RNC MINERALS. Q Results Conference Call TSX:RNX. November 15, 2017

Transcription

1 RNC MINERALS Q Results Conference Call November 15, 2017 TSX:RNX

2 Disclaimer Cautionary Statements Concerning Forward-Looking Statements This presentation provides certain financial measures that do not have a standardized meaning prescribed by IFRS. Readers are cautioned to review the stated footnotes regarding use of non-ifrs measures. This presentation contains "forward-looking information" including without limitation statements relating to the liquidity and capital resources of RNC, production and cost guidance, the potential of the Beta Hunt and Reed mines, and the potential of the Dumont development project and Orford Mining s Qiqavik, West Raglan, Jones-Keystone Loflin and Landrum- Faulkner exploration projects.. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RNC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could affect the outcome include, among others: future prices and the supply of metals; the results of drilling; inability to raise the money necessary to incur the expenditures required to retain and advance the properties; environmental liabilities (known and unknown); general business, economic, competitive, political and social uncertainties; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; or delays in obtaining governmental approvals, projected cash costs, failure to obtain regulatory or shareholder approvals. For a more detailed discussion of such risks and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, refer to RNC's filings with Canadian securities regulators, including the most recent Annual Information Form, available on SEDAR at Although RNC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this presentation and RNC disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. Cautionary Statement Regarding the Beta Hunt Mine The decision by SLM to produce at the Beta Hunt Mine was not based on a feasibility study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that that anticipated production costs will be achieved. Failure to achieve the anticipated production costs would have a material adverse impact on SLM s cash flow and future profitability. It is further cautioned that the PEA is preliminary in nature and includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. No mining feasibility study has been completed on Beta Hunt. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that the PEA will be realized. Cautionary Note to U.S. Readers Regarding Estimates of Resources This presentation uses the terms "measured" and "indicated" mineral resources and "inferred" mineral resources. The Company advises U.S. investors that while these terms are recognized and required by Canadian securities administrators, they are not recognized by the SEC. The estimation of "measured" and "indicated" mineral resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. The estimation of "inferred" resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. It cannot be assumed that all or any part of a "measured", "inferred" or "indicated" mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of "inferred mineral resources" may not form the basis of feasibility studies, pre-feasibility studies or other economic studies, except in prescribed cases, such as in a preliminary economic assessment under certain circumstances. The SEC normally only permits issuers to report mineralization that does not constitute "reserves" as in-place tonnage and grade without reference to unit measures. Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. U.S. investors are cautioned not to assume that any part or all of a "measured", "indicated" or "inferred" mineral resource exists or is economically or legally mineable. Information concerning descriptions of mineralization and resources contained herein may not be comparable to information made public by U.S. companies subject to the reporting and disclosure requirements of the SEC. 2

3 Overview Beta Hunt operating improvements during quarter Mined gold production was 10,489 ounces in Q3, up 27% compared to Q2 Gold mining cash cost in Q3 was US$804 per ounce, a 34% improvement compared to US$1,211 per ounce in Q2; gold mining cash cost was further reduced to US$578 per ounce in September 2017 Gold material mined averaged 1,582 tonnes per day in Q3, a 17% improvement from Q2 levels; September 2017 mine production averaged 1,837 tonnes per day Q3 17 gold grade increased 7% quarter-over-quarter to 2.24 g/t; grade increased further to 2.53 g/t in September Excellent drilling results during quarter highlight resource potential Annualized production of 70 koz expected to be achieved by year-end Reed Grades rebounded to expected levels in Q3 RNC s 30% of copper contained in concentrate production was 2.7 million pounds (1.21 kt) Cash costs were US$1.55 per pound sold and all-in sustaining costs were US$1.57 per pound sold Mine closure scheduled for Q Orford Mining Corp (55% owned by RNC) Spin-out of exploration assets to Orford completed in October; trading on the TSX-V exchange under the symbol ORM commenced on October 27, 2017 Multiple high grade gold and gold-copper discoveries Financial Adjusted EBITDA 1 was $1.3 million for Q3 1. EBITDA is a non-ifrs measure. Please refer to Adjusted EBITDA section of RNC s MD&A for the period ended September 30,

4 Beta Hunt Substantial Operating Improvements Improvements in production, grades and costs in Q3 expected to continue through Q4 Gold Material Mined (tonnes per day) 2,000 1,800 1,600 1,400 1,200 1, Gold Mined Grade (grams per tonne) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 Gold Mining Cash Cost (US$ per ounce) $0 4

5 Beta Hunt Mine Q Overview Tonnes mined in Q3 17 up 18% quarter-over-quarter to 146 kt Q3 17 gold grade increased 7% quarter-over-quarter to 2.24 g/t; 2.53 g/t September As gold production continues to ramp up, and grades improve, operating costs expected to decline towards target levels 2017 guidance: Gold production of koz Full-year 2017 AISC costs of US$1,450 1,550 Beta Hunt Gold and Nickel Operation 1 Q Q Q2 to Q3 % Change Sep 2017 Gold tonnes mined (000s) % 55.4 Gold mined grade (g/t) % 2.53 Gold mined (ounces) 1,2 8,281 10, % 4,508 Gold tonnes milled (000s) % 86.9 Gold mill grade (g/t) % 2.13 Gold Recovery (%) Gold milled (ounces) 6,535 13, % 5,939 Gold sales (ounces) 1 5,891 8, % 2,242 Nickel tonnes mined (000s) % 2.3 Nickel tonnes milled (000s) % 2.9 Nickel mill grade, nickel (%) % 2.86 Nickel in concentrate tonnes (000s) % 0.07 Beta Gold and Nickel Operation 6 Q Q Q Gold mining cash cost per ounce (US$/oz mined) 3 $804 $1,211 $1,669 Gold AISC, net of by-product credits (US$/oz sold) 4,5,6 $1,569 $1,786 $1,685 Gold C1 cash operating cost, net of by-product credits (US$/oz sold) 4,5 $1,439 $1,687 $1,647 Nickel C1 cash operating cost (US$ per lb. sold) 5 $3.40 $3.31 $2.97 Nickel C1 cash operating cost (US$ per tonne sold) 5 $7,499 $7,293 $6,541 Nickel all-in sustaining cost (AISC) (US$ per lb. sold) 5 $3.45 $4.15 $3.00 Nickel all-in sustaining cost (AISC) (US$ per tonne sold) 5 $7,596 $9,150 $6,618 Annualized production of 70 koz expected to be achieved by year-end 1. The difference in gold sales ounces and gold mined ounces is due to timing differences in receipt of gold sales depending on completion date of tolling campaigns. 2. As of September 30, 2017, 43.5 kt of gold mineralization from Q production remained on the ROM pad for tolling in the subsequent quarter, compared to 80 kt of gold mineralization as of June 30, Gold mining cash cost per ounce for the month of September 2017 was US$578 per ounce mined at a recovery of 90%. 4. Gold operation declared commercial production in the second quarter of 2017 with effect on effect on July 1, Prior to Q3, gold operations were in the ramp up stage towards commercial production and operating and sustaining costs per ounce for those periods are not comparable to other companies. 5. All-in sustaining cost, net of by-product credits, cash operating cost, net of by-product credits, cash operating cost, cash operating cost per tonne, all-in sustaining cost, and all-in sustaining cost per tonne are not recognized measures under IFRS. Such non-ifrs financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors, and others who follow RNC s performance, assess performance in this way. Management believes that these measures better reflect RNC s performance and are better indications of its expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. 6. Reference is made to the Non-IFRS Measures section of RNC s MD&A for the period ended September 30, 2017, available for download from ww.rncminerals.com and sedar.com. 5

6 Beta Hunt Mine: Drilling During Quarter Continues to Yield Excellent Results Gold mineralization at Western Flanks has been extended over a vertical extent of 60 metres and laterally over 200 metres with multiple drill hole intersections containing greater than 20 metres of mineralization Recent Western Flanks Results Show Wide Zones at Higher Grades WF18-036: 6.3 g/t Au over 33.0 m, including g/t Au over 3.0 m WF18-035: 4.1 g/t Au over 21.5 m, including 5.72 g/t Au over 12.4 m WF18-064: 3.7 g/t Au over 30.2 m, including 6.95 g/t Au over 6.8 m WF18-041: 3.2 g/t Au over 33.0 m, including 7.84 g/t Au over 8.2 m WF18-056: 3.0 g/t Au over 25.3 m, including 6.45 g/t over 3.7 m WF18-033: 3.0 g/t Au over 27.5 m, including 7.44 g/t over 6.8 m Source: Beta Hunt Mine PEA dated March 4, 2016 and news release dated October 19, 2017, available at and 6

7 Reed Mine Q Overview Reed Mine Q Operating Review (100% basis) Q tonnes milled of 18 kt and copper grade of 4.06% Q production of 2.7 MM lbs copper (1.21 kt) and 300 oz of gold (RNC s 30% share) Q AISC US$1.57/lb copper 2017 production guidance (30% basis): 4-5 kt copper and koz of gold Q Q YTD Q YTD Q Ore (tonnes hoisted) 117, , , ,842 Ore (tonnes milled) 107, , , ,794 Copper (%) Zinc (%) Gold (g/t) Silver (g/t) Reed Mine Q Operating Review (30% basis) 1 Q Q Q Copper contained in concentrate (kilo tonnes) Gold contained in concentrate (ounces) Copper cash operating cost per pound sold 1 $1.55 $1.58 $2.06 Copper all-in sustaining cost per pound sold 1 $1.57 $1.66 $ Cash operating cost per pound, and all-in sustaining cost per pound, are not recognized measures under IFRS. Such non-ifrs financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors, and others who follow RNC s performance, assess performance in this way. Management believes that these measures better reflect RNC s performance and are better indications of its expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. 7

8 Q Financial Results Adjusted EBITDA 1 for Q was $1.3 million, or $0.00 per share, compared to a $4.8 million loss in Q and positive $3.0 million in Q RNC recorded a net loss of $12 million ($0.04 per share) for Q versus a net loss in Q The Q net loss includes a $4.3 million loss on gold operations, a $2.6 million expense associated with the option to purchase Westgold s South Kalgoorlie Operations and an impairment charge of $1.9 million with respect to VMS properties Excluding the above noted impairment charge, mining operation had a net loss of $3.1 million in Q3 2017, compared to a net profit of $1.1 million in Q EBITDA is a non-ifrs measure. Please refer to Adjusted EBITDA and Adjusted EBITDA per share section of RNC s Management Discussion & Analysis for the period ended September 30,

9 Dumont: A Robust, Long-Life Ni-Co Sulphide Project Renewed Investor Attention in Battery Metals A compelling project ideally positioned to deliver nickel and cobalt to global markets by th largest nickel sulphide discovery ever One of five world s largest nickel reserves and one of world s largest cobalt reserves outside Africa In production, a top five nickel sulphide operation globally and largest cobalt operation in North America Excellent location in the Abitibi region of Quebec - All major infrastructure in place, well supported by community Significant upside potential from roasting and alternate downstream process versus traditional smelting and refining 386 Contained Cobalt Resource by Operation (kt) Reserve * Based on 2013 Dumont Feasibility Study; Source: Company reports 9

10 Nickel Demand Underpinned by Strong Stainless Steel Demand + Millions of EVs Coming Based on OEM announcements, IEA estimates EV cars on the road could range between 9 20 million by 2020 and million by 2025 compared to just 2 million in 2017 At 35-50kg nickel per car, that is Mt of additional consumption by

11 Qiqavik Gold Exploration Potential Multiple high grade gold and gold-copper discoveries 2017 program drill-confirmed three high-grade discoveries and made five new high-grade visible gold discoveries prospecting discoveries at surface that remain untested by drilling 40km Qiqavik Break gold potential confirmed in just nine weeks of exploration Map of Qiqavik Property Showing Significant Gold and Copper Exploration Results from 2017 Program Source: RNC news release dated September 19, 2016 available at and 11

12 RNC Focused on Value Creation Western Australia Quebec, Canada Quebec and Carolinas Manitoba, Canada Beta Hunt Mine Gold, Nickel Producer Massive exploration potential - known gold showings over 4 km strike, open in three directions, limited exploration at depth Ramping up gold production expect to reach annualized rate of 70koz by year-end Infrastructure in place to support much larger gold operation RNC-Waterton Nickel Joint Venture RNC - Waterton 50/50 JV to advance Dumont and grow nickel business with $US 35 MM cash Dumont Nickel Project: structurally low cost, large scale, shovel ready 3rd largest nickel reserve in the world, 5 th largest nickel sulphide discovery ever One of largest cobalt resources outside Africa Orford Mining (~55%) Exploration Spin-Out High grade gold exploration projects in Northern Quebec and U.S. Carolina Gold Belt Successful 2017 drill program: multiple high-grade gold drill intersections up to 13.7 g/t, five new surface discoveries up to 457 g/t Au confirm 40-km high-grade Qiqavik break gold system Exploration to begin in Carolina Gold Belt properties Trading as ORM on TSX-V Reed Mine (30%) Copper Producer 2017 Production Guidance: Copper: kt; Gold: koz (30% basis) Low cost production, Q AISC US$1.57/lb 12

13 Corporate Overview Share Structure 1 : Basic Shares Outstanding 1 : million Convertible (price: US$ (C$0.2573)) million Options (ave. exercise price: C$0.38) 26.8 million Warrants (exercise price: C$0.40) million Deferred/Restricted Share Units 5.5 million Contingent Shares 7.0 million Fully Diluted Shares Outstanding: million Directors and Officers Share Ownership: ~4% Large Shareholders: Eric Sprott ~9% Westgold Resources Limited ~8% Balance Sheet Highlights: Cash and Cash Equivalents 4 : C$21.6 million Market Capitalization 1 : C$56.9 million 1. Shares outstanding, fully diluted shares outstanding, shareholdings and market capitalization as at November 14, Assumes maximum conversion of 75% of US$10M principal into RNC common shares; US/C $ exchange rate as at June 7, 2017 and conversion of US$4 million principal and interest into RNC common shares ; US/C $ exchange rate at September 18, million C$0.49, 5.9 million C$0.24, 5.0 million C$0.25 and 1.5 million compensation C$ Cash and cash equivalents as at September 30,