of companies, apparently? So what is it going to do going forward? Let’s start with where this volatility is going to happen and then why it happened in the past?

Mark Selby: For investors, that’s one thing to pay attention to. We are going to go through some major swings as we go in a sustained upturn. But it’s definitely not going to be a straight line. The things that are specific to Nickel that enhance that volatility, is that historically stainless-steel is the primary demand driver for Nickel. And they have a pricing model that basically builds in the expectation of future price increases. So what happens is you get buying behaviour throughout the chain where people anticipate prices going up, so they stop buying. And then when they think it’s going to roll over, everybody puts their hands in their pockets and wait for the price to come back into the market again. We’ve seen evidence of it already this year. Nickel got to $18,000 a tonne / $8 lbs in September. And as I said when we previously talked, that by the end of the year, it’s going to come off, probably 15% or 20%. And it has.

Matthew Gordon: Explain why.

Mark Selby: Two reasons. As you get a new spike in Nickel prices, two things happen. 1. Nickel Pig Iron (NPI) production. Basically, the Chinese producers have a bunch of ore stockpiles and they turn that into cash at higher Nickel prices. They take advantage of those surge in prices. ‘If I can make money making NPI, I will make NPI’. 2. And the other piece of it is the stainless-steel scrap chain, which is a massive source of feed. Scrap is something that isn’t talked about. But it is a huge factor.

Matthew Gordon: What is scrap?

Mark Selby: Scrap is a big component of stainless-steel production. For most of the stainless-steel producers in the West, more than 2/3rds of their feed is scrap material, Nickel containing materials. Now, it’s not exactly a bunch of stainless-steel knives and forks. It’s actually a blended box of material that scrap makers make to a specific specification.

Matthew Gordon: Literally from scrap yards?

Mark Selby: Literally scrap yards. And then they take 10 of this, 5 of that, 4 of that, 2 of that, 1 of that, put it in a container and that container meets the specifications that have been agreed with that stainless-steel supplier. But what the entire scrap chain does is put a little bit away waiting for high-prices to come and when it hits their number, that scrap comes flooding into the market. So when we hit a price level this past Fall, that we haven’t been to for 4-years. You basically have 4-years’ worth of people putting stuff in a corner that all comes out into the market.

Matthew Gordon: Obviously Nickel has come off the last couple of weeks. That is possibly what the cause could be or is?

Mark Selby: Oh it is, because when lots of scrap become available, then stainless-steel companies don’t need to buy primary Nickel. And so that takes more demand out of the market. And you’ve got more Nickel Pig Iron in the market, as the Chinese producers produce it.

Matthew Gordon: What is the size of each of those markets is? The pig iron and the scrap markets… and how long is it going to remain at the current pricing?

Mark Selby: Next year is going to be a tale of two halves. It’ll probably take us most of the first half of next year to get through that extra amount of scrap that’s come into the market. And that extra amount of Nickel Pig Iron. Prices could go another 10% to 15% lower from here. But, once we work through that scrap, work through those ore stocks, then we come out on the other side and I think the prices start to move higher. Once that inventory is gone, it’s gone. You end up with a big restocking phase that’s happened as people have to come back out and say, ‘OK, well, I don’t have these stockpiles anymore. I need to go buy even more primary material’.

Matthew Gordon: You’ve talked previously about the OPEC of Nickel. What does that mean? Who are the players?

Mark Selby: Robert Friedland at the BMO Conference called Nickel the new gasoline. Which I thought was a great phrase and reflects what is going to be happening as the EV’s move forward. OPEC at its peak controlled about just over 50% of the market. And, we remember all the things that countries and companies did to avoid that supply concentration at that point in time. In the Nickel market, Indonesia, the Philippines and New Caledonia will control a very similar amount of global Nickel supply. Those are 3 countries that have intervened in their mining sector. Those are 3 countries that have financial issues, revenue issues. The temptation for them to put some sort of export duty, some way to capture additional value for the country, is going to be just too tempting. And that will make Nickel assets outside of those areas much more attractive. Was oil outside OPEC a good investment in 1971-1972?; that was a pretty good trade for a good 20yrs or 25yrs. It’s going to create those kinds of opportunities in the Nickel space.

Matthew Gordon: We can’t talk about supply and not mention Indonesia. The big news, 3-4 weeks ago… This Nickel Series is going to be for people of all abilities, a lot of people will know about Indonesia. Some won’t. For people that don’t know much about it tell us about their influence on the marketplace.

Mark Selby: One of the things that’s unique to Nickel is it’s not found in many places across the world. There’re some specific geological conditions that have to occur to have Nickel deposits. So as a result, Nickel supply is relatively concentrated in a few countries. In Indonesia, particularly the island of Sulawesi, and some nearby islands, is basically the Saudi Arabia of Nickel resources. There’s a substantial Nickel resource base that was tapped in the mid 2000s as they mined the ore, shipped it to China to make Nickel Pig Iron. And now what the Chinese producers are doing is building stainless-steel plants on top of the ore body, because that’s the cheapest way to make stainless-steel. And, we’ve seen a massive increase in capacity during that timeframe. And we will need more capacity to come. That’s one of the only places in the world where there’s substantial resource reserve available to be developed.

Matthew Gordon: But they also announced that they are halting exports. That’s had a big impact. Sent shockwaves. Why did they do that? What is the impact of that’s going to be short-term and medium-term?

Mark Selby: They first started banning ore exports about 4-years ago.

Matthew Gordon: They’ve been stop-starting?

Mark Selby: Yes, it’s come and gone into the market a few times. One of the reasons why Nickel has been a difficult metal to invest in is because of some of these dynamics. What is Indonesia going to do or not do as we move forward? In 2014-2015, they put a ban in place, because when you look at the price of ore, as a percentage of the contained Nickel value versus the price of Nickel, when you ship it in ore form, the country is only capturing 15%-20% of the value. Indonesia has a finite amount of Resources. They wanted to see as much value-add happen in Indonesia. So by putting the ban in place, it was forcing Chinese companies to build their plants in Indonesia, as opposed to China. And that plan worked very successfully. Indonesia has seen tens of billions of dollars of investment in capacity. They then changed their mind, and allowed some more exports to continue, partly because the local producers, including a state-run company, PT Aneka Tambang (AnTam), was mining to provide high-grade ore to the local Chinese plants. But they were also… you can’t just mine the high-grade ore, you have to take some lower-grade with it. They were facing mountains of unsold ore that they couldn’t do anything with. Indonesia then allowed exports for a period of time. And this was supposed to continue until 2022. And what the big announcement said ‘we’re going to bring that forward’. It got brought forward to 1st January 2021. And then in the past month or so, there’s been talk of banning, but they’ve actually now allowed some exports.

Matthew Gordon: This driven by what? There’s politics involved. You’ve talked about Chinese companies building plants in Indonesia. They must hold some sway, because of employment, building roads… What are the dynamics?

Mark Selby: It does come down to local stakeholders who are mining ore, and want to continue to sell ore to China and make money that way. And now you’re going to lose that ability and that revenue stream. It comes down to balancing off those local interests versus some of the larger Chinese companies that are there, and trying to find that balance. When they banned it the last time, it was hard fast rule. There is no leakage. And by 1st January of 2020, it will be enforced. And we don’t expect any leakage going forward, because they want encourage that next wave of investment. In terms of HPL plants as well and stainless-steel plants.

Matthew Gordon: And that’s going to come from China?

Mark Selby: Yes.

Matthew Gordon: HPal is not cheap?

Mark Selby: Not cheap at all. You’re looking at $30,000 – $35,000 per ton of capacity that you want, at best. HPL plants built in other parts of the world have faced massive overruns, and have ran up $60,000 – $100,000 per ton of capacity that’s in place.

Matthew Gordon: What does that mean, as a number? If you are looking at the CapEx for a HPal plant, what number are you asking me for typically?

Mark Selby: So if there’s a $30,000 tonne plant, the best example that has been done, is by Sumitomo Metal Mining. They spent about USD$1.4Bn.

Matthew Gordon: These are big CapEx numbers upfront. There are very few people can do that. Not only fund it, but very few people can put that consortium together. The Chinese influence, or the China building plants locally and funding them. How have they structured that? Is it build and operate model?

Mark Selby: It’s different between the NPI and stainless-steel. What they’re doing with the HPL. So the NPI and stainless-steel, you have several large producers and some smaller ones in China, who take the same technology that they put in place in China. Clearly building a carbon copy of that plant in Indonesia. Cut and paste. There you’re looking at $10,000-$20,000 tonne of installed capacity. All the way through to making stainless-steel in Indonesia. So they have expertise in that particular area when it comes to HPL, that’s Hydro Met technology. If you’re making stainless-steel there is no hydro metallurgy involved. What we’ve seen in terms of the HPal plants that are being built in Indonesia today is they are joint ventures between several different Chinese partners, some of whom bring that hydro met technology, people who bring the resources. And then people were able to bring the scope and scale of their existing business to help deliver some capital in there to build the HPL plant. None of them are operational yet. There’s going to be a big TBD to see how quickly they ramp up relative to some of the other plants that have not done so well. Typically, HPal has taken longer and costs more.

Matthew Gordon: We have talked to a few Nickel companies along the way and they drop in very casually that the HPal bomb, the conversations without comprehending. Are there many people in world who can put a HPal project together, not just financially, but technically?

Mark Selby: Sumitomo Metal Mining is the only company that has really done it successfully, that delivered projects that have ramped up relatively quickly and were delivered close to budget.

Matthew Gordon: So that’s important. Because all this is for the benefit of retail. High net worth office investors. These are little red flags, which I’m interested in getting and getting out of those conversations. Sumitomo. Noted. On the Supply side of things, who are the other influences? Who are the other players in the market?

Mark Selby: If you look at the supply today, you’ve got a handful of groups that really control the biggest bulk of supply. You’ve got Indonesian production that we’ve talked about in terms of NPI and to integrated stainless. You have the Chinese Nickel Pig Iron producers that have been taking ore from Indonesia. But we’ll have to get it from the Philippines and a few other countries to continue to produce Nickel Pig Iron in China. You’ve got the larger integrated historical producers. Vale, Inco from the past, Glencore with Falcon Bridge from the past. And then the Russian producer, Norilsk. Each of those are large integrated Nickel producers. AuraMet is a smaller integrated producer and has again been around a long time. And then obviously BHP has their operations in Western Australia. So that large base of integrated, multi-asset producers who Nickel has just one of their commodities, is other important big chunk of supply.

Matthew Gordon: The thing that those guys all have in common is they are vast. Big companies with access to finance. Because Nickel not cheap to put together.

Mark Selby: Yes, it is not.

Matthew Gordon: From investors point of view. You need to so understand when you’re looking at companies you need to understand where they fit in the cycle. I think we will get to the end of this conversation. But in terms of picking winners, it’s good to understand that the thesis behind Nickel. And how companies can actually monetize what they’ve got. So on the supply side, just as a first conversation, thank you very much. Demand. It comes back to our lovely Super Cycles. Demand at the moments is what sorts of levels?

Mark Selby: Demand has continued to be quite robust. That’s one thing people underestimate about Nickel. Nickel demand is grown at an average of almost 5% a year over the last decade. For things like copper and zinc, the comparable number would be 2-3%.

Matthew Gordon: What’s that been driven by?

Mark Selby: Stainless-steel growth. Batteries are just 2% of the market today. It’s a very small amount and is going to grow very quickly and very to a very large number. All of that historical growth has really been driven by stainless-steel and to another extent, alloys and Alloy steel. And the reason it’s able to grow and will continue to grow is stainless-steel is a very small fraction of the overall steel market. So stainless-steel has a lot of properties in terms of long-life, highly recyclable, which are becoming more valuable in today’s economy. Stainless steel continues to steal share from other types of steels. We don’t expect any slowdown in stainless-steel demand growth going forward.

Matthew Gordon: Is that coming out of China as well?

Mark Selby:  Yes, China has been the massive source of demand growth, but it continues to grow in a lot of a lot of other countries.

Matthew Gordon: What are the other common demand drivers for Nickel at the moment?

Mark Selby: The other big one is high Nickel alloys. That’s one of the things with China is that it moves up its economic development curve. You start with carbon steels, you move to stainless-steels. And then when you get into other sectors of your economy that become more important, you start to use Nickel as Nickel, and things like high Nickel alloys that, are used in jet engines, gas turbines. Nuclear power plant alloys. There’s another big chunk of about 15% to 20% of Nickel demand that goes into those types of applications. And every time you’re sitting on a plane, if you look out a window, there’s several tons of Nickel in every one of those jet engines. So as tourism becomes a big part of the Chinese economy, and Chinese tourists start to fly everywhere, they’re ordering thousands and thousands of planes. That’s helping drive Nickel demand globally for those airframe manufacturers.

Matthew Gordon: So you going to stick with the Super ~Cycle because it sounds terrifying and exciting at the same time to me. Where do you think we are in relation to the next Super Cycle? We know the price is today. Where do you think it’s going to get to?

Mark Selby: I think we’ve completed leg one. It’ll be three or four legs. You have a set of conditions that sort of have to unfold over a period of time. What set the stage for Super Cycle today is and when what historically has happened the past is, you end up in periods of underinvestment. To your point on supply, in supply you’ve got a lot of large companies. Well, they chose not to allocate capital to non-Nickel projects over the last decade or so. So most of the existing production has shrunk over the last decade. The existing mines are deep underground mines, or larger scale processing plants. Those are things that you can’t, add something and 12-months and be in production. It takes multiple years to do it. 2 underground projects. Vale finally approved the Voises Bay underground project a couple years ago, but that was announced in 2017 – 2018. First Nickel is not till 2021, and it doesn’t ramp up until 2023. 5-years from announcement to full production. Glencore and Sudbury again new mine in Sudbury called Onaping Depth. The first production won’t be for 3-years, because they’re sinking a several thousand metre shaft, and then it won’t ramp up fully for another few years after that. So with that under-investment, supply can’t be flipped on quickly again. So that’s starts the set the basis for it. And then there’s, a demand surge that comes out of somewhere. So, in the late in the 1960s, when we had the big spike, it was Japan that was growing very quickly. And there had been some underinvestment in Nickel, and they couldn’t catch up quickly enough. They then overbuilt in the 1970s. And in the 1980s, you had Korea and Taiwan industrializing. And so that was driving a significant amount of new growth. And we’d come off 10yr or 15yr of low Nickel prices under-investment as people were rationalizing vastly. That was overbuilt in the early 1970s in response to the big spike in the 60s. And in the 2000s, through the 1990s, Nickel had to absorb the collapse of the Soviet Union. So that was a big Nickel producer and consumer and their consumption of Nickel dropped by 80%-90%. And you had this huge amount of new supply introduced into the market and huge amount of scrap that came into the market, as basically the Russian economy got torn down and sent its scrap to the West. That time period leading up to the early 2000s had seen a significant under-investment in Nickel capacity, and then China came along and set the spike. So in this case, we’re coming off a decade of under-investment in other capacity outside of Indonesia. And we see now electric vehicles on the horizon. Then a big lump of demand that’s coming from the EV story.

Matthew Gordon: It’s fascinating because you’ve seen the replications and so therefore there are patterns, with these emerging economies, as they grow, get ever more demanding consumers. China at the moment is. Where are they in the phase of development? Because if you look at some of the cities and its hugely sophisticated. 1.3Bn people. They don’t all live in the cities.

Mark Selby: And that’s it. The thing that’s important about China is it’s not just one country. You’ve got several different areas that are going through a different stage of industrialization. So the Eastern coastal cities are probably all very up the curve. And then as you moved into the Western Centre of the country, you get less and less developed. So there’s, other parts of the regions that are moving up the curve. And then China’s got its Belt and Road policy. They’re extending that infrastructure build out into their neighbouring countries.

Matthew Gordon: We were there last year, Chengdu, Sichuan… And it’s exciting. There is a notable difference. But it’s coming. That wave is still there. They still have a way to go. This is so much of it. So the demand side of things for China is still encouraging for Nickel suppliers. And that’s not just the EV.

Mark Selby: That’s just 5% demand growth that we’ve seen in Nickel and will continue to see for long time. We don’t see that slowing down anytime soon.

Matthew Gordon: How do companies work out where they fit in to the mix? So you’re looking at these Super Cycles happening and these growth patterns. And, all the numbers point up, the pricing points up, but it takes a while to get into production. It also takes a lot of money to get into production. But before you get anywhere near production… how does a junior company establish itself in a world of giants? You mentioned super huge companies with big balance sheets and access to cash. How does a small company get into the market and establish itself?

Mark Selby: So one of the opportunities and this is actually going to be a fundamental shift, that’s going to happen over the next 3-4yrs. Nickel processing, historically was an oligopoly controlled by Falconbridge, Vale. Norlisk. Glencore. The problem for small miners was, you could build your mine, but then you had to sell your concentrate to somebody. And unlike, copper and zinc, where there’s benchmark terms, they’re negotiated very competitively every year. There was, some fairly, take it or leave it pricing, which transferred a significant amount of that value to the smelter refiner, and away from the miner. Mining is hard. But when you end up having to give up a fairly significant share of that value to the smelter. What’s now going to be changing in the Nickel space? It’s we’re not there now, but over the next 2-3yrs is the Chinese and every other semi-finished, semi-processed material goes ahead and builds way too much capacity to meet the market demand. And then they bid up the price of the feed to a break-even number. With Nickel sulphate for EVs, a massive amount of capacity is required in Asia. They will build capacity to take various Nickel intermediates and then process them into the products that the EV market is going to need. So it’s opening up the door now for smaller sulphide mines to be able to come into production and have competitive pricing for their product in 2-4yrs. It will create the opportunity for some smaller producers to more easily come to market. In terms of laterite ore suppliers, China is going to need ore supplies, because Indonesia is now not going to be supplying it. There’s not a lot of places where you find laterite ore in coastal deposits that you can ship out of the country. But there are some places.

Matthew Gordon: Can you explain the difference between those types of ores.

Mark Selby: Yes. There are two primary types of Nickel deposits. Sulphide is what you think of in Sudbury and so forth. And so that the issue there is generally the mining is expensive. You have to build a deep open pit. Now there tend to be deeper underground mines or bigger open pit operations, processing low-grade Nickel. Once you make a concentrate, because you upgrade it from anywhere from 0.3% to 3% Nickel, up to something that’s 10%-15% Nickel. The processing of it from there is relatively uncomplicated, smelter refiner and it gets them. The tricky part for a laterite project is it is much easier mine. It’s basically a rock that’s been converted to dirt, over time. And in that process, the Nickel and Cobalt gets concentrated in the soil. You literally are just digging dirt. These mines in Indonesia, that ship ore to China, literally just dig it up, put it on a boat. The mining part of its quite simple and cheap, and the processing the mineral that’s the Nickel is in is a very complicated minerals so you have to use a lot of energy either through electricity to melt it all. And that’s how Nickel Pig Iron works. You take all that soggy dirt, dump it in a furnace and melt it and make Nickel Pig Iron ore. You have to use energy in the form of acid to break the bonds, to liberate the Nickel and Cobalt. That’s the HPL process. Those are big, complicated, expensive plants to do that. So one’s easy to mine. One is harder to mine. One’s much easier process, one’s much harder to process.

Matthew Gordon: And while you’re explaining the technical detail, cause there’s lots of talk in the market about Class 1 and Class 2 Nickel. For the audience can you explain what the difference is.

Mark Selby: There’s been a massive amount of airtime about this particular discussion. And the issue is more should be more about how many total Nickel units we have. At the end of the day, you can take a sulphite intermediate and you can make a range of products with it. You can make Nickel Pig Iron, Ferro Nickel via the roasting approach that we had a Dumont. You can take that to a smelter and to make finished Nickel products, and the same thing through the laterite source-based material. Most of that does go to make NPI today, but there’s no reason…there are producers, PT Inco, AuraMet that have produced for a long time that make a product that does go to a Nickel refinery that gets converted into finished Nickel and cobalt products that can be used for the battery sector. I think it’s very important for investors to not get caught up in that particular discussion. The Chinese are going to build lots of processing capacity to process intermediate’s junior mining companies, having processing plants at a location to make a product. That specification as we go to have more Nickel in batteries that the specification for that sulphate gets stricter and stricter and stricter. Are you going to build a sulphate plant and then continue to improve that plant to be able to make that product? You should just focus on making high quality intermediate and then you will have a market to sell that into in the future.

Matthew Gordon: You are saying Class 1 & Class 2 is a distraction for investors, because the market will resolve the economics around that.

Mark Selby: Exactly. There will be short-term dislocations. So, don’t say, today the premiums X, but Nickel sulphate premiums were $2,000 two years ago They’re down to zero today.

Matthew Gordon: So back to our small company. You think it’s going to be easier for junior Nickel miners to actually get into market, be able to, not just find Nickel, dig it out the ground, but actually get it processed in market.

Mark Selby: At a competitive price.

Matthew Gordon: It’s got to be economic. Do you think mining Nickel in the past is advantageous, or do you think Nickel is a relatively easy type of commodity to mine?

Mark Selby: Generally mining is. The bottom line, the technologies, processes that are used are similar. If you’ve run a copper mine, you should be able to run an underground copper mine; should be able to run an underground Nickel operation because.

Matthew Gordon: We’ve talked to some CEOs of commodities and who have not mined in this space, who say you don’t know what you don’t know.

Mark Selby: I would say it’s consistent with the other base metals. Each metal does have its specifics. But you can find the expertise and put it in the place.

Matthew Gordon: I said earlier in the conversation, we’re going to try and work out how we can spot winners. So on a no names. I don’t want to pick any companies out. I want to understand the profile a little a little bit. There are bulk plays. And slightly higher grades. And they each have different challenges. So bulk for me is a little bit below 1%.

Mark Selby: No, it would be below 0.5%.

Matthew Gordon: What are the higher-grades?

Mark Selby: Higher-grades would be 3-4% Nickel. You get some massive sulphide Nickel, smaller players in Western Australia, and then you get another sort of bucket sort of between 1-3% that you could mine underground on a larger scale. Again, the biggest challenge with Nickel, is there’s not many new Nickel discoveries. If you look at the project pipeline of most metals, there’s literally hundreds of gold projects. There are dozens and dozens of copper projects. In the Nickel space there really are a very limited number of projects. And, there’s been a very limited number of new discoveries. When investors start to look at it, there isn’t a big universe of Nickel opportunities with which to invest in.

Matthew Gordon: And we have the pleasure meeting a few people with large-scale . This is a bottom up in terms of resource. But they’re all struggling at the moment, because the money’s just not there for them. But if you talk to institutions or banks, what are they feeling about this? But given the Super Cycle component, how does a financier put together a package based on what they’ve seen go on in the past? Or does it not matter to them?

Mark Selby: Dumont for the first 7-years, Nickel was an out-of-favour metal. There were concerns over the long-term price. It was very hard for people to get their head around building a big $1Bn Nickel project at that point in time. But with the shift over the last 2-years, the thing that’s been fascinating with the EV sector is they want the Nickel now. And they keep asking when can we, how quickly can you double it? Can you double it a second time? They have such massive growth requirements that discussion is starting to change. And I think one of the things, that’s to me is fascinating is you’re seeing literally tens of billions of dollars of investment in battery capacity. But they haven’t necessarily done that for the metal that they’re going to need yet. They’re going to wake up to that reality soon, that if you’re not also building the capacity to provide the raw materials that you’re going to need. It’s going to make it more challenging to make the battery if you don’t have this stuff, to make the battery out of this.

Matthew Gordon: It’s quite confusing for investors, because almost every company that we speak to is pitching the EV revolution …’that’s going to change our fortunes’ and therefore invest in us. Whatever the pitch is, some are more believable than others. We’ve had people talk about the timing of all of these things. The reality is a couple of years away. And realistically not going to be impacted by the EV revolution or price in the market, etc.. Demand in the market at the moment. But the what they what they will say is. ‘Get in cheap, our stock is cheap today. Get in ahead of the crowd’. How do you pick winners? What should we be looking for specific to market? What sorts of what are the sorts of things that should be avoided?

Mark Selby: The things to focus on are… because most projects are expensive. Vale’s new underground mine Voises Bay $1.5 billion. Glencore’s new mine $1Bn. Most Nickel projects are going to require $1Bn or so of CapEx To be able to fund that kind of investment, you need large companies to be interested. I think that’s one of the one of the things to look at is, is the scale of the resource that this company has got going to be attractive to one of the majors who say, ‘I want to grow in the battery material space and I can do that through Nickel’. If in attracting investment from the EV companies, they’re not going to fund 62 little mines to come into production. No, they want larger, long-life, large scale assets that can hopefully grow with them as they grow their businesses.

Matthew Gordon: So what is large scale?

Mark Selby: Nickel is a 2.4Mt market. And if you can produce, 20,000 to 30,000 tonnes a day. That’s a decent size mining operation. So roughly 1% of global supply.

Matthew Gordon: And if you can’t?

Mark Selby: I’d say that’s one class of investment. I think the other opportunity again would be smaller scale, that is produce a concentrate. Just make sure that, they’re using realistic operating cost assumptions and realistic capital cost assumptions, in terms of if they’re restarting a small scale mine. There are some of those opportunities out there today. Some of them are good, and are at a good price. They’ll be able to come to market relatively quickly and participate in the cycle as the Nickel market rebounds. When we were at RNC, we did the joint venture with Waterton. The cash-pool that we did was to sell down part of Dumont to be able to pick up some of these smaller scale restart opportunities. So you could participate in the cycle more quickly. As opposed to having to build a big project for 2-years. I would say that it’s the world scale asset, the sort of small-scale restart or small-scale resource that you can bring into production relatively quickly and cheaply. But again, make sure they’ve got realistic operating capital cost numbers.

Matthew Gordon: You talked about Sumito and HPal earlier. If someone’s pitching to the market, they can build a HPal operation for less than $1Bn. You’ve got to ask does that makes sense to me.

Mark Selby: There’s been one successful person, and that’s the cheapest. They’ve built multiple plants. They built it in the Philippines, which is a very low-cost place to operate. If you use that as a benchmark. And then scale it up from there. If you’re in a higher cost country than the Philippines, then that cost should go up. They only made an intermediate, they shipped an intermediate product that went to their existing refinery in Japan. If someone’s going downstream and going to a final product, that should be another chunk of higher cost. Because some of the less successful plants, if you look at some of the CapEx numbers, they ballooned to $7Bn-$10Bn before they started to work even close to properly. So that’s the upper end.

Matthew Gordon: So the answer is, you would be suspicious of someone saying HPal operate, if you’re spending less than $1Bn, that would be a red flag. Thank you for that.

Mark Selby: I would say justify to me why you think you can build a better than Sumitomo Metal Mining.

Matthew Gordon: Coming back to small companies. They are going to have to find strategic investors. Because with the balance sheet to be able raise the money to be able to invest in a Nickel project. How should companies structure those relationships? Obviously, you don’t want them coming into Pubco, because there’s going to be nothing left of the company. They tend to come in at asset level typically. What do those relationships look like?

Mark Selby: The Nickel projects that will get advanced this cycle are similar deals to what you saw in the copper space. You have an Asian either off-taker or a strategic who wants access to that material? And do they come in on a joint venture basis. They provide a big chunk of the equity capital that’s required and provide the balance of the financing to get that in place, we just haven’t seen it in Nickel yet. But it will be coming.

Matthew Gordon: I’m going to just to thank you because it is. Mark, thanks very much for your time today. Really enjoyed that. I learned a lot. I hope everyone else does too. We’re going to talk about your Canada Nickel company maybe when you when you’re back in Canada. So after that would make you look forward to hearing about that. But thank you very much for helping us learn a little bit more about the Nickel market. If we can talk to you again, some future date with some questions which do come in from a lot of the viewers and subscribers and followers.

Mark Selby: Oh, very much glad to do it. I think this is a metal that people haven’t had a chance to invest in very in very many ways. So, the more educated investors are, the better decisions are going to make.


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An Interview with Mark Selby, CEO of Canada Nickel

Nickel forecasts make extremely good reading at the moment and with very few mines capable of coming online in the next 3-years, investors are clambering for big, solid deals which can get in to production. Could this be one?

Nickel: The New Gasoline?

A statement of emphasis, intrigue and opportunity, but one that demands investigation.

  • The Creation of Canada Nickel
  • Structure & Management
  • Business Model & Strategy
  • Nickel Market & Equities
  • How do Investors Get Involved?

Click here to watch the interview.

Creation

The pillars of validity supporting this statement were revealed by Canada Nickel CEO, Mark Selby, in an interview with Crux Investor.

After nearly 20-years in the nickel business, Selby announced the launch of his new enterprise last week. Drawing knowledge from “10-years and $100M” of investment in the Dumont Project, this latest venture has induced more excitement for him than any that have preceded it.

Structure & Management

Having departed the Royal Nickel Corporation, investors saw Selby as the ideal candidate to drive the project forward.

Selby was keen to stress his focus on implementing “the right corporate structure.” Canada Nickel will be “dividend out of Noble Mineral Exploration Inc.” It will be a “clean, brand-new company,” with 50M shares outstanding after financing is complete.

By taking this approach, Selby claims to have severed himself from the shackles of a legacy structure with legacy shareholders. He has begun the assembly of a new management team to propel the company forward.

Business Model & Strategy

Selby states the potential for exploration at the Crawford Ultramafic Complex is “tremendous.” The 3.5km body has shown great promise, exemplified by the December 2018 phase 1 drilling program. Unlocking the value of the site for shareholders is central to Canada Nickel’s business model.

In addition, several other opportunities have caught the attention of the company. Exploring these will create a portfolio of assets that could render the company ‘the go-to for Nickel sulphite investment.”

However, Selby insists Crawford is the pre-eminent project on the Canada Nickel agenda.

Another element of Canada Nickel’s business plan is to overcome the difficulties associated with investing in Nickel. Unlike Copper and Gold, aside from the ASX, platforms for Nickel investment have been lacking and the market has become somewhat forgotten for the last ten years.

Nickel Market & Equities

Selby warns against the presumption made by some investors that prices will increase linearly. For investors today, he expects a rollover of Nickel prices by the end of the year. A “big spike” is expected after an influx of scrap and NPI into the market which will need to be worked through over six months. However, he is confident of a return to an upward trajectory after this period.

While this will likely result in an initial “dampening” of equity for new investors, Nickel has been proven to move in relatively predictable cycles. At the end of 2005, Nickel prices rolled over off a peak, but just 6-months later prices had nearly quintupled. Nickel’s status as the best performing base metal by a wide margin can provide prospective investors with additional confidence.

Selby advises investors to take advantage of Nickel prices falling and position themselves strongly. Every 15-20 years, Nickel prices have moved in “super-cycles.” While the date of potential spikes is not definitive, increasing demand over the next decade creates a strong likelihood of exciting Nickel markets in the near future.

Robert Friedland’s quotation, that Nickel is the new gasoline, is reinforced with solid statistics. Robust Nickel demand growth occurs at a rate of 4-5% per year. By 2030 we will need 2Mt of Nickel per year, in a market which only generates 2.4Mt of supply in the present day.

The potentially exponential growth of demand has been capitalised upon by Canada Nickel; the marketplace is almost completely devoid of projects, so Selby has secured a strong position for the company by delving into the market at this particular time.

How do investors get involved?

Noble Mineral Exploration Inc. and Spruce Ridge will be receiving Canada Nickel shares. Noble will dividend 10M of the 12M shares to its shareholders.

Between now and when public trading commences later this year, the only way to invest is to purchase shares from Noble or Spruce Ridge.

Selby states now is the right time to get involved given the current valuation point of Nickel. New Nickel discoveries have exited at valuations exceeding a billion dollars in previous cycles: enough to excite any investor.

The anomalous readings at Crawford.

Canada Nickel – Nickel is the New Gasoline. Growing at 5% a year. (Transcript)

Former RNC Minerals CEO Mark Selby called us to talk about his new venture Canada Nickel Company which owns the Crawford Nickel-Cobalt sulphide project. He is excited about the scale of the opportunity but the simple corporate structure that they have been able to put together. With a c.$12M valuation and around $5M it’s certainly the clean start he was hoping for. It’s early days but with 4 drill holes and an electromagnetic survey he feels that there are strong parallels and technical learnings from his time at Dumont which give them a strong indication of what they may have.

Nickel forecasts make extremely good reading at the moment and with very few mines capable of coming online in the next 3 years, investors are clambering for big, solid deals which can get in to production. Could this be one?

Interview Highlights:

  • Overview of the Press Release Announcing the Creation of Canada Nickel
  • Leaving RNC: What Were the Reasons Behind the Decision?
  • Structure and Management
  • $5M Private Placement: What Will it Be Used For?
  • Business Model and Strategy
  • Nickel Market and Equities
  • Crawford and Dumont: What Are the Similarities?
  • How Do Investors Get Involved?

Matthew Gordon: It’s been it’s been a while, but we saw the press release earlier this week and delighted to get your phone call this morning. So what’s going on?

Mark Selby: I’m very excited. We announced the launch of Canada Nickel yesterday. I’ve been in the Nickel business nearly 20 years between Inco and my time at RNC. And during that time, spent a lot of time looking at Nickel opportunities around the world. And to be honest, this is one I’m most excited about. It’s at the right stage. It’s an early exploration play. But given our experience of Dumont and unlocking the value of that asset, there’s a lot of parallels for this new project that we can take all of the learnings that we had at Dumont to unlock the value added at the Crawford Nickel Project.

Matthew Gordon: So if you don’t mind, if I ask, and I do want to get onto the structure of this because there’s a lot of moving parts. But before I do. Obviously, you were at RNC, where were the Dumont asset resides. You left. What happened there?

Mark Selby: It was the right time for me to step away, I needed to deal with the personal issues at that time. And then over the course of the summer, I was approached by an investor group, that’s one of the parties in the transaction, who felt they had a very Dumont like opportunity and thought my experience with RNC and Dumont would make me the ideal candidate to be able to drive this forward.

Matthew Gordon: I appreciate that. And I don’t mean to pry. But we talked about the structure because, we have Spruce Ridge involved, we’ve got Noble Minerals involved. And you’ve got this new vehicle, Canada Nickel. Can you tell us how that looks?

Mark Selby: On paper, I’m sure if you read through the release it looks like a fairly complicated transaction. And it was. There’re three different parties that we needed to bring together. But one of the things I’m excited about, in addition to the potential of the project itself, is just that we’re going to put it out in the right corporate structure. So at the end of the day, Canada Nickel is going to be dividend out of Noble. It’ll be a clean brand-new company. It will have 50M shares outstanding after the financing. And I’ll be putting together a new management team, a new board to drive it forward. When I joined RNC, it was already a company that had been in existence for 3 years. And we had to deal with legacy shareholders, and legacy structure and so forth. So I’m really excited about what I think best team and having the ability to create value for shareholders and a structure that’s designed specifically to do that.

Matthew Gordon: So you got a nice clean structure. You’ve also announced a private placement of circa $5M. Where are you in that process?

Mark Selby: Yes, it’s fully subscribed. It’s a friends & family around at this point in time. So if anything, we know we’re cutting people back a bit. Given the interest, there’s really very few ways to play nickel. And for those people who have got the nickel story are keen to get some exposure to this asset.

Matthew Gordon: Let’s come onto the nickel market in a minute. So what’s $5M going to allow you to do and over what timeframe?

Mark Selby: The nice thing with this is that this is a very large structure, large geophysical anomaly that we’ve outlined. And the nice thing with a big bulk deposit is you can very quickly, without a lot of drilling, define a fairly substantial resource very quickly. So this will allow us to do that first stage of drilling to really have a proof of concept around how big is this resource? What the potential support source could look like and to do the mineralogy work to understand to make sure there’s recoverable minerals there. They’ve already done some initial work, which was attractive to me to say, ‘hey this does look like Dumont in terms of the minerals that are there’, the ability to recover the type of minerals that can be recovered seem to be there. So again, it’s early days, but it’s very, very compelling. And the fundraiser will allow us to get to that stage one.

Matthew Gordon: My next my next question is around what is the business model and probably goes neatly into your perception of what’s happening in the nickel market. Because for most people, I think you alluded to earlier, outside of Australia, there haven’t been too many options for people to get involved in nickel. So what’s your business plan? How are you going to deliver it?

Mark Selby: The Go Forward Strategy here is, Crawford itself has tremendous exploration potential. We want to unlock that value for shareholders. Obviously, the team we’ll build will be, I hope the leading nickel sulphide team in that space. There’s a couple of other opportunities that we have our eye on that will build the portfolio of assets that we think will be that go to nickel sulphide investments play in the market.

Matthew Gordon: Well, that’s interesting to me. What you’re saying is potentially is you’re looking at roll-up, acquisitions, M&A activities, is part of what you want to do. That’s the business plan?

Mark Selby: Not a long list. The focus is Crawford right? We’ll pick up another one or two assets, because I think we’re innings one of what is going to be a good 5-7 year bull run. I think for your listeners there really hasn’t been, and you alluded to this, there’s been very few ways to invest a nickel outside the ASX over the last 10 years. So I think a lot of investors have forgotten names like. Diamond Fields, Lion Ore, FNX, Jubilee Mines, DynaTech. In the 90s, you had Diamond Fields taken out as a new nickel discovery. You had FNX, Jubilee, Lion Ore taken out as development stories through the last cycle and in the mid 2000s at between $1Bn – $3Bn. Unlike copper and gold, where there’s literally dozens, if not hundreds of ways to play those particular metals, in every cycle there’s really ever only a handful of real Nickel projects to get exposure to. So because of that, those projects that tend to command a pretty premium valuations in the marketplace. And while we’re in inning one, we want to make sure we’re positioned with a couple of the best assets. Just a couple of the best assets going forward.

Matthew Gordon: So a lot of those things are dependent on timing, finance and what the commodity prices doing, clearly nothing new there. So your view on the nickel market is what? In terms of where you’re coming in?

Mark Selby: Too many investors get caught up in think that prices are just going to go up in a straight line. That never happens. For investors today, I think we will see a roll over nickel prices by year end with the big spike in nickel prices. We’ll see slug of scrap come in the market, a slug of NPI come into the market. We’re just going to have to chew through over six months. But within six months a year, we’ll be sort of back on our way up again. The reality is as Robert Friedland coined it nicely at the BMO conference. Nickel is the new gasoline. In terms of an EV economy, Nickel is the primary metal in the cathode of that battery. And that’s on top of robust Nickel demand growth, at 4% or 5% a year. So you go out to 2025 to 2030. You’re looking by 2030, we need 2Mt more Nickel per year in a market that only generates 2.4Mt of supply today. There’s literally almost no projects in the pipeline.

Matthew Gordon: That’s fascinating. So you’re saying come the end of this year, some prices spike, but more scrap in the marketplace.

Mark Selby: Prices rolled over.

Matthew Gordon: Yes. What’s going to be for Nickel equities?

Mark Selby: That that may have a little bit of a dampening for new people to get on this story. If you look at Nickel, it goes through these cycles. At the end of 2005, nickel prices had rolled over off the peak and they bottomed at $11,000 a tonne. 6 months later, they were at $54,000 a tonne. So it was a x5 in 16 months. That’s the kind of explosive moves that Nickel makes. Nickel is the best performing base metal this year by a wide margin. I would say if there’s any weakness in the Nickel prices, use that as an opportunity to position yourself in these names. Because, if you look back at Nickel’s history, you see in the late 60s, we got to $8 a pound in 1968, which is about $50 a pound today. We had a big spike in nickel prices in the late 80s. We had another big spike in nickel prices in the mid-2000s. So every 15 to 20 years you tend to get this super cycle in nickel. I don’t know when it’s going to come, but in three, four, five, six, seven years from now as the EV demand comes roaring in on top of already strong stainless-steel demand. I think we’re going to see some pretty exciting Nickel markets come the next decade.

Matthew Gordon: It will be interesting for you guys. You should be getting to production about then shouldn’t you?

Mark Selby: Well, we’ll see. The nice thing is because we spent 10 years and a $100M advancing Dumont, we can take all of that learning and apply it to what we’ve got at Crawford.

Matthew Gordon: It is that much of a parallel? Is the geology the same? Are the rocks the same?

Mark Selby: Both of them are serpentinized dunite that contains three different nickel minerals of varying proportions. And the scale of the resource… if you look at the geophysical anomaly, that’s Dumont. And you look at where Crawford is. One of the big findings for us is we did a pile of very complicated minerology and metallurgy work to understand how to solve that puzzle for Dumont. But by the end, we realized the geophysics that you do on day one gives you 70% to 80% of the answer. I can look at Crawford today, and get a pretty good feel for how this may play out again. Four holes in it so early days. But the scale of the potential is clearly demonstrated by the scale of that anomaly, which in total dimensions is bigger than what we had at Dumont.

Matthew Gordon: What’s next? You are fully subscribed with your private placement.

Mark Selby: Yes.

Matthew Gordon: That’s great. How would investors wanting to look at the story get involved?

Mark Selby: So as of right now, if you haven’t let me know, and I can talk to you, because the placement is fully subscribed. Both Noble Minerals and Spruce Ridge as part of the transaction will be getting Canada Nickel shares and Noble will be dividending out 10M of the 12M shares to their shareholders. So between now and when we’ll probably trade later this year, the only way to get access to it is to buy shares of either Noble Minerals or Spruce Ridge. The other thing that’s exciting about this opportunity in general, 1. I talked earlier about the structure and how it’s a nice target type structure 2. Just the potential, the deposit itself and 3. Getting in at the right valuation point. The full formal market cap, including the financing is $12M dollars. We will have a nice chunk of change in the bank, with that $12M market cap. So again, if you look at peers in the marketplace today, they’re trading anywhere from $20M to $180M. And again, in the long run, if you’ve seen what happens what happens to new nickel discoveries and buyer cycles. They’ve exited about a $1Bn plus valuation. It’s still very early days here. And then we’ll see how everything unfolds. But that’s the deal. That’s really the upside potential here in terms of getting into a nickel story.

Matthew Gordon: And then with regards to the Canada Nickel itself, you’re starting to tell that story. Get the private placement closed off and then you can start telling that story in the market once you’ve got the team on board.

Mark Selby: One of the advantages of structuring everything this way is that we can talk about the story from day one, and see that value reflected in the Noble and Spruce Ridge share prices. Fundamentally, it’s just outside of Timmins. You’re in an established mining camp. I’ve talked about the scale of the resource already. You’re sitting next to a highway and all the infrastructure in place, very similar to Dumont and you’re in a jurisdiction where you can actually permit a mine. So, if you look at Crawford versus the other handful of nickel opportunities that are out there, that may be in a remote location, that might be in a place that’s challenging to permit, that might not really have the scale to support a very large-scale operation, Crawford ticks a lot of boxes. And that’s why I was so excited about the opportunity.

Matthew Gordon: Mark, that’s fantastic. We’re glad to see you back. And I’m glad all is well, and you’re back doing what you love best, which is Nickel. And bringing a great story to market. Do stay in touch, Thanks for the phone call. Really appreciate it. And let us know how things progress.

Mark Selby: Thanks Matt. The drills are turning right now, so we’re going have a pretty steady news flow. So hopefully we’ll have regular updates over the next couple of months.

Matthew Gordon: Wonderful. Looking forward to it.

Noble Mineral Exploration Inc. Announces Creation of Canada Nickel Company

Mark Selby, former CEO of RNC Minerals, and the owner of Dumont Nickel project in Quebec, has resurfaced at a new Nickel company called Canada Nickel Company. To us it looks like Dumont 2.0 but with a $12.5M market cap versus comps at $20M-$200M. Selby says it is potentially the first new large-scale Nickel resource in more than a decade, which will command a much higher valuation in the coming bull nickel market. Highlights are:

  • Located 10km north of Timmins adjacent to all major infrastructure
  • Multi-kilometre anomaly with potential for Dumont scale resource 
  • Mineralogy and geology similar to Dumont so they could leverage some of the work done there
  • What is most exciting is potential for similar or higher grade zone 
  • The new entity will be created with just 50M shares outstanding
  • It’s early stage exploration and has 4 holes in a multi-kilometre anomaly and if anything like Dumont, the geophysics results could allow them to put together large resource relatively quickly.

Continue below to read the full press release.


  • Mark Selby Appointed Chairman and CEO of Canada Nickel Company
  • 100% Consolidation & Spin-out of Crawford Nickel-Cobalt Sulphide Project
  • Fully-subscribed $5 Million Private Placement in Canada Nickel Company

September 30, 2019 – Noble Mineral Exploration Inc. (TSX-V NOB) (“Noble” or “the Company”) today announced its plan to:

  • create the Canada Nickel Company (“Canada Nickel”), which will own a consolidated 100% interest in the Crawford nickel-cobalt sulphide project, and
  • distribute a significant portion of Noble’s interest in Canada Nickel to Noble shareholders and qualify Canada Nickel as a new public entity.

Canada Nickel will be led by Mark Selby, who will be appointed Chairman & CEO. The Company also announced the plan to complete a fully-subscribed $5 million private placement into Canada Nickel, subject to regulatory approval, to fund the cost of the Crawford project consolidation and continue exploration and mineralogical work to advance the project.

“I am delighted to welcome Mark Selby to lead Canada Nickel through the next phases of exploration and development to unlock the massive potential of Crawford. Mark is a recognized leader in the global nickel industry given his experience and network successfully advancing the Dumont nickel project,” said Mr. Vance White, Chairman & CEO of Noble. “I am very proud of the team that made the Crawford nickel discovery, which is one of the few nickel discoveries in many years with large scale potential.

With the planned consolidation of ownership in Crawford and private placement, Canada Nickel is well- positioned for the next exciting phase of growth and value creation for Noble shareholders.”

Mark Selby was most recently President & CEO of RNC Minerals, where he led the development of the Dumont nickel-cobalt project through to a fully permitted, construction ready project. Before RNC, he held senior management roles at Quadra and Inco and he is recognized as a leading authority on the nickel market.

“I am pleased to lead Canada Nickel and advance Crawford, which is an exciting project. While it is still early days, the promising drill assay results and the encouraging initial mineralogical work demonstrate many similarities to the Dumont project. Coupled with the close proximity to significant infrastructure near Timmins, I believe this will allow me to leverage all the experience and insights we learned in advancing Dumont,” said Mr. Selby. “The timing of this discovery is excellent. We are in a robust nickel market increasingly driven by demand for nickel from the electric vehicle (EV) market which will require new nickel projects to be built over the coming decade. I am encouraged by the strong support we have received from a number of new and existing investors who have committed to $5 million in financing which will allow us to execute the next phase of drilling and metallurgical work for the project.”

Crawford Nickel-Cobalt Sulphide Project

The recent drilling program by Spruce Ridge (TSX-V SHL) and its Joint Venture partners, a group of private investors, Dr. K. Sethu Raman, Robert Hirschberg and Sam Sehota, was focused on the Crawford Ultramafic Complex, a 3.5-kilometre long body of peridotite, dunite and their serpentinized equivalents. The target, entirely under cover, was defined by a helicopter-borne magnetic and electromagnetic
survey and an airborne gravity survey, both conducted over of the entire project area of 100 sq. km. An Artificial Intelligence (A.I.) review of data, provided by Albert Mining Inc. (TSX-V AIIM), also identified the area as being prospective for nickel. All four discovery holes totaling 1,818 metres intersected multi- hundred metre intervals of serpentinized dunite with persistent nickel values with two of the four holes ending in mineralization. (see Noble release March 4, 2019)

Highlights from the drilling:

  • Hole CR18-01 intersected 558 m of 0.26% nickel, 0.013% (127ppm) cobalt, (ended in mineralization)
  • Hole CR18-03 intersected 318 m of 0.25% nickel, 0.013% (126 ppm) cobalt
  • Hole CR18-04 intersected 208.5 m of 0.32% nickel, 0.013% (135 ppm) cobalt (ended in mineralization)

Drilling on the project has resumed both east and west of the existing drilling and to infill the existing drilling to test the southern contact.

Table 1 – Recent Drilling Results

Crawford Nickel-Cobalt Location

Initial Mineralogical Results (see Noble release dated June 11, 2019)

Twelve samples of drill core were selected from 1.5-metre analyzed intervals from the recent 1,818- metre, four-hole drill program, to cover a range of nickel, cobalt and palladium contents as well as differing degrees of serpentinization and a range of sulphur contents. Polished thin sections were made from the core samples and were examined under reflected-light microscope and a scanning electron microscope (SEM), which provided chemical analyses of individual mineral grains to aid in their identification. The following minerals were identified as carrying most of the nickel and cobalt (in order of decreasing abundance): pentlandite (nickel-iron sulphide – 50%), heazlewoodite (nickel sulphide – 35%), awaruite (nickel-iron alloy – 15%) and minor godlevskite (nickel sulphide with minor iron). In addition to the mineralogical identification study, an analysis was performed on pulp samples of the 12 core intervals from which the mineralogy samples were taken. Table 2 shows a comparison between the Peroxide Fusion analysis and the Aqua Regia analysis for cobalt and nickel and establishes the potential percentages of ‘Liberation” of these key elements.

Table 2 – Peroxide Fusion vs. Aqua Regia Analysis for Nickel & Cobalt

100% Crawford Project Consolidation

The planned consolidation of the Crawford properties will be implemented under the terms of a binding letter of intent that has been entered by Noble, Mr. Selby, Spruce Ridge Resources Ltd. (TSX-V SHL) (“Spruce Ridge”) and certain private investors (the “Investors”) under which, subject to certain specified conditions including required regulatory and shareholder approvals:

  • Noble will receive 12 million common shares of Canada Nickel (representing a 24% interest in Canada Nickel post-financing) and $2 million in cash; 10 million of the Canada Nickel common shares will be distributed to Noble shareholders;
  • Spruce Ridge will relinquish its joint venture interest in the Crawford project (the current joint venture arrangements are described below) on the following terms:
    • Noble will pay $1 million to Spruce and cause Canada Nickel to issue 20 million common shares of Canada Nickel to Spruce;
    • Spruce will issue 2 million common shares to Noble;
    • Noble will issue 10 million units to Spruce, each unit to be comprised of one common share of Noble and one-half of a common share purchase warrant of Noble (exercisable for three years at $0.15 per share); and
    • Noble will transfer certain assets to Spruce (unrelated to the Crawford project) subject to 25% earn-in rights.
  • The Investors have agreed to relinquish their joint venture interest in the Crawford project (the current joint venture arrangements are described below) on the following terms:
    • Spruce will transfer 10 million common shares of Canada Nickel received from Noble (representing a 20% interest in Canada Nickel post-financing) to the Investors; Spruce will hold the remaining balance of 10 million shares of Canada Nickel (also representing a 20% interest post-financing); and
    • Spruce will issue 10 million units to the Investors, each unit to be comprised of one common share of Spruce and one-half of a common share purchase warrant of Spruce (exercisable for three years at $0.10 per share).

Noble and Spruce Ridge are parties to a joint venture agreement dated May 4, 2018 (the “Crawford JV Agreement”) under which Spruce has the right, subject to the terms and conditions thereof, to earn up to a 75% undivided interest in the Crawford project. Spruce and the Investors entered into an agreement relating to the Crawford JV Agreement, dated September 9, 2018 under which the Investors have the right to earn up to a 37.5% undivided interest in the Crawford project (with Spruce retaining a 37.5% undivided interest therein). For a description of the existing joint venture agreements between Noble, Spruce Ridge and the Investors, please refer to Noble news release dated May 8, 2018 and Spruce Ridge release dated September 27, 2018 (both available under the applicable corporate profiles on www.sedar.com).

Canada Nickel – $5 million Private Company Financing

A $5 million private placement of common shares and flow through common shares into Canada Nickel has been fully subscribed and is expected to close on or before October 15, 2019. Under this private company financing, it is expected that Canada Nickel will issue 13 million common shares at $0.25 per share and 5 million flow through shares at $0.35 per share. The proceeds of the private placement will be used to fund the joint venture consolidation described above, mineral exploration of the Crawford project, and working capital requirements ancillary thereto. This financing will be completed by way of a private placement to qualified investors.

Special Meeting – Distribution of Canada Nickel Shares

A special meeting of the shareholders of Noble is expected to be called to approve the distribution of the Canada Nickel common shares received as part of the transactions described and other matters relating thereto.

Timing – Property Consolidation, Share Distribution & Canada Nickel Qualification as Public Entity

Subject to the receipt of regulatory and shareholder approval, it is expected that the consolidation of the Crawford properties will be completed on or prior to October 31, 2019, and that the distribution of the Canada Nickel common shares to Noble shareholders and qualification of Canada Nickel as a public entity will be completed on or prior to December 31, 2019.

It is expected that Canada Nickel will have 50 million shares outstanding following the transactions and private placement described above.

Qualified Person

Randy S C Singh PGeo (ON), PEng (ON), VP Exploration & Project Development of Noble and a “qualified person” as such term is defined by National Instrument 43-101, has verified the data disclosed in this news release, and has otherwise reviewed and approved the technical information in this news release on behalf of Noble Mineral Exploration Inc.

Contacts (Noble):

H. Vance White, President

Phone: 416-214-2250 Fax: 416-367-1954 Email: info@noblemineralexploration.com Investor Relations Email: ir@noblemineralexploration.com

Contacts (Canada Nickel Company):

Russell Starr
Phone: 647-669-9801

email: RussellStarr@canadanickel.com

About Noble Mineral Exploration

Noble Mineral Exploration Inc. is a Canadian-based junior exploration company which, in addition to its shareholdings in in Spruce Ridge Resources Ltd. and MacDonald Mines Exploration Ltd., and its interest in the Holdsworth gold exploration property in the area of Wawa, Ontario, holds in excess of 79,000 hectares of mineral rights in the Timmins – Cochrane areas of Northern Ontario known as Project 81.

Project 81 hosts diversified drill-ready gold, nickel-cobalt and base metal exploration targets at various stages of exploration. More detailed information is available on the website at www.noblemineralexploration.com.

Noble’s common shares trade on the TSX Venture Exchange under the symbol “NOB”.

Forward-Looking Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This News Release includes certain “forward-looking statements” which are not comprised of historical facts. Forward-looking statements include estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to the Company, the Company provides no assurance that actual results will meet management’s expectations. Risks, uncertainties and other factors involved with forward- looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward looking information in this news release includes, but is not limited to, the intention to complete the transactions and the expected expenditure of the proceeds of the private placement, and the Company’s objectives, goals or future plans. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to an inability to complete the Transactions, failure to identify mineral resources, failure to convert estimated mineral resources to reserves, delays in obtaining or failures to obtain required regulatory, governmental, environmental or other project approvals, political risks, inability to fulfill the duty to accommodate First Nations and other indigenous peoples, uncertainties relating to the availability and costs of financing needed in the future, changes in equity markets, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects, capital and operating costs varying significantly from estimates and the other risks involved in the mineral exploration and development industry, and those risks set out in the Company’s public documents filed on SEDAR. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. The Company disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.

This news release does not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of any of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful, including any of the securities in the United States of America. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or any state securities laws and may not be offered or sold within the United States or to, or for account or benefit of, U.S. Persons (as defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws, or an exemption from such registration requirements is available.

RNC Minerals (TSX: RNX) – 1,000oz Gold From Just 2 Cuts. Only 40m into Mining Programme (Transcript)

In our latest interview with Mark Selby, CEO of RNC Minerals (TSX: RNX), he gives us an update on their latest drilling. “To us this confirms strategy and model is working.”

Mark is keen to add a note of caution saying this may not happen again imminently (it could), however this is the third time they’ve hit +1,000 ounce. And (laughably) it happened just 40m in to the current mining programme while they were on their way to a ‘higher probability area’. Beta Hunt just keeps giving.

Click here to watch the interview.


Matthew Gordon: Good morning Mark.

Mark Selby: Morning Matthew. How are you?

Matthew Gordon: Very good. Now you’re in New York, but you called us and you got some news!

Mark Selby: Yeah. We’re quite excited. Earlier this week, we resumed mining in the area… to target the area below the Father’s Day Vein.

Matthew Gordon: So we’re in Beta Hunt right?

Mark Selby: We’re in Beta Hunt Gold mine. Yep. We resumed mining, and we talked about getting underneath towards the Father’s Day Vein. And so now as we’re approaching that area, we intersected another one of these extensional veins and pulled out a 1,000oz from two cuts. And again we still have some some distance to go in that area that has some potential. So the most exciting thing for us is really confirmation of the model. So we first bumped into this structure in… well over a year ago, on our 14 Level. We hit the Father’s Day Vein (FDV) on our 15 Level, last fall. And now in the past month we’ve been able to developed low enough, and are able to now just start mining in this area and hit another one of these essential veins. So it’s a real confirmation that our model around why this course gold pops up, works, has worked again.

Matthew Gordon: We’ve talked previously, I think last last time, about the drill program 5,000m  plan coming up. That’s separate from this. This is part of the mining process on, as you say, Level 14, 15 Father’s Day Vein. This is where? Underneath it? Near it?

Mark Selby: Yeah this is underneath the projection of those same structures again. It’s where the sediment hits our sheer zones, where the gold sits that has the potential for these veins to pop up. Again I would love to say we can hit one each week for the next week or next month right. But these are intermittent structures, we know once we get into this area, we have the potential for one of these veins to pop up. And just in mining on the 16 Level here, just over the past month, we’ve hit another one of these veins and we still have some distance to go on this level. And then as well we’ve just had the development drives in place. We still have all the stoping blocks, over several hundred meters, that we’ll mine over the coming year. And hopefully we’ll have more of this high-grade course Gold pop out.

Matthew Gordon: So how far into the mining Level 16, have you got? I mean are you just started? Or you know several weeks into this thing?

Mark Selby: Yeah. So we had to spend some time driving a ramp down through the winter, to get down to that level. We’ve come in and we’ve mined probably a bit on this level, for just over 40m or 50m, and entered sort of this high-probability area, just last week.

Matthew Gordon: So you are literally only 40m or 50m into the plan, and you’ve hit this +1,000oz. I mean a +1,000oz in itself isn’t huge, but I guess like you say, it’s what it signifies.

Mark Selby: Yes. And again people shouldn’t think that these things are 25m and directly below each other. These are structures that plunge slowly, so we literally have hundreds of metres of areas to go mine, in between what we just found, the Father’s Day Vein, from the Father’s Day Vein back up to the 14 Level. And again once we’ve got the updated Resource model, and the mine plan going, will be mining those over the coming year.

Matthew Gordon: Right. And so this was part of a vein structure which you’ve been chasing or you plan to chase?

Mark Selby: What we target is the intersection of the sediment, where it intersects the sheer. And where those things happen… When it was formed the Gold fluids come up they hit the sediment layer and the Gold has to chemically drop out and physically drop out in to something. So it just fills up a little void with a lot of Gold in it. So the Father’s Day Vein happened to be a very large one of these. But we we’ve hit thousand ounce ones now, this is sort of the third time that we’ve pulled a thousand ounces of location.

Matthew Gordon: So I guess it comes back to what you told me in I think in one of our first interviews, you were saying that these are nice to haves, they’re not essential to the economics of the project. But they certainly help when you come across them, and there seems to be some regularity that to it. I guess you hope that continues?

Mark Selby: Yes. Very much so. So they are intermittent. I don’t want investors to think OK now that we’ve hit it again, we’re gonna be hitting one next week and the week after. It might happen next week, or it might not happen for a month or another three months on this area.

Matthew Gordon: But it’s not critical?

Mark Selby: It’s not critical. No, we’re running the base business and this is just very nice to have cash flow, because as you can imagine those are very, very low cost ounces.

Matthew Gordon: Yeah for sure. I mean what was sort of grade? I mean you talk about a thousand ounces, but what sort of grade do you suspect…

Mark Selby: Came out of basically just two cuts, and a few hundred kilos of rocks that were picked.

Matthew Gordon: Right. OK so that’s great news. That is great news indeed. You’re 40m or 50m in, and you’ve discovered this and you will continue to mine along the planned …

Mark Selby: Yeah. Sorry… we still high-potential area to continue to develop through. So we’ll see how things go over over the coming months.

Matthew Gordon: Ok. Great news. Can I just ask you, one other thing you talked about last week and we’ve had a lot of kind of people asking questions about that. And that’s with regard to, ‘this is one of the best times, given the exchange rate. The Australian dollar to US. Australian dollar gold price hit $1,900 this week. That’s good for you. Can you just remind people why that is the case?

Mark Selby: Yeah. So again the bulk of our costs are denominated in Australian dollars and again most people are focused on the US dollar Gold price, but the Aussie dollar Gold price overnight hit an all time high, and its well over $1,900 an ounce early this morning.

Matthew Gordon: So it all helps. Ok just just lots of small but good stories. And Mark while I’ve got you on the line, could you just give us an update on Higginsville. Is that still closing next week?

Mark Selby: Yes. As at this point everything’s on track to to be able to close on Monday.

Matthew Gordon: It’s fantastic. Because I know people are interested in that. You’ve talked about it as a mechanism for reducing the AISC numbers. What are the other things that are coming up this year. If you can just remind us some of the other things that we should be looking out for later this year.

Mark Selby: Yeah. So sort of looking over the balance of the year, you’re going to get further drilling updates. And again we’re now moving out of the Resource drilling phase, into the Exploration drilling phase, where we really want to start to show the potential of what the size the Resource… the potential Resource could look like.

Matthew Gordon: Right. That’s chasing the sheers that you’ve talked about.

Mark Selby: Yeah. The four sheers that are four kilometer strike length. So we’ll have the Higginsville mill, which we’ll be very focused on integrating with the with the mine. And then lastly, we’ll have the Resource update, coming out at the end of June, which will then lead into an updated mine plan in Q3. And then look to restart mining before Year End.

Matthew Gordon: And finally, what’s the feedback been with regards to the Dumont announcement last week? I know we’ve had a lot of positive feedback. People hadn’t been looking at it. Beta Hunt was the golden child, literally. But now people understand what you’ve been working towards with the Feasibility. I mean what’s the feedback you’ve been getting?

Mark Selby: Yeah. It’s exactly that. With an updated Feasibility Study, with numbers that we’re very happy with. People see… you know it really is demonstrable value for that asset, that’s not really reflected in our share price today. You can see we got a slide in our presentation, if you look at the comps. And even on the lowest value comp our interest in Dumont is worth $0.22 a share.

Matthew Gordon: I guess not too much more you can say about Dumont. You said you’re going to reignite or continue conversations with potential strategic investors there. That has not changed?

Mark Selby: The plan has not changed.

Matthew Gordon: But have you had a few more phone calls?

Mark Selby: We’ve had discussions with people that were on hold pending a Feasibility Study. So those discussions are continuing.

Matthew Gordon: Okay. Great news. Well I appreciate the phone call. We were pleased to get it. That’s great news, and we look forward to hearing more from you in the next few weeks.

Mark Selby: That’s sounds great.


Company page: www.rncminerals.com

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RNC Minerals (TSX: RNX) – Investor Questions Answered (Transcript)

Owning their own mill, smart choice? Dilution? Liabilities? How much Gold? RNC Minerals (TSX: RNX) CEO Mark Selby tackles these questions and more investor questions head on.

Putting together a global project one piece at a time and making sure shareholders understand the strategy and the logic is a key focus. Hear what he has to say.

Click here to watch the interview.


Matthew Gordon: We’re here today with Mark Selby from RNC Minerals.

Mark Selby: Hi Matthew, how are you?

Matthew Gordon: Very well thank you. Now we’ve both been at the 121 Conference.

Mark Selby: Lots of activity. Yeah. No it’s good.

Matthew Gordon: Lots of investors.

Mark Selby: Lots of investors.

Matthew Gordon: Perfect. So why are you over here? Who are you seeing?

Mark Selby: Basically just to get the word out in terms of spread… we had the big discovery in September obviously, people are interested in that. But it did give people more behind Beta Hunt and more behind Dumont, because we’ve got a lot of milestones coming up on both.

Matthew Gordon: Perfect yeah. You’ve got to go and tell that story. So look we spoke online last week. Had amazing response – some very, very positive responses from a lot of people. But still some questions. You’re in London with us. Yeah I thought I might take this opportunity to ask some questions on behalf of all subscribers and some of the people all across social media, if you don’t mind. So a key driver for them, share price, share appreciation. That’s how they make money. Okay. So looking at the Haywood report, recent broker report. They’re targeting you at $0.75 cents which is great. Obviously not there at the moment. Just help us understand how you think the company’s going get there. So if I’ve look at some of the questions again sent in here, people want to understand a little bit about the Exploration phase that you’re going through with Beta Hunt. So give us an update on that.

Mark Selby: Yeah. We’re in the last phases of a 40,000m drill campaign. I think in terms of…the share price has drifted lower. We haven’t shown up with a bunch of the large shiny boulders and we haven’t been I wouldn’t say we haven’t been focused on promotional Exploration at this point time. It’s really about building out the Resource, which is something that we’ve always wanted to do with this asset. And we’re now wrapping up that phase of the Resource drilling. And now we’re turning to the Exploration phase. And again we’ve try and drive home that, ‘Yes we know we will find a lot more high grade Gold’, but this is really about a very large Gold potential here. We’ve got four sheers, and 4km of strike length that have been identified from this 700km of drilling that was done for the Nickel. And basically highlighted the first few meters over all these sheers are sitting. So that final 5,000m of drilling that will happen over the next month or so, is basically really to do the step outs, to give people a sense of how long and how deep this thing could start to look like. And really get to what we think is a multi-million ounce potential of the Resource that’s there.

Matthew Gordon: Because, it’s interesting really, because I think one comment was, ‘Oh what happens if this is a one hit wonder’.

Mark Selby: Yeah.

Matthew Gordon: It’s exceptional find, but it isn’t a business in its own right. So I can’t help but look at the team that you’ve put together. These guys have been there, done it before and very rigorous in their process.

Mark Selby: Yeah.

Matthew Gordon: So what is your strategy? You’re doing the step out program. What do you want to achieve?

Mark Selby: Yeah, we’re building the base mine. That’s going to fund the Exploration so that hopefully we won’t have to go back to the market to fund drilling in the future. So with that solid base business in place, then we can start to really sort of stretch out what the Exploration potential looks like. And what the high-grade potential looks like. I think.. there are people asking, ‘Is it a one hit wonder? Are you going to find any more high-grade Gold? And I would point.. there’s a couple slides in our investor deck. One where we basically show all of +100g/t, +300g/t intersections that are scattered throughout the mine from the Nickel drilling. Again they weren’t even drilling for Gold. And they bumped into dozens of high-grade intersections throughout the mine. In our current drilling program, I was fully expecting to actually to not hit any high-grade Gold, because again 20,000oz of the 25,000oz came from basically about two tons of rock. It was the size of a dining room table. So statistically to hit that with the drill hole with the spacing that we’re doing, is actually rather remote. So the fact that we hit a 7,600g/t drill hole which is the highest-grade … the only two mines have done better than the last few years are Fosterville and Bruce Jack, which are both pretty good comps and a pretty select group to be part of. And then we’ve had a 2,200g/t and a 1,400g/t intersection. So… and on different sheers and across the mine. So I think in terms of more high-grade, I can’t say whether it’s gonna be tomorrow or next week or month. But we will hit more as we go forward.

Matthew Gordon: But you don’t need it.

Mark Selby: No no no. We want to make sure that the base mine pays for itself.

Matthew Gordon: They are are bonus.

Mark Selby: They are a bonus.

Matthew Gordon: The fundamental business is a little much lower grade. Okay. I mean to why don’t we… I mean you’ve got some drill results coming out. You go Resource coming at the end of Q2?

Mark Selby: Yep.  So yeah we have our Resource update out into Q2, and then we’ll be putting together mine plan to Reserve through Q3. And that’ll be the basis for which we fully revamp the mine up. So we’ve taken the mine up to about 40,000 ounce run-rate. We’ll kind of stay there for the next few months as we understand exactly what we have. And then we’ll look to ramp… based on we’ll trade off capital versus run-rate, and  we’ll make a decision as to where we ramp the mine up to.

Matthew Gordon: Right. Okay. And say see you’re looking at the AISC at the moment. You’re always looking at reducing costs because you can control that. You can’t control grades, but you’ve got some pretty good indicators to date, at Beta Hunt. So what is the process you going through with AISC. What are the things you look at? It’s not just about the mill, which we will talk about in a second.

Mark Selby: Sure. Yeah. I mean the mill’s obvious one component of it. And then on the mining side, what’s encouraging for us is that we’ve got these big broad intersections anywhere from 2.5g/t to 3g/t material. So that gives us a lot of tonnage to work with. And then within that there’s a number of 5m, 8m, 10m width wide 5g/t-7g/t intersections. So that gives us some ability in terms of how we should decide on the shapes the stopes, to be able to play with that grade a little bit. So are we…is it better to do more tonnes and be closer to 3g/t. Or is it better to narrow it up a little bit and be closer to 4g/t in terms of what the grade is that’s going come out of the mine. And again it’s just a pure economic trade-off in terms of what gives us the most value.

Matthew Gordon: Yeah. Okay I understand. Well what I we talk of the mill, because it’s a big component of reducing the AISC, when we talked last week. Big question people want to ask is, ‘So how do you justify spending AUS$50M on an asset like that?’

Mark Selby: Yeah.

Matthew Gordon: What was the thinking?

Mark Selby: Sure. So for that AUS$50M, we picked up more than a 1.5Moz Resource, 400,000 Reserve. Just the near-term mine that’s already proven out, and that’s part of the mine plan, that’ll generate $10M or $15M of cash flow from us. So you take that off the purchase price, and then you’re looking at basically $35M-$40M…

Matthew Gordon: Is that a nett number? When you say $10M, $15M?

Mark Selby: That’s just from … that assumes that we find no other ounces from from the mines that we’re looking at. But there’s still a big …

Matthew Gordon: The question I was asking was.. that’s a nett amount for processing ore?

Mark Selby: Just just ore… Just ore from the Resource that we’re buying. So in terms of benefit to Beta Hunt. We’re picking up a mill for $30M-$35M, that 12yrs ago was built for $80M and would cost you, probably $100M-$120M to replace today. So when you get capital for cents on the dollar that that helps add value long-term.

Matthew Gordon: So let’s talk about the mill very quickly. Another question from subscribers and viewers is, “What condition was the mine in?’ Because I think there are two reports out there. We’re reading about. There’s a 2018 report, which suggests that it needs a lot of work. And there’s a second report which suggests that you have acquired something which has being updated.

Mark Selby: Yeah.

Matthew Gordon: So what is it?

Mark Selby: So we’ve acquired something that’s been updated. They’ve spent.. during the past year, they’ve refurbished all the upfront crushing circuit. So that’s been rehabbed. They were processing ore from the mines that they had, and one of those operations is Mount Henry. And it’s very hard ore. It’s also a lower recovery. And so again I think if there are people who went back in to some of the West Gold quarterly reports and see some of the costs there, and they’re kind of going ‘oh geez what have these guys bought’. The very nice thing that’s happening is, they’re… Mt. Henry is getting turned off. And they’re about to bring on deposit called Baloo, which they acquired from S2 Resources. It’s very soft. +90% recovery and it’s only 10km from the mill, as opposed to 85km. So it’s a structurally much lower cost ore, that’s going to be feeding in the mill, as well as ore from Beta Hunt.

Matthew Gordon: Got it. Okay. Is there anything left to do in terms of… this strikes me this is like maintaining a car. It’s got moving parts. They are going to wear out!

Mark Selby: They need to be maintain. And I basically just overhauled the car basically, and we get the keys, and get to jump in the car, after it’s just been overhauled.

Matthew Gordon: Okay. So you talked about hard rock / soft ore there. So what is this mine set up to do? Mines that we’ve looked at the past, they’re great at processing high-grade or low-grade or certain types of mineralization. So what is this set up to do?

Mark Selby: Yeah. Higginsville there is a few deposits there that were multi-gram per tonne open pits. They process very well. The two things that we need to get the 94% recovery, that we’ve gotten from the best mills that we’ve tolled at the past, is basically enough crushing and grinding capacity, to get to a certain size. We don’t need it to get a very small small. We just need … there’s some mills in the area that don’t have enough capacity. So this mill is got more than enough crushing and grinding capacity to get our Beta Hunt ore to the optimal grind size. And then the second piece is because we obviously have a lot of course Gold. You need a good gravity Gold circuit, that you know captures that Gold, rather having getting entrapped in various parts the of the mill. This also has a very good gravity Gold circuit, and allow us to maximize recovery from the high-grade from Beta Hunt.

Matthew Gordon: So remind me how much ore is it processing?

Mark Selby: It’s a 1.3Mt pa plant.

Matthew Gordon: And can you feed that? Have you’ve got enough at the moment?

Mark Selby: We know we should… I mean we’ll see where… again it depends on where we come out with Beta Hunt. But between Beta Hunt and Baloo, we should… we’re going to be very full for quite a while. And then the other part is, we’ve already been approached by different parties in the area, who have tolling material available. So and again it just becomes an economic trade-off.

Matthew Gordon: So have you inherited any contracts as part of this deal?

Mark Selby: There’s basically one set of tolls that conclude in June, and after that the capacity is 100% ours.

Matthew Gordon: And you are going to make that decision and say, ‘right we’re not going to renew that contract. We’re going to just process our own stuff’, or at least have the optionality of what you do.

Mark Selby: We’ve got the optionality. And we’ll make the decision between processing ore from from site, from Higginsville. Or do third party tolling, whatever is going to give us the highest return.

Matthew Gordon: Right, now you used an amazing phrase with me, which I’ve not heard before, and I quite liked it, which was, ‘there’s the time when you want to do the deal. And then there’s a time when you can do the deal’.

Mark Selby: Yeah.

Matthew Gordon: Which I thought was beautiful. Because there’s a lot of things that that applies to. So in this case, what was your actual timing for perhaps going out and buying a mill?

Mark Selby: Yeah, once we’d have the Beta Hunt Resource update done. And we’ve got sort of a better view in terms of how much we’re going to be mining from from the mine. You know post that would have been ideal. The reality is this was available. There was very few mills and… there’s a number of mills in the area. But as everyone sort of focuses on the US dollar Gold price. And it’s been through…

Matthew Gordon: Yeah it’s been an unusual year.

Mark Selby: Been a pretty weak year, but in Aussie dollar Gold terms, we’re close to all time highs. So in terms of Gold production…

Matthew Gordon: When you say that..explain to people what the difference is?

Mark Selby: Yeah. So the you know the Australian / US dollar. So when US dollar Gold was USD$1,800 an ounce, the Aussie dollar was ‘at par’ to the US dollar. So for an Aussie miner, the vast bulk of your costs are all in Australian dollars. So you’re seeing AUS$1,800, when US dollar Gold USD$1,800 an ounce. Today at USD$1,270 an ounce. The Aussie dollar Gold price is over AUS$1,800 an ounce.

Matthew Gordon: You are benefiting from the exchange rate.

Mark Selby: So in terms of for the Australian miners, things are as good as they’ve ever been.

Matthew Gordon: Right. Understood. Understood. So Higginsville. Your strategy was not necessary to buy it now, but it came up now. You’ve done the deal. So you recognise that perhaps the timing could have been different.

Mark Selby: I’d love to do it…I’d have done it at a higher share price, which I think is going to happen after Dumont Feasibility Studies done, after the Beta Hunt Resource is done. And after we pull up the next load a high-grade Gold.

Matthew Gordon: But you don’t always get the choice. So what would happen if you haven’t have bought it now?

Mark Selby: The risk is we had tolling capacity that was in place. Again it cost us $15 a tonne more than what we have now. As you go into a Resource update, and start to look at what the Reserve looks like, when you can take $15 a tonne out of your costs that has a dramatic impact in terms of what you can do with the Resource and the Reserves to generate a much more total free cash flow operation.

Matthew Gordon: Okay. So is anything else that you think you need to say or want to say with regard to giving people comfort that Higginsville was a smart decision? Because I imagine it wasn’t a session taken lightly. Casually. So what would you like to say?

Mark Selby: It’s a relatively new mill, it’s the right size for Beta Hunt. It gives us some some growth. We pick up a pretty big land package, in one of the most prolific Gold camps in the world. We get $10M to $15M of NAV immediately. Plus it’ll be mining there for a very long time, from the Higginsville assets. And we save $15 a tonne on Beta Hunt versus what we had in the past.

Matthew Gordon: So that was the thinking there. I guess the unknown there is the Exploration upside potential. You expect there will be some?

Mark Selby: Yes. Yeah.

Matthew Gordon: But we don’t know what number.

Mark Selby: Right. Right. And we’re not expecting any Exploration downside.

Matthew Gordon: Well there you go. You have to do that. You say what’s the worst thing that can happen, is if there’s no Exploration upside is it still a good deal?

Mark Selby: Yes it is. If we find zero ounces beyond what we’re going to take out of their current mine plan, it’s still a massive home run.

Matthew Gordon: And to do that Exploration would you… how would you finance that?

Mark Selby: Yeah. Basically we’ll make an Exploration trade-off between incremental dollars from cash flow, from Higginsville or Beta Hunt.

Matthew Gordon: So that’s a timing issue?

Mark Selby: It’s a timing issue on cashflow.

Matthew Gordon: Okay fine. Next section I what to talk about. Or rather your followers, the audience following the RNC story, is finance. People want comfort around dilution. Of course they do. It’s the overall overarching theme here. I think you mentioned to me Dumont is fully funded through to FS, at this point you’re looking at JV with Strategic, JV. partners who would finance it moving forward. It’s a big project which we can talk about a little bit, if you don’t mind at the end.

Mark Selby: Sure.

Matthew Gordon: But with regard to Beta Hunt. Is there anymore financing?

Mark Selby: No. In terms of getting the Higginsville mill deal. We’re looking at some other options which are completely non-dilutive.

Matthew Gordon: Non-dilutive?

Mark Selby: Yeah. And that’ll provide us the capital to get the Higginsville deal done and to basically get us on our way going forward.

Matthew Gordon: Okay. So good. And same for drill programs, not just Higginsville, but Beta Hunt in terms of drilling, in terms of CapEx, OpEx.

Mark Selby: Yeah. We’ll be we’ll be fine. I mean where it will come down to, as we look at the mine plan, we’ll just need to make a decision. There’ll be… the nice thing with Beta Hunt, because the main infrastructure’s in place, really comes down to sort of how much incremental capital development we want to do upfront, to get to… do we want to get to 60,000 ounces, do we want to get to 80,000 ounces, we want to get to 100,000 ounces. And again I can’t tell you what’s it going to look like.

Matthew Gordon: You’re going to sit down at that time with a spreadsheet, as we all do, and say what makes sense now? Do we spend a lot of money to get there quicker? Or do we take our time and have a longer life mine.

Mark Selby: Exactly.

Matthew Gordon: Another kind of comment which came back. A comment you made last time, I think I understand it. But there’s some people who perhaps may have misunderstood, or are unsure of what you meant. And that was with regards to an exit. Okay. You said, ‘you know if we sell a September, that’s fine as long as it’s the right deal, but if we have to build this thing out that’s fine too.’ Okay. What did you mean?

Mark Selby: I am laser focused on where the share price is ultimately going to get to. And you know in a mining company you always have to make a decision between realizing value now, or realizing value in the future. All I was throwing out was there, again there is a scenario where if we have a great Resource update, and the drilling this Exploration drilling is successful, we could very easily get a knock on the door from one of these Australia mid-tiers. One of them just took out Atlantic Gold.

Matthew Gordon: That’s right.

Mark Selby: And so they’re cashed up. They have well valued paper. They all have production, many of them have production profile Resource profile issues. And so we think Beta Hunt can become an attractive asset for a lot of those companies. On the other side, on Dumont. Again the EV story is getting lots of traction. Dumont is really one of the only Nickel Cobalt assets that can deliver Nickel and Cobalt by the early 2020’s, in meaningful volumes. So again it’s quite possible that somebody shows up in June, July, or August and says, ‘Hey we’d like we’d like this asset’. So again there’s nothing imminent. I just wanted to sort of make it clear, that we will realize value when it makes sense for shareholders.

Matthew Gordon: I think that’s the point to make. And you are a significant buyer, I remember you saying. Everyone’s aligned, which is great. I didn’t mean to ask on the Higginsville deal, When’s that due to close?

Mark Selby: June 10th.

Matthew Gordon: Right. Okay. And there’s some of these contracts which are running through to June 30th. Which you are going to let expire. Okay fine. We need to talk about shareholders. We talked about some people being vocal. People like Eric Sprott, and others, who are looking for you to talk more to the marketplace. You’ve said you will offer more guidance, and talk more, with more news flow. I guess there’s a lot coming up. We’ve talked about a lot of those things. So do those larger shareholders have any influence over the way that you operate your business? I just want clarification for some people.

Mark Selby: No no no. We do as a management team. Shareholders trust the management to do what they need to do, to run the business. I don’t get any calls on specific issues one way or the other.

Matthew Gordon: Okay. Great. If we can talk about tolling? I guess with Higginsville…

Mark Selby: We will stop. .

Matthew Gordon: Ok that’s a real simple one. You’re going to stop?

Mark Selby: We are basically wrapping that up our last hole with our current third party toller, literally as we speak.

Matthew Gordon: What’s the overlap there in terms of….?

Mark Selby: It basically it just goes.. we’re trucking to one location, and we’ve already started trucking ore over to Higginsville, on the assumption that we’re going to close. If we don’t close and we’ll do it as third party toll.

Matthew Gordon: Got it.

Mark Selby: But we’ve already started we’ve already made that shift.

Matthew Gordon: Fantastic. Okay. I hadn’t appreciate that. Okay. Well that that gets rid of a lot of questions for me. I’m just sort of generally, because again we’ve done some analysis. You know people can look at that on our website, in terms of how we grade companies. If I look at all the variables, all the moving parts, and I put a dollar sign beside each of those. Okay, for me… the infrastructure at Beta Hunt. You’ve put a number of $400M. Is that $400M to build it new?

Mark Selby: Yes.

Matthew Gordon: What’s a fire sale value or red book value?

Mark Selby: No I mean the fire sale… I mean the value that infrastructure is really predicated on the Resource below it. Right. And we bought it for… we basically bought it for $12M, three years ago.

Matthew Gordon: I’m trying to put some sense around what $400M actually means. If we try to replace it today, that’s how much we’d have to spend.

Mark Selby: Yes.

Matthew Gordon: Right. But if you were selling that equipment and someone’s coming in and moving it. Is that a reality? Is that a real number?

Mark Selby: No. But I think where it becomes a real number, is to the extent that sitting below that 5km ramp system that we define a Gold Resource. And we have the potential to define a Resource that’s sitting directly below that 5km ramp system, then it becomes a real value. Because as a miner, you’re not having to build that main infrastructure to get to that Resource.

Matthew Gordon: But how do you put a value on that? One question was sent and was, StIves may want to use the ramp system. How do you put a value on that? How does that sit… where does that sit on the spreadsheet?

Mark Selby: Oh that’s always … I was they worked at Inco and tried to merge and Falcon Bridge, and tried to merge multiple times. And then the age old debate between.. is the infrastructure to get to the Resource the value or is the Resource itself is the value so ..

Matthew Gordon: There is a dance.

Mark Selby: It’s really quite hard to put a value on it. But again it’s really about when you put the Resource in place. And you have the infrastructure, then that values… that turns that infrastructure into real value.

Matthew Gordon: Right. But the question is, we’ve done it and I’m not going to say the number. I guess you guys have done it, and you may or may not want to throw a number out there. I look at, obviously the Resource, I can put a dollar number on that. The Reserve coming up, Beta Hunt there. Dumont, clearly it’s in a very exciting space. Very exciting space. You know Cobalt Nickel, amazing. Very few good deals out there right. The potential value of that when you get a strategic investor, I can put a dollar value on that..

Mark Selby: Oh, it’s tremendous and a really good rule of thumb, if you look at, and this has held up very well over time, that a world class base metal assets, which Dumont does, is the fifth largest sulfide discovery ever, qualifies. Basically they exit it anywhere from x0.8 to x1 NAV. So you know when the updated Feasibility Study comes out. You’ll see the NAV number, we’ll have 28% of that. And so ultimately, there’s no reason in my mind why a strategic at some point in time wouldn’t want to acquire that asset for close to that value. So I guess it’s not recognized today, but is something over 12mth to 24mth period.

Matthew Gordon: Well that’s where I’m getting to. Okay. So I’m going through this process of looking at moving parts and putting dollar signs on there heavily discounted. And I look at your market cap. And I go, “What is happening right?’. Because this is one of the better companies that we’ve spoken to in a long time. Based on what I’m looking at. You’re not getting that reflected in the share price. What’s happening?

Mark Selby: I think we haven’t shown up with a lot more high-grade Gold. So there’s a bunch of investors are expecting that to pop up regularly. I think on a couple of conventional metrics, if you just look at EV per ounce, again we don’t have a large Resource that’s in place today at at Beta Hunt. And so but I think realistically again, at a $200M market cap, we’re trading for half the value of the infrastructure Beta Hunt and you get Dumont for free.

Matthew Gordon: Do you think it’s because you haven’t been talking to the market enough? I know is there something that you’re addressing, and you are going to. So you know was there something in what Eric Sprott said to the market a few weeks back. Is it because you’ve been too busy focused on business?

Mark Selby: I think you know A) we probably we haven’t been talking to the market as much. We’ve been out there, sort of off the initial wave. We were waiting for this next wave of news flow to really get active, in terms of there will be more to tell. And I think  the other part of it is the stock again, has come.. we went up x13 in two weeks. We’ve come back but we’re still up over x4, so for a lot of investors coming in. If you got in, you’ve had a great return. It’s like OK well do I want to step in at this kind of value.

Matthew Gordon: Do I see more value?

Mark Selby: Do I see more value? So I think that’s where I think once we get the Exploration drilling going, and they start to have some wow. This this can really sort of demonstrate what the scale of this asset could really look like. And then I think when we get the updated Dumont Feasibility Study to make it very real for the value is?

Matthew Gordon: What the timing on that?

Mark Selby: That’ll be up before the end of the quarter. So I think that I’ll make that a very tangible value for for investors. And so I think those things can help re-rate the stock and help really start to push it higher from here.

Matthew Gordon: Right, give me a summary here, because I’ve looked at your team. They are smart guys. Okay. Been there done it. Smart guys. You’ve got your strategy. When you came in you had one strategy. You kind of had to adjust it slightly as results come through. You are constantly evaluating. So you’re very clear about what you needed to do then. That’s share price appreciation. It worked. So what is the thinking now, about how you move forward and how you create this value, that people can look forward to?

Mark Selby: So on the Beta Hunt front, is basically establishing it as cash flowing asset. With a Reserve update there. And then start to highlight what the scale of this asset could be. That would make it very attractive to people and people need to think about it as a potential take-out target. And what that value looks like. And then on the Dumont side, again once that updated Feasibility Study is done. The permitting is all done. It’s clearly comes down to financing, and we got well down the path in 2014/15. So as that moves closer to construction and you start to see a lot more activity in the space, that value between, right now is zero. And at that x0.8 to x1 NAV.

Matthew Gordon: What’s your sense of the EV market? We’ve been speaking to a lot of battery metals companies, certainly the past few days actually. There’s a lot of excitement about that space. You have got to be careful about when you want people to come in. So the Feasibility Study is a big potential re-valuation moment for you.

Mark Selby: Yes. Very much so.

Matthew Gordon: Okay. Right. Look Mark appreciate you coming in. I know you’re busy, you are at the conference and you’re whizzing around London speaking to investors so. Thanks for making time to come and see us.

Mark Selby: Always glad to.

Matthew Gordon: I think some of these.. some of our subscribers and some of the guys on social media for us chat rooms very pleased that you’re getting out there, responding to them and answering these questions. And if we’ve any more questions, can we come to you?

Mark Selby: Anytime.

Matthew Gordon: Perfect.


Company page: www.rncminerals.com

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RNC Minerals (TSX: RNX) – 5x Return for Shareholders Since September. Can They Keep it Going? (Transcript)

We interviewed Mark Selby, CEO of RNC Minerals (TSX: RNC).

Q1/19 Highlights:

  • Quarterly Gold Production: Gold mined production for the first quarter totalled 3,716oz compared to 13,780oz in the first quarter of 2018. Production was lower due to the planned temporary ramp down of bulk mining during the first phase of the ongoing 40,000 meter drilling program. The Gold mined grade in the first quarter was 3.36 g/t, 32% higher than in the first quarter of 2018.
  • Restart of Gold and Nickel production: Limited restart of bulk Gold mining is well underway at Beta Hunt. By the end of April 2019, the restart had already achieved a 40,000oz annualized run rate. Nickel production has also resumed and will contribute cash flow going forward.
  • Father’s Day Vein: Development is now sufficiently advanced to allow mining activities to begin underneath the Father’s Day Vein Discovery on 16 Level. This development will target a 1,406 g/t intersection sitting just 7 metres below the Father’s Day Vein area.
  • Exceptional exploration results: Results from the 40,000 metre drill program that was initiated in the fourth quarter of 2018 have been positive. RNC is on track to complete a resource update by the end of the second quarter of 2019 and will shift its drilling focus from resource definition to a broader exploration campaign to test the substantial exploration potential of each of the four shears on the property.

Click here to watch the interview.


Matthew Gordon: Hello Mark, how are you?

Mark Selby: Hey Matthew, how are you?

Matthew Gordon: It’s lovely to have you on. I know you’ve got a very passionate fan base out there, who are dying to hear from you. They’ve been sending us lots of questions, so I’m keen to see how you respond to some of those thoughts. But why don’t we kick off first with a two-minute elevator view of the company for those who aren’t familiar with the RNC story.

Mark Selby: Yeah no I think you know RNC fundamentally is a tremendous investment opportunity at present time. Most junior companies are lucky to have one great asset, and we’re fortunate to have two great assets. So there’s the Beta Hunt, Gold and Nickel mine in Western Australia. Obviously investors who have been following this story work, are very aware of the Father’s Day Vein Discovery last fall, where we pulled out +25,000 ounces out of the size of the living room, that generated that Gold at a 40% Gold at 400,000g/t of content. So again, we think one of the most exciting Gold discoveries that’s been made in a very long time. The great thing there is there’s a massive amount of exploration potential. That’s why we acquired the asset in the first place. We’re now able to start to drill that potential off and we’ve been coming to the end of a 40,000m campaign. But from an investment perspective, fundamentally you’ve got this massive exploration potential. We’ve got four sheers, spread across 4km, that has been barely tested to date. We have this potential for this high-grade repeat of a Father’s Day Vein, where you know 150m down into each of these sheers, where it intersects the sediment layer, we’ve the potential for more of these high-grade discoveries to be to be made. And then the best part about it all, is that there are very few multi-million ounce deposits that have been discovered in low risk jurisdictions. And not only are we the basically the backyard of Australia’s main Gold region, we have all the mine infrastructure already in place, that we acquired which cost you $400M to replace today. So you know that’s Beta Hunt. And then on the DuMont side, we’re wrapping up the updated feasibility study, on what is the largest Nickel Cobalt project, development project in the world. It’s one of the largest sulphide discoveries ever. We’re sitting up and Quebec and the Abitibi, next to a pile of infrastructure. And so in a market that I think the market now is beginning to realise how much Nickel the world is going to need by 2025, 2030. Glencore just put out a report out yesterday, saying we need 1.3Mt by 2030. And so you know Dumont is one of the few projects that’s ready to meet that need. So you know we’re very excited about what we can do with that asset. So you’ve got Beta Hunt. You’ve got Dumont. And fundamentally our team is going to work to whatever way maximizes the value for shareholders for each of those assets.

Matthew Gordon: Thanks for that summary. A week we did a bit of work before this call to learn a little bit more about the company. And it struck us that you, from the get go, have designed this not like a junior but something bigger. There’s been a bit more rigour to the planning, I’m saying this as an outsider. There’s been a bit of rigor to the planning, and of course, you can’t get away from the obvious statement if I look back to your share price back in the beginning of September to now it’s five times. So if I was in getting of September, I’d have five times the value of my shares. That’s a pretty impressive type of return. I think a lot of companies be very, very happy with that. But you tell us a little about the strategy. I mean how have you mapped this out? How have you planned it from when you started to today and perhaps a little bit about where it’s going?

Mark Selby: Yeah I mean the board and management team here have come from majors. All of us are generally worked at Inco or Falcon Bridge at one point in time. I worked at Quadro for several years as well so yeah, in terms of our approach, we are looking to try and build out a multi-asset mining company. That was designed from day one when we went public and in 2010. Our first asset was obviously Dumont, which we’ve taken through to fully permanent Feasibility Study complete, ready to go mine. But we realised a few years ago is that while the EV story is exciting, you know at that time was still four or five years away. So in the meantime, we look pretty aggressively at a range of assets. So we’ve picked up two assets at the bottom of the market in early 2016. The Reed Copper Mine (Canada) which we owned 30% of and then and then Beta Hunt (Australia) and so we were fortunate to take those two smaller assets. Reed we generated a 120% return on capital over three years, which was a fantastic investment. Beta Hunt, to be honest we struggled out of the gate with that, but then obviously with the big discovery last year, it validated our investment in that asset,which again created several hundred million dollars of market cap just off that one particular investment.

Matthew Gordon: Yes I guess there’s a little bit of fortune to that, but there’s it strikes me also certainly a lot of planning involved to be fortunate enough to make that find. What are you gonna be doing over the next 12 -8 months going to repeat that success, repeat that kind of value creation. Is that that is their plan? And what is it?

Mark Selby: Yes. So you know we just announced that we exercise the option on Higginsville property. Again we had a mine that needed a mill, they at a mill that needed mine, so for us that was a perfect transaction and with a real synergy. That’s a word gets misused quite a bit, but in this case there is some real synergy between that set of asset. And that’ll really allow us to take Beta Hunt to a strong cash flowing position and provide the foundation for it to become the very large Gold mine that we think it has the potential to become. And then on the Dumont front, we are the operator with that with our partner Waterton. And so the key there is that asset right now is fully funded from the cash that exist within the joint venture already. So there’s no call on the company’s cash today. And we’ll look to partner a JV in a way that makes sense for our existing shareholders, if we get a bid for that entire asset that makes sense, we’ll sell the asset. At the end of the day I have most of my net worth in this company, so I am going to do, my focus is on doing what’s best for our shareholders.

Matthew Gordon: We did happen to look at the buying and you have been a big buyer over the past few months, and of some of the other management team. So I think that’s indicative of you your view of whether this thing will work or not. And just just on that, I mean how do you think you’re doing in relation to your peers for instance. I do want to want to come into the Higginsville in second, but talk to me about how you think you’ve done in 2018 & 2019.

Mark Selby: Yeah I mean obviously the price has come off in the first half of 2019, but if you look through 2018, 2019 as you indicated we’re up x4. x5 over that timeframe. If you go back to early 2016, when we made that shift, to pick up those additional assets, we’re up to x2 to x3, from that timeframe. At a time when the value of most junior companies just continued to erode away, post post that date. So you know again, I’d like to think in terms of that overall time-frame, in terms of the value that we’ve created to date. And again with Beta Hunt, we’re really just getting going. The Resource drilling is where it is. We’re going to start the exploration drilling now, and again we want to really show people just how big this Gold mine can be. And as I said you know we’re in the enviable position of having one of the few Nickel Cobalt projects that’s ready to go, in a market that’s desperate for Nickel.

Matthew Gordon: Well yeah actually we talked to Anthony Milewski last week the CEO of Cobalt27, that you’ve recently done..not necessarily recently, done a deal with them. He was very positive about the Dumont project and being involved with it. How did that deal come about?

Mark Selby: So they yeah they picked up an existing royalty back in 2015. Again we’ve tried to be as creative as possible, in terms of some of the financing that we’ve done, given the equity markets have largely been closed for most of the last 8yrs, for development projects. And so they picked up an existing royalty from Orion Mine & Finance and they purchased that back a year ago February. And I think in terms of the endorsement for Dumont, is pretty profound in the sense that that Dumont royalty acquisition was their very first non-physical metal transaction. So this is a group that has probably spent more time than just about anybody on the planet looking at Nickel Cobalt assets, and the first assets to make an investment in is in Dumont. And then secondly,they continue to I think actively promote it as a mine that they see as one of the few projects that gets built this cycle.

Matthew Gordon: Yeah for sure, it is very, very positive but we’re gonna be talking to him about it again quite soon. So obviously all the PR, all the headlines, have been about Beta Hunt, for obvious reasons. The Father Day Vein, extraordinary find there. A lot of hard work to get to that point I guess. It takes a little bit of the limelight away from Dumont. Because you said a minute ago you said you knew three years back that EV was coming but it was it was going to take a while to get those and you started looking at other assets. Tell us about the Nickel market what you saw then, and what you see now. Why Dumont should be something people pay attention to?

Mark Selby: Yeah. No I mean I again going back to day one with this company. You know the reason the group of us came together in 2010 was…We had we went through a great big Nickel boom in 2007. Where Nickel prices got to $25lbs, +$50,000t. And what happened at that time was. Nickel had had this overhang of a bunch of large laterite projects that literally sat around for decades. And with that spike in prices, basically all of those projects that I’ve been sitting around for decades finally got financed and put into production. Now a lot of those plants took a long time to ramp up. But basically the emptied out the project cupboard. So you know our view was with Dumont in 2010, was we knew we had to get through 5-6yrs of Nickel pig iron pain as the market absorbed all that supply that was going to come from from Indonesia and the Philippines. But once we got through that additional supply, fundamentally Nickel demand is still very robust from just stainless steel demand at 5% a year. And then on the other side equation you now have this brand new use with EV’s. Robert Freeland, I think said it best, Nickel’s the new gasoline. I think we’re moving from the oil based transportation system, to a Nickel Cobalt based transportation system. So that’s going to require vast amounts of Nickel. So having a Nickel project ready in a development pipeline that’s basically largely empty. We think was going to create a lot of value over the long term. It was not.. in 2010 this was not about a quick home-run. It was really building a foundation, building a world class asset which takes more than a few months to do. And so we think we’ve got that with Dumont… We always had that Dumont and now we’re increasingly…we think Beta Hunt has that potential on the Gold side as well.

Matthew Gordon: So you could call it the world’s second largest Nickel reserve. Yeah I think fifth largest Nickel Sulphide reserve, and the ninth largest Cobalt reserve. This is, on any level, that’s pretty impressive. You got I guess options there, but can you give us some sense of what the Nickel market’s doing. You mentioned, I think Indonesia certainly is one of the with Nickel pig iron etc.. Tell us a little bit about the market, again for those sort of uninitiated in this space.

Mark Selby: Yeah I know and there’s lots of investors and for good reason haven’t paid much attention to Nickel because fundamentally it was a pretty structurally beat up metal. So through the first half of this decade, you had the supply come from Indonesia and China where they took this laterite ore and dumped in furnaces and provided a significant amount of new supply. You had a massive amount of inventories pile up, and that really weighed on the Nickel price for quite a period of time. But today, we’ve now we worked through that first wave. Nickel demand continues to be robust. You know the thing about 5% growth, which in Nickel is about twice what it is and Copper and Zinc. That means you need to double supply every 14yrs. So we need by the middle of 2020’s, we need to find all of the Nickel supply that existed in 2010. And not only build it, ramp it up, and get it into production by 2025, and we’re a fraction of the way there. There’s lots of Nickel plants being built in Indonesia. We need every single one of them. The biggest risk to the market is that I think we’re going to struggle to find enough supply to meet demand. And if you look back a Nickel, again I think for people who are new to Nickel, if you look back a Nickel over time. It goes through these massive squeezes every few decades. So in the late 60s Nickel prices got to $8lbs in 1968, which would be about $50lbs today. We had another big Nickel spike in the late 1980s. We had another Nickel spike in the mid 2000s, where we got to $20lbs. And if you look at the kind of projections that the Glencores of the world are putting out in terms of demand growth over the coming decade, it feels like we’re setting up for another one of those squeezes in the first half of the twenty twenties.

Matthew Gordon: So how do you as a company, because if I look at other commodities sources such as Gold, the value for investors is usually late exploration, development stage. That’s when people get taken out. Once you move into production, there’s less returns for the shareholders and in terms of share appreciation. How do you value this space? Obviously you’ve got Gold. You’ve got Nickel. There’s this curve building of value creation. You could existing shareholders. You’ve got potential new shareholders. And you are constantly evaluating where the company is today and where the maximum point of return is. How do you go about that?

Mark Selby: Yeah. No I think you know again you pointed out that we’ve had this massive run since the Fall. You know up x4, x5 since that timeframe. And people think oh well I missed the boat. But today you know at a $220M market cap you know again at Beta Hunt, the infrastructure that we acquired that would cost you $400M to replace today. So you know if we find any Resource the investors getting it for zero. And again given the scale of the sheers, and the highlighted potential already from the historic drilling that’s there. You know this could be a very large multi-million ounce deposit potentially at some point in time. And so if you look at what those kind of Resources and hopefully Reserves in the not too distant future, trade at, exit at, multiple wise. Now again that can be a very, very valuable asset on its own. And then on the Dumont side. Again we haven’t been in a development cycle for a long time, so I think people have forgotten about what metrics around development assets, basically exit for. And again there’s been a few recent examples so. Arizona Mining with their Zinc projects the Southwest United States. You look at the takeover of Nevsun, those  basically both went out for close to x1 NAV. But if you look historically, high quality base metal assets of the scale that Dumont and these assets are, exit at x0.8 NAV to x1 NAV. And if you look at what the old Feasibility Study said we have +$1Bn NAV. The new Feasibility Study is going to probably come in… the CapEx is going to be lower, and the NAV is going to be lower but it’s going to be in the same same order of magnitude. And so again we think there’s tremendous value upside, on both those assets, from where we’re sitting today.

Matthew Gordon: Okay. Well that’ll be interesting to kind of get your guidance on us as you moves through that process, with both both assets. As you say the both world class assets. I imagine you’re quite a few people’s radar. It’s a question of I guess when you want to have conversations and what these conversations mean in terms of value. Can I come back to play to Beta Hunt momentarily if I may. And then we can talk about Higginsville. So Beta Hunt, you got the Father’s Day Vein,  you extracted several very large, high-grade rocks which you have been on tour with. I’ve seen them live myself here in London. Very, very impressive. I guess you’ve extracted the… or have you… extracted the maximum PR value from these now. Are those things which are now going to be monetised?

Mark Selby: Yeah. No we’re actively in the process of monetizing those specimens. Just like you said you know we did take them around the world because again to be able to generate that amount of PR and exposure is again companies don’t get that kind of opportunity every day. And so you know when you’re in the feature Corshack Exhibit at the BMO Mining Conference, which is the first time that we’ve been invited. And you’ve got people who’ve run… I won’t name specific names of guys who ran some of the largest mining companies in the world, crouching behind one of your giant rocks, taking a selfie with it… to be able to have… and have 15 minutes of discussion time with them. That’s been invaluable. And again that’s been repeated time and time again with a number of the larger Mid-tier Gold producers. A number of the largest mining companies in the world. So you know it’s tremendous exposure for that.

Matthew Gordon: It’s very interesting to see. I think people become quite childish when they see those rocks. They behave in a very different way. So let’s talk about Beta Hunt. So Goldfields and St Ives? Are you in any discussions with them?

Mark Selby: No, I mean when the prior owners of the asset had some option potential for some of the adjacent ground, underground. Again at the right time, we’ll re-engage with Goldfields to see if there’s any interest there. Fundamentally we have this this ramp that goes down into the heart of that system, and so there are areas adjacent to the property that would make sense to access from that ramp. So you know at the right time, we’ll resurrect those conversations with Goldfields and hopefully come to a deal that makes sense for both groups.

Matthew Gordon: And with Higginsville with the St Ives operation as well is that on the table? Is the part of the thinking?

Mark Selby: In terms of with Higginsville just have a …again from having mine / mill combined is a much more attractive acquisition target. And the reality is, unlike the North American market, unfortunately where the mid-tier Gold guys have struggled for quite a while, the Aussie market, you’ve got a bunch of mid-tiers that are fully cashed up. Have paper that’s  very well valued. So again I think once we get through these next three rounds of drilling here, and really start to prove up the scale a Resource that we think we have. We’re gonna get more than a few knocks on the door from these mid-tiers. Who bought a bunch of old Gold mines that are facing production profile issues, whereas we bought an old Nickel mine that happened to have a brand new Gold deposit.

Matthew Gordon: Yeah see. Let’s get on to Higginsville because I think I understand you’re thinking process. Why you structured it the way that you have. Why don’t you give us the run through and I’ll perhaps pick up on some of the questions.

Mark Selby: Yes. So we’re picking up Higinsville for AUS$50M, half in cash, and half in shares, that West Gold will have to hold on to for a period of time. When we announced that we had the option, we did.. the equity… what we believe will be the equity component that we need to satisfy that $25M payment. And you know we’ve gotten very attractive terms on a bunch of very non-dilutive type financings, that we expect to have in place by the time we’re ready to close the deal in early June. Again fundamentally, when we bought Beta Hunt the plan was to start drilling i,t get a long term milling solution in place, and at the right time as well we’ll be talking to the royalty company about working, re-working the royalty so that we get to a number that makes sense, hopefully for both of us. And so when the Higginsville opportunity came around, there’s only so many mills that are already in place, that close by. And so again to build that sized mill new, today would probably cost you close to $100M  so a $50M price tag was much better than then buying it new. And then in addition to the mill, we get a significant land package on one of the most prolific Gold camps. And so any of the Resource value and the operations which will be coming online later this year. That’s nice, easy to process, good grade for for an open pit oxide ore and so that blended with the material Beta Hunt makes a lot of sense. We save $15 a tonne versus what we’re paying at beta right now. So it doesn’t take too many years of just the milling synergies alone, to pay for the acquisition.

Matthew Gordon: Tell me about numbers there. So it’s $50M. You’ve obviously done the math. Worked out that that’s good value. You saving $15 which is which is great, but can you tell us a bit more around the thinking of the way that you structured it, in terms of the cash flow and the shares. With the share price, it is now a little bit lower than it was just after Christmas. Do you look at the case of, ‘money is the cheapest when you can get it’. I mean do the deal now. Could you have waited?

Mark Selby: No but I think if we had waited to do… we did the equity component when we announced it. Because again we wanted to take away from any sort of equity overhang that’s there. I think when we announced that, and again hopefully we’re in a place where it is completely non dilutive financing, that I think that will really help the story going forward. You know in terms of doing the deal when we did it. You know obviously, there’s always the best time to do it and then there’s the time when the assets are available. So you know that was… the asset was available. It was the right…it was the right time to do it. And we chose a structure that we think made the most sense for both investors. And we’re glad to have West Gold as a large RNC shareholder here going forward who quite likes the Beta Hunt mine.

Matthew Gordon: So how quickly does something like that pay for itself. $50M is a of money.

Mark Selby: Yeah if you just look at the milling synergies alone. If you just assume Beta Hunt is going to produce 2,000 a day, just the milling cost savings v tolling, you’re looking at $10M a year. So if we do nothing else other than get milling cost synergies that it’s paid for itself in just over five years. If you…and again at a higher mill rate that that cycle comes in much much shorter. But then on top of it, again we have all of that Resource that’s there, we will have ounces coming from that land package and then being positioned in that part of the camp, opens up a bunch of other future opportunities going forward.

Matthew Gordon: Interesting. So tell me with the land package with Higginsville, obviously that.. to define what you’ve got. I imagine you’ve got some information from them, but you’ll want to explore yourself and understand and what you’ve got there. Is that something you’ll do yourselves, or do you feel that you may find a partner to help you develop that. I mean how are you looking at that?

Mark Selby: Yeah I mean the primary focus for exploration is going to remain Beta Hunt. That’s job one and job two. And we obviously need to Resource…basically just develop and expand the existing Reserve Resource that’s there. So sort of just some small step out there to continue to sustain production from those those areas. But again across that larger land package, if we don’t have the time and dollars relative Beta Hunt to do that exploration, yeah we’d look to JV that out to the right kind of partner to help unlock that value that’s there.

Matthew Gordon: It’s interesting. And again, if we continue along this strategy of building infrastructure and I guess what the ultimate aim of reducing your AISC. That’s that’s got to be the bottom line?

Mark Selby: Big time. Yeah. Again the lower your processing cost, the more Resource potential opens up for you.

Matthew Gordon: For sure. So what are the others sort of infrastructure type acquisitions or builds or other types of acquisitions, that you’ve been considering? Not necessarily specifics but what have you been looking at?

Mark Selby: Yeah. No I again I think with Beta Hunt, it makes sense, given that the geology and the location, to look for things that are nearby that asset. And there are the things that we’ve looked at in the past that are nearby. I think right now, it’ll take.. we’ll focus on consolidating those two assets and extracting all the value we want to get from there. But again if an opportunity to infill a nearby opportunity that can provide feed at low cost into that mill, know those kind of things that we’ll continue to look for in that part of the world. And then on Dumont the focus is really gonna be on finding a funding partner to take it into construction as quickly as possible.

Matthew Gordon: Sorry I will get on to Dumont, I just want to very quickly finish off on Beta Hunt because there’s a lot been going on and you’ve done everything in such an accelerated time frame. It’s been quite impressive. Only the AISC. What are the other things that you’re looking at reducing the AISC? It’s around $1,100 at the moment, you need to get that down. What’s happening?

Mark Selby: Yeah I know. I mean the key thing is going forward 1. is obviously the milling cost. 2. Is going to be scaling up the mining operation there. There’s a bunch of fixed costs at a mine. And if you can you know increase the rate your mining at that’s gonna help bring down those costs going forward. Now a lot of the drilling results that have been exciting in the western flanks area. The structures look like it’s getting quite large. And that creates… gives you more flexibility in terms of being able to use lower cost mining methods to pull that ore out. And then as I as I mentioned earlier we’ll we’ll be looking to have discussions with the royalty company at the right time in terms of is there is there a change to that royalty structure that makes sense for both of us.

Matthew Gordon: Who manages the… you mentioned technology there… who manages that? Is an outsourced thing? Or do you have your own in-house team managing the technical component?

Mark Selby: Oh in terms of the mine itself? We have our inside Technical Services Group.

Matthew Gordon: Right. Okay. Okay. Let’s get this get back to Dumont. It’s a huge, huge operation. You talked about JV’ing. Finding the right partner to JV with. .You’ve begun conversations?

Mark Selby: Yeah. We’ve had discussions given our relationships in the Nickel industry. We know all the leading players in Japan, Korea and elsewhere, and so Nickel prices spiked in 2014, 2015 briefly. And but at that time, we advanced discussions with a number of groups to provide different components to financing package. Today it’s just a matter of we’ve kept a number of those discussions warm, so it’s just a matter of once this updated Feasibility Study is out, those sort of kick start discussions going forward.

Matthew Gordon: So that’s due out Q3 of this year?

Mark Selby: It should be out this quarter at some point.

Matthew Gordon: Right. Fantastic. Okay. So everyone’s sort of sitting by waiting to see what’s happening. So how much time are you allocating… I mean I look at the board and there’s a lot of advisors there…. it has grown rapidly as well, some pretty big names on there. How much time are you allocating between the different assets, because you’ve also got three different exploration assets as well, haven’t you.

Mark Selby: Yeah yeah. The key thing there is again I mean, we have we have people and teams are dedicated to each of those those assets group. So again given the activity and a focus of the company right now, it’s Gold and Beta Hunt. I’m spending a large majority of my time on Beta Hunt right now, but you know there is a block of time on Dumont. And then again, we’ve got some great people with Dave Chrissy running Orford. He doesn’t need too much help for me in terms of driving that asset forward.

Matthew Gordon: Okay so look what I’d like to do, and I know you don’t have much time today but I’d like to come back to and maybe have a conversation with you around technical component of the assets. And perhaps that’s something we can do with your head of geology etc. But with the time we’ve got left. Can you talk about the finances and financing. You’ve announced recently the financing of $12M. Why did you do that?

Mark Selby: And so again we had this coming $25M potential payment, if we had to exercise the option. Again the risk of announcing an option to do something without the financing fully in place at that point, is… the market sells off in advance thinking that you’re going to come to the market with a big raise. So we thought it was important to do that raise at that point in time. If the deal did not go forward we’d be able to use that cash to do more exploration at Beta Hunt. I’ve said to investors before, I said you know if there’s someone like Osisko on this asset, there’d be 12 drill rigs going. There’s just that many targets to go after. And so. Yeah so we put that in place. With that and with the financing that we’re looking at right now, and again we’re making good progress on a number non-dilutive financing opportunities. We’ll have the cash that we need to complete the deal, and the cash will need to continue to move those assets going forward.

Matthew Gordon: And obviously the the the the large nuggets that are at the end of their world tour. A monetisation event there.

Mark Selby: We’re monetizing those which feed in to our cashflow.

Matthew Gordon: Can you give us a sense of what they’re worth, because I’m not quite sure how you go about selling something like that?

Mark Selby: Yeah. Basically I mean we’re looking at premium somewhere, we’ve been offered somewhere between 50% and 100% type premiums for most of the most of the stones so we’ll be working with some advisors to get those out the door sooner than later.

Matthew Gordon: Right. Right. But no sense of what range you’d expect there.

Mark Selby: But what 50% to 100% premium on top of the Gold value.

Matthew Gordon: Right. But you know what that Gold value is?

Mark Selby: So yeah we do. So I mean you know we have almost 4,000 ounces in specimen. And other 2,000 4,000 ounces of value.

Matthew Gordon: So we can do the maths. Yeah. Okay. Now I mentioned you were rather impressive boards and some of the names on there but you will see some process shareholders. Not least of which is a certain Mr. Sprott. What his involvement? Is he involved actively in the business or is he just a shareholder?

Mark Selby: No I think you know he’s just a shareholder. You know we do talk from time to time. And he also publicly expresses opinions as well I think. The key thing is he likes high-grade Gold exposure. You know as soon as the announcement came out of the Fall, he acquired his position at that point in time. When we first discovered Gold, high-grade Gold, traditionally where it was found at Beta Hunt, alongside the Nickel deposits, he had become an investor at that point in time as well. So he basically came back in and up this position. We’re really grateful to have a really great Gold investor like Eric involved in the story.

Matthew Gordon: For sure but he has been vocal in the market. He said that he’d like more guidance from the company. Do you think that’s a fair comment?

Mark Selby: I think it’s again, it’s not typical of a junior to have sort of two major assets and two …you’ve got Gold in Australia and Nickel in Quebec. And so I think investors, including him, want to know where we are and where we’re going with both. And I think once the Feasibility Studies at Dumont is done, we’re kind of talking about what’s going to happen on that front. I think it’ll be very clear to investors there. Again I just want to drive home most of my net worth is tied up in this company. And so you know we will, I’m not here to build an empire. I’m here to create value for shareholders. And if it means both those assets get sold by September, great. If it means we have to continue to advance and develop them for another 12 months, then we’ll continue to develop them over that timeframe.

Matthew Gordon: So I think that’s fair enough. So I think your answer would be that… It’s a fair comment. You’re looking to issue more guidance and you’re looking to create more value because you’re aligned with shareholders.

Mark Selby: More clarity in metric for sure. And again I think we have a Gold Investing base today, and I guess I think for those Gold shareholders are nervous that we’re going to sort of cross subsidize things or sort of muck things up a little bit. To be very, very clear. There is a pile of cash in the Dumont joint venture that is funding those activities. And so today Dumont is a self-funding entity. Self-funding asset, at this point in time.

Matthew Gordon: I mean that’s that’s fantastic for shareholders. I mean but when do you think the entire operation becomes self-funding, because obviously people are looking at their shares go up in value. So funding is the moment where things get exciting.

Mark Selby: I mean I think for Dumont to be able to the next stage on a Feasibility Study is really to a construction decision. And at that point in time, we’d like to have you know a big project partner come in and work with us, and Waterton in terms of being able to provide the remaining help to provide the remaining capital that will take it through to production, so that hopefully the amount of dilution that’s required to get that project going, will be very low or zero going forward. Again we can spin that out into a separate entity, we can joint venture into separate entity with somebody else. You know there’s a full range of options that we’re open to and looking at.

Matthew Gordon: Okay. I think that’s a good comment. I mean for me I guess what I would like to understand is that investors have got high hopes in this company because you’ve done so much so quickly. It’s been really impressive. If you feel that you believe in.. there’s more appreciation to come for them, because of what you’re doing with Dumont, what you think’s happening with the EV space and Nickel, and you think that people should continue to support the business countries where you’re head’s at?

Mark Selby: Oh yeah. Again you know putting my money where my mouth is. I bought my two largest single purchases of RNC shares ever value wise were back in earlier this year and the end of last year. You know in the $0.50s and $0.60s at share prices. I was buying them at those prices because I thought the stock was undervalued and can see value from here. So we know today where we’re trading in the high $0.30s. No I obviously believe there’s a substantial amount of upside from here going forward.

Matthew Gordon: Well I mean cut short though because I know you’re short of time today but we know that we could perhaps catch up again. I think potentially you’re in London next week. We’ll be able to get into some of the detail and we’ll certainly be taking some questions from the investors out there, potential investors and perhaps we can address those then. But thanks again for your time and see you next week.

Mark Selby: Yeah thanks Matthew. Take care sir.


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RNC Minerals (TSX: RNX) – 390% Increase in M&I Resource. News Release 27th June 2019 (Transcript)

CRUX investor sat down once again with Mark Selby, CEO of RNC Minerals (TSX: RNX). We ask Mark Selby about the latest drill results, Zone A, exploration, mining plans, resource update timing, Higginsville Mill plans, GDXJ Index, Dumont conversations, share price and the news of the recent Cobalt 27 acquisition by Pala Investments.

Click here to watch the interview.


Matthew Gordon: We will be speaking in a second to Mark Selby. He’s the CEO of RNC Minerals. We spoke to him a month ago and he’s going to give us an update as to what’s been going on since then. They had a press release out this morning about their drill results in the Western Flanks of their Beta Hunt project. But we’re also going to be asking about Zone A, exploration drilling, his mining program, the resource update due in Q3. Higginsville, the GDXJ listing, Dumont and his opinion about the recent Cobalt 27 acquisition. So Mark, hi how are you?

Mark Selby: Great sir. How are you?

Matthew Gordon: Not too bad. Now you’re doing the rounds in Toronto. I know you were in New York also recently.

Mark Selby: Obviously with today’s release, it’s getting lots of attention and lots of investor enquiry. So it’s been a good day.

Matthew Gordon: Well that’s why we called. So obviously we’ve been through the press release. Do you want to give us the highlights in your own words?

Mark Selby: The key thing there is when we bought this asset two years ago, we wanted to drill out the Resource, get a mill in place. And today’s Resource is a vindication of what we saw as the massive Resource potential for the mine itself. So what we announced today is just for Western Flanks. 710,000oz M&I Resource and another 250,000oz of Inferred. Almost a 1Moz combined. At a discovery cost of less than $5/oz. And Western Flanks remains open up along strike and at depth as well. And again we think these structures can continue for many hundred metres, so we’re very happy with the results today. And now we’re entering a phase the exploration we’re going to start to step out… Now we’ve proven what the potential of one of these shears looks like, we’re going to step out and start to highlight where the Gold that we think exists is in some of the other shears on the property.

Matthew Gordon: That’s a great point to bring out. So this was just along 1km of one shear and you’ve got another three shears of aggregate 4km.

Mark Selby: Exactly. So lots of room to go find a lot more ounces.

Matthew Gordon: I’ve got to talk about the cut-off grade. Now that’s shifted from 1.8g/t Au to 1.6g/t Au. You’ve got a grade tonnage curve diagram in the press release, we can see that. But maybe it’s worth just explaining that for people, why you’ve done that. In fact why couldn’t you go lower?

Figure 1: Grade tonnage curve for Western Flanks Resource – Measured and Indicated Resource only (CNW Group/RNC Minerals)

Mark Selby: I think with our own mill and with the mining costs that we think we’ll be incurring on a go forward basis, we think that’s the appropriate cut-off grade. I think you highlighted the grade tonnage curve there, and the point we made in the release is that there’s 450,000oz of that 750,000oz is at 4g/t. So where we’ll end up in a mining plan, which will be out by the end of third quarter, was likely somewhere between that 3 and 4 grams. And it gives us lots of ounces to work with.

Matthew Gordon: And I’ve noticed you are also quite careful in the release to talk about, and focus on, the bulk tonnage and not the High-Grade ‘nuggety’, I think is the word of the day, Coarse Gold. Why was that?

Mark Selby: We can’t put a Resource around it, so it will be bonus ounces and bonus grade on top of whatever we have in the base Resource today. So that’s the way that investors should think about that going forward.

Matthew Gordon: I think it’s quite a well-written press release so perhaps people should have a look at and there’s a few diagrams that are definitely worth looking at. You’ve also got a lot going on. And we haven’t spoken for a month so I want to take advantage of you today. There’s a lot going on. There’s obviously Zone A. You may be making an announcement on that. When is that due?

Mark Selby: Yeah. So the way we’ve done it, we’ve got the Western Flanks Resource out first. We’ll get the A Zone out probably sometime in the first half of August. And we’ll, in one technical report file, 45 days from now, we’ll have the report for both of those Resources. So it’s not as big…it’s not as thick as a Resource as Western Flanks. So we’re not going to see the same total ounces. But we should see a good bump in the Resource from what we had in 2017.

Matthew Gordon: And between now and then you continue to drill?

Mark Selby: So we’ve got to the one drill left that’s working on the exploration holes. Again the diagram in the release shows where the Fletcher Zone is. In 2016 we put one hole out there and hit 25m at over 2.5g. Mineralisation looked very similar to what we had a Western Flanks. We have our East Alpha, which is on the other side of the A Zone. And from the historic Nickel drilling, we literally have hundreds, if not thousands, of historical intersections from the Nickel drilling that highlighted where the where the Gold was. So we’ve got lots of targets to go after. And in this phase of the drilling we’ll be able to start to do that.

Figure 2: Long section of the Western Flanks (looking east) Mineral Resource colour-coded for 2019 resource classification and compared to December 31, 2017 mineral resource estimate. Note that all material mined has been depleted from resource. (CNW Group/RNC Minerals)

Matthew Gordon: When we last spoke you made a fabulous announcement in terms of the mining component. You’ve continued to mine. And you continue to make discoveries. When do you expect to be able to talk about that?

Mark Selby: We’ve been mining along that 16 level. So we pulled out initially 1,000oz. We pulled out a little bit more. From there we’ll end up seeing what the final number is once we get that Gold processed in the next week or two. But the key thing there is we’ve gone at the intersection of the set of shears three times, and we’ve hit it three times on the 14 level, 15 level and now the 16 level. We still have all of those stoping blocks left in between. And we’ve been pulling off a 1,000oz to 2,000oz per 5m level. You can do the math to see what the potential High-Grade coarse Gold that we might find once we stope those areas out. And that’s stuff that we’ll be doing between now and the end of this year.

Matthew Gordon: Okay. I think we spoke previously about a Resource update in Q3. That’s still on schedule?

Mark Selby: Yeah. That’s correct. It will be a Reserve update.

Matthew Gordon: A Reserve update.

Mark Selby: So we’ll have the first Reserve for Beta Hunt Gold in the mine’s history.

Matthew Gordon: Which is obviously great news. I think everyone is expecting great things because they have done the maths as you just asked. So the planning for the mine. That continues to evolve at the moment. Have your plans changed in terms of the kind of rigour and planning that you’ve put out so far?

Mark Selby: No. The first step in that was always getting a comprehensive Resource in place which we’ve got for Western Flanks and we’ll have shortly for the A Zone. And using that base we’ll look at the mine plan. Fundamentally, because of the scale, the thickness, Western Flanks that 10 to 40 meters wide. It provides us lots of opportunities to look at different ways to mine it. Potentially a lower cost way to mine it. We’ll see when the mine plan comes out. But we’re quite excited to have this much Resource to work with. Which should deliver a multi-year Reserve for the mine, which is ultimately where we wanted it to get to when we acquired it back in 2016.

Matthew Gordon: Well talking of which, obviously the recent acquisition, and you did touch upon it earlier, Higginsville. That obviously comes with a few ounces in the ground too. I think some people are curious as to what you’ve done in the last month since that deal closed. And do you have any sense of what the mix between Beta Hunt ore and Baloo ore will need to look like or could look like? Or is that still a work in progress?

Mark Selby: So it’s a work in progress. But with Higginsville, whenever you acquire an asset, the key thing is to get the people right. So our team there has been actively managing that integration. That’s gone well. We’ve ran our first batch of ore through. We don’t have the final numbers yet but based on the amount of Gold we’ve poured. We think that the mill performed quite well. We’re doing one of the last third-party tolls from there, and then the remainder of July, August and September is going to be focused on Beta Hunt and Higginsville material. By September we should be having quantities of ore from Baloo to feed the mill. And we’re looking forward to a decent Q3 and then a good Q4. Which hopefully we’ll be ramping back up Beta Hunt to whatever we think the optimal level is from the Reserve. Mine plan and Reserve update, that’ll be done at the end of Q3.

Matthew Gordon: Two questions that come out of again from listeners and viewers, is obviously you continue to do work there. What’s your expectation in terms of the All In Sustaining Cost (AISC). You had a number previously. You’re going to be doing this work to optimise that. What do those savings mean in the new environment we’re in today?

Mark Selby: I think in terms of All In Sustaining Cash Cost, we should come out somewhere in the range of $900oz to $1000oz. We can do better than that. Certainly will. And that assumes the zero High-Grade Gold. So any of that will help increase the denominator and help bring that number down.

Matthew Gordon: You used the word earlier ‘vindicated’. So you feel that this… you’re on the way to vindicating the decision to acquire this. Because you had a few critics at the time. I think the chat rooms would bear out that perhaps people think that’s now quite a smart call of yours, especially with Gold having done what is done in the last couple of weeks.

Mark Selby: With Gold at $2000 an ounce.

Matthew Gordon: Australian dollars.

Mark Selby: $2000 Australian dollars an ounce. Yes. With Australian dollar. With Australian Gold at that level. Having done that mill deal when we did, was very fortuitous because there’s lots of low-grade open pits scattered throughout the Kalgoorlie region. And with Gold at these levels there’s going to be a new surge of ore. Looking for a mill to process it, to take advantage of these high Gold prices. So we are in the position over the next six months here, that as people who are looking for capacity to process, we are one of the few people who have it.

Matthew Gordon: Remind me what the mill capacity is?

Mark Selby: Basically, it’s about 1.2Mt per annum.

Matthew Gordon: And what does that work out a day?

Mark Selby: That’s about 3,500 tons a day.

Matthew Gordon: And you think that’s the limit?

Mark Selby: No I mean there’s potential to expand it further. Westgold Resources was looking at options to make it a larger mill. So for the right opportunity, if someone’s looking for a capacity to mill a sizable Resource, if it makes sense for our shareholders and creates value for shareholders that it’s something we’ll take a look at.

Matthew Gordon: I don’t quite understand the process for optimising or upgrading it, but is that a quick to market process?

Mark Selby: It depends on how much you would want to expand it. Right now we want to focus on filling what we have. But there’s a number of different projects in the area and if there’s an opportunity that makes sense we’ll it will definitely take a look at it.

Matthew Gordon: And you have made a statement previously that you believe that the grades will improve at depth. Do you still feel that’s the case with a new data that you’ve got?

Mark Selby: I think that’s one of the things and we highlighted it in the release, was the final hole of that Western Flank’s campaign, which is sort of the deepest northern most hole. It had a fairly consistent grade across the intersection at over 6g/t. So we’ll see when we continue to drill further north and further down and see what happens. But if the grades continue at those levels then that gets too a pretty exciting grade going forward.

Figure 3: 3D View of Beta Hunt gold resources and Exploration Targets (CNW Group/RNC Minerals)

Matthew Gordon: Okay. Well let’s step back and we’ll wait and see. What is the focus between now and December then for you? You’ve got a lot of moving parts here. And I’m looking at the share price today, hasn’t really moved on what is now reasonably good news. I think maybe a few people taking the chance to cash in. Which is fair enough. Name of the game. But for you, what’s important?

Mark Selby: We’ve been focused on getting a multi-year Reserve mine plan in place for Beta Hunt. And so that remains on track. And we will look to have that in place by the end of the third quarter. Based on that we will then look to ramp up the mine to the level that that mine plans suggests, makes the most sense and creates the most value. At Higginsville, we will be looking to get Baloo into production by September. And then between the optimisation between the Higginsville property and Beta Hunt, in terms of feed for that mill. And then on the Dumont front, we’ll be continuing to resume discussions with a number of people around partnering and financing on the Dumont project.

Matthew Gordon: Well that’s great. That was one of my questions actually, have those conversations started up again or are they about to resume?

Mark Selby:. They’ve been ongoing. One of our team was just in Korea last week, so those discussions continue in earnest.

Matthew Gordon: Also by the way, congratulations on getting on the GDXJ Index. I think people perhaps haven’t given you enough credit for that. I was talking to the CEO of a $700m market cap company who is very keen to get on the Index. You’re obviously a lot smaller than that but you’ve a very enthusiastic following and trading which I think has got you on that. So congratulations.

Mark Selby: Thanks. And that’s the thing too is, liquidity in the stock is something that’s important to join an index. And so that consistently good volume that we’ve shown through September is what allowed us to join it. And obviously we were quite happy with the response post the index listing last week.

Matthew Gordon: I think it’s important to note that, the importance of it. Obviously again, looking back to from September to now, shares 9x higher than they were then. Which is great. But you just turned the corner. So getting back to where you were. Are you feeling confident with the news coming through that people should start reacting to that in the marketplace? And if so is it going to be institutional or retail?

Mark Selby: I think that one of the big things about this Resource update and then the A Zone Resource update to come, and then a Reserve, is I think for some institutional investors relative to the Resource base that we had at the time, valuations look pretty rich. So the fact now that we’re getting some pretty robust Resource and hopefully robust Reserves in place, we will make it a lot easier for them to step into the story and step in a meaningful way. Fundamentally for investors today, yes the share price is up quite dramatically. But my beliefs always been is that we acquired this asset because there’s a 5km ramp system sitting above what we think is 4 shears across +4km. And so once we start demonstrating the Resource potential of those shears, which I think today’s announcement is a major step forward on that, the reality is there’s very few multi-million ounce Resources available in low-risk jurisdictions around the world. You have a bunch of Aussie mid-tiers that are cashed up with well valued paper. You saw some transactions that occurred during the last month. I think over the next 6 to 12 months, if we continue to do what we’re doing, we may start getting a few knocks on the door. Or maybe more than a few knocks on the door.

Matthew Gordon: Well you’d hope. Just to finish off because I know your time is tight, you’re running around the city at the moment. We got into this because we appreciated the rigour and the planning and the thought and the strategy to this, and you’ve always said from the start this is going to be big. Question is how big. You’re now telling that story to the institutional brokers, the Haywood’s, the Cantor Fitzgerald guys. How are they reacting to what’s going on over the last couple of months?

Mark Selby: I think getting the mill, milling solution in place took a big question mark around the asset away. I think it’s one thing for a CEO to say, ‘oh we’ve got a massive Resource potential’. It’s another thing to deliver 700,000oz of incremental Resource at a discovery cost of less than $5oz. I think it ticks the question mark around what the potential could be now that we’ve demonstrated for one shear. This next round of drilling is really going to step out and test some of the other shears. And I think really start to show what the potential of this asset could ultimately be.

Matthew Gordon: And you think technically things are going as expected, as you planned? There haven’t been any hiccups since when we spoke last?

Mark Selby: No. Beta Hunt’s working well. Higginsville, the integration is going well. We’ve got a great team in Australia in place. And with the Dumont update as well, we’re firing on all cylinders on Dumont as well.

Matthew Gordon: Well talking of which. Cobalt 27. They just did quite an enormous deal with Pala Investments. Do you think that’s been a good deal for Cobalt 27? For investors? For Pala?

Mark Selby: Well I think with Cobalt 27, now becoming Nickel 28, I think it highlights what some of the potential is in the Nickel space. I think the portfolio of assets they had, between royalties and mining assets and stuff that is more Nickel and less cobalt, or more Cobalt and less Nickel. It helps to separate the assets and bring some clarity and focus to each of the portfolios. I think they’ve got a very fundamental belief in where Cobalt is going and it’s a transaction they’re paying a premium for.

Matthew Gordon: It’s interesting, I think congratulations due to Anthony. We’re speaking to him shortly actually. And by inference yourself with Dumont. Don’t forget Dumont, it’s a big part of this story. Well congratulations by the way. I just want to say that. It’s been a good month, been good month for shareholders I think. You’ve got to keep it going. The hard work has just begun. But also please pass my congratulations on to Russell Starr, he did a great presentation recently. I think anyone watching this, should maybe look at Russell’s presentation as well that he did. I think last week.

Mark Selby: Yeah. At the conference in the US there.

Matthew Gordon: Yeah, perfect. Okay well I’ve taken enough of your time. I know you were you were rushing off.

Mark Selby: Okay. Thanks Matt. It’s great to catch up and we’ll be catching up again soon. 


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