RNC MINERALS Results Conference Call TSX:RNX. April 3, 2017

Transcription

1 RNC MINERALS 2016 Results Conference Call April 3, 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 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 2016 and 2017 Overview 2016 Moved from single asset development company into multi-asset gold, nickel and copper producer Beta Hunt 2016 gold production of 28 koz and 4.0 MM lbs of nickel Reed 2016 copper production of 11 MM lbs 2017 Focus on completion of ramp up of Beta Hunt, unlock value for shareholders from asset portfolio with strong partners Complete ramp-up of Beta Hunt to target production levels Joint Venture with Waterton to unlock value in the nickel industry 50:50 JV with Waterton, a leading mining private equity firm JV will contain 100% interest in Dumont and US$35 million of committed capital Westgold SKO mine / mill purchase option pro forma 120+koz gold annually A$80 million purchase option on multi-mine operation anchored by 1.2 Mtpa gold mill next door to Beta Hunt, multi-million ounce resource on km 2 land package If option exercised, Westgold to become 19.9% shareholder of RNC significant endorsement from experienced, well-respected Western Australia operator Spin-out of TNN subsidiary (68% RNC) as a TSXV gold-focused exploration company during 2 nd quarter Project portfolio: Qiqavik and West Raglan in northern Quebec; Carolina gold belt properties 3

4 Beta Hunt Mine 2016 Overview Beta Hunt Overview Pre-commercial production was 27,882 oz in 2016 and 7,553 oz in Q4 Gold sales were 20,958 oz in 2016 Pre-commercial gold cash costs were US$1,331/oz and all-in sustaining costs were US$1,608, net of by-product credits As gold production ramps up and grades improve, operating costs are expected to decline towards target levels 2017 guidance: 65-70koz, net AISC US$900-1,000/oz Beta Hunt Mine 2016 Q Q Q Q Gold tonnes mined (000s) Gold mined grade (g/t) Gold tonnes milled (000s) Gold mill grade (g/t) Gold mined (ounces) 1,2 27,882 7,553 7,094 7,599 5,636 Gold sales (ounces) 20,958 4,571 7,570 5,402 3,416 Nickel tonnes mined (000s) Nickel tonnes milled (000s) Nickel mill grade, nickel (%) Nickel in concentrate tonnes (000s) Beta Hunt Mine (YTD period March 16 Dec 31, 2016) Gold all-in sustaining cost, net of by-product credits (US$ per ounce sold) 3,4,5 $1,608 Gold C1 cash operating cost, net of by-product credits (US$ per ounce sold) 3,4,5 $1,331 Nickel C1 cash operating cost (US$ per lb. sold) 4 $2.20 Nickel C1 cash operating cost (US$ per tonne sold) 4 $4,854 Nickel all-in sustaining cost (AISC) (US$ per lb. sold) 4 $2.23 Nickel all-in sustaining cost (AISC) (US$ per tonne sold) 4 $4,927 YTD 1. The difference in gold sales ounces and gold mined ounces is due to a delay in reporting outturns from the Perth Mint in the last two weeks of December The outstanding gold sales occurred in Q As of December 31, 2016, 22 kt of gold mineralization from December 2016 production remained on the ROM pad for tolling in the subsequent quarter, compared to 5 kt of gold mineralization from September 2016 production as of September 30, Gold operations in 2016 were at the early stage of the ramp up towards commercial production and operating and sustaining costs per ounce are not comparable to other companies. 4. Cash operating cost, cash operating cost per tonne, and all-in sustaining cost, 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. 5. Excluding in each case inventory adjustments of C$4.3 million as of December 31,

5 Reed Mine 2016 Overview 2016 production of 11 MM lbs copper (5.0 kt) and 1.4 koz of gold (RNC s 30% share) 2016 AISC US$1.49/lb Reed Mine 2016 Operating Review (100% basis) Q Q Q Q Ore (tonnes hoisted) 104, , , ,461 Ore (tonnes milled) 123, , ,002 94,997 Copper (%) Zinc (%) Gold (g/t) Silver (g/t) Reed contributing cash flow to RNC (contribution and bridge loan owed to Hudbay have been repaid) 2017 production guidance (30% basis): 4-5 kt copper and koz of gold Reed Mine 2016 Operating Review (30% basis) 1, Copper contained in concentrate ( kilo tonnes) 5.0 Gold contained in concentrate (ounces) 1,357 Copper operating cash cost per pound sold 1 $1.40 Copper all-in sustaining cost per pound sold 1 $ RNC closed the acquisition of its interest in Reed on April 27, Production figures are full year 30% share of production attributable to VMS 2.Cash cost and all-in sustaining cost per pound sold, net of by-product credits. Cost s above are for the April 27 December 31, 2016 period. 5

6 2016 Financial Results Financial statements only reflects operating results from Reed mine and only nickel production at Beta Hunt Gold production and costs capitalized until commercial production achieved Updated allocation between nickel and gold operations Adjusted EBITDA 1 loss for the year ended December 31, 2016 was $4.5 million or $0.02 cents per share RNC incurred a net loss of for the year ended December 31, 2016 was $28.6 million ($0.13 per share) Loss largely driven by a number of one-time items and write-downs related to the acquisitions of SLM and VMS and the recent sale of 50% of Dumont One time non-cash impairment charges of $17.5 million were largely related to the acquisitions of SLM ($7.9 million) and VMS ($4.5 million) The impairments were based on market and operating assumptions on the date of acquisition, not current market and operating assumptions The recent sale of 50% of Dumont to Waterton resulted in an impairment charge on the Dumont property of $5.0 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 December 31,

7 Beta Hunt: Massive Exploration Potential Gold Intersections Across 4 km Strike Length 675,000 metres of historical nickel drilling has yielded gold intersections along a strike length, 3 major structures of 4 km each (A Zone, Western Flanks, Fletcher) Recent drilling under previously mined nickel deposits successfully extended A Zone by 500 metres Fletcher Trend discovered through drilling in July 2016 Recent A Zone Extension discovery announced February

8 Massive Exploration Potential A Zone Extension Rapid Discovery to Production A Zone Extension less than 50 metres from existing development for Western Flanks Allows 2 for 1 - Get access to 2 nd deposit from same set of development Highlights: WF16-011: 4.05g/t including 10.60g/t WF16-013: 2.69g/t including 9.34g/t WF16-014: 4.24g/t including 7.99g/t WF16-015: 6.71g/t including 8.74g/t WF16-016: 7.31g/t including 10.15g/t WF17-008: 5.97g/t including 11.38g/t and 4.77g/t Section view looking northwest showing the A Zone Extension drill results and proximity to existing underground infrastructure as well as the Western Flanks resource. Section window is +/- 125m. Additional drilling underway, results pending 8

9 Beta Hunt: SKO Asset Purchase Option and Toll Processing Rights Provide Synergy Potential and Lower Costs Transactions are a significant step forward for RNC and its Beta Hunt mine 12 month tolling agreement with Westgold s Jubilee Mill Lowers tolling and transportation costs - generating $7 million in savings over 12 month period - reduces AISC costs by US$80 per ounce during tolling period Purchase option to acquire Westgold s South Kalgoorlie Operations (SKO) for A$80M would transform RNC s Beta Hunt mine / Western Australian assets A multi-mine operation anchored by 1.2 Mtpa mill with multi-million ounce resource base and km 2 land package in prolific gold belt Pro forma gold production of 125+ kozpa from 2 underground mines (Beta Hunt, HBJ) and several open pit mines at AISC of US$950 per ounce Locks in annual mill synergies of $7 million with potential future annual savings to $10-$12 million with production growth at Beta Hunt Option structure allows RNC to focus on realizing value from completion of the first phase ramp-up at Beta Hunt before exercising with a structure that maximizes value for our shareholders Significant endorsement from experienced Western Australia operator Westgold (recent gold spinout from Metals X) is receiving a total of $8 million in RNC paper ($4 million for purchase option and $4 million for right to toll) and is willing to accept additional RNC equity as part of the consideration for a purchase of SKO up to 19.9% of RNC Westgold (Metals X) is an experienced and well-respected Western Australia mining company 9

10 Unique Partnership with Waterton Establishing a Well-Funded Joint Venture Arrangement to Create and Unlock Value within the Global Nickel Industry Strong Partnership RNC Minerals and Waterton to create a 50/50 joint venture limited partnership ( JV Entity ) to advance Dumont and acquire high quality nickel assets globally Well-Funded Funded with US$35M in capital commitments to develop Dumont and acquire additional nickel assets, and backed by Waterton s two largest funds with a total of US$1.725B in committed capital Focused on Nickel The joint venture s objective is to establish a pure play nickel company with multiple projects operating in stable jurisdictions Advancement of Dumont Waterton s acquisition of 50% of Dumont for US$22.5 million (C$30 million) in cash valuing Dumont at C$60 million. Provides funding to continue to advance Dumont. 10

11 RNC Waterton Joint Venture First of its Kind Platform for Growth Unlocking value in Dumont through a strategic joint venture partnership 50% 50% JV Entity 100% interest in Dumont US$35 million in capital commitments US$5 million to continue to advance Dumont US$30 million to acquire additional nickel assets 11

12 Dumont RNC s Nickel Roasting Approach A Significant Breakthrough RNC s strategic alliance with Tsingshan led to the development of the first integrated nickel pig iron ( NPI ) plant to directly utilize nickel sulphide concentrate as part of the stainless steel production process through concentrate roasting Significant potential benefits to producers of suitable nickel sulphide concentrate feed such as RNC s Dumont Project: Lower costs due to simpler processing compared to traditional smelting and refining Higher payabilities than traditional smelting and refining Greater flexibility for more potential partners and customers Ferro-nickel puck produced from Dumont concentrate Roasted nickel concentrate is effectively a very high grade laterite ore feed creates new source of demand for nickel sulphide concentrate, notably at a time when many NPI and ferronickel producers face feed shortages as a result of Indonesia s nickel ore export ban 12

13 Qiqavik Gold Exploration Potential Asset to be JV/Spun Out for Future Funding 2016 program discovered two new high grade gold mineralization zones, Aurora and Esperance, extending mineralized trend to over 40 km, more than doubling the known extent of the trend The prospecting results demonstrate the potential for the Qiqavik project to host important new gold and copper deposits (multiple grab samples returned 1-10% Cu) RNC to joint venture or spin out this asset to allow funding of future exploration programs with minimal dilution at the RNC level Map of Qiqavik Property Showing Significant Gold and Copper Exploration Results GET CHART THAT HAS COPPER GRADES AS WELL Source: RNC news release dated September 19, 2016 available at and 13

14 Going Forward Focus on completion of ramp up of Beta Hunt, unlock value for shareholders from asset portfolio with strong partners New leadership at Beta Hunt focused on development and completing ramp-up of Beta Hunt to target production levels Joint Venture with Waterton to unlock value in the nickel industry 50:50 JV with Waterton, a leading mining private equity firm JV will contain 100% interest in Dumont and US$35 million of committed capital Westgold SKO mine / mill purchase option pro forma 120+koz gold annually A$80 million purchase option on multi-mine operation anchored by 1.2 Mtpa gold mill next door to Beta Hunt, multi-million ounce resource on km 2 land package If option exercised, Westgold to become 19.9% shareholder of shareholder of RNC significant endorsement from experienced, well-respected Western Australia operator Spin-out of TNN subsidiary (68% RNC) as a TSXV gold-focused exploration company during second quarter Project portfolio: Qiqavik and West Raglan in northern Quebec; Carolina gold belt properties 14

15 RNC Value Proposition Western Australia Quebec, Canada Manitoba, Canada Quebec and Carolinas Beta Hunt Mine Dumont/Nickel JV Reed Mine (30%) Exploration Spin-Out Gold, Nickel Producer Ramping up gold production to 65-70koz in 2017, net AISC US$900-1,000/oz Massive exploration potential Westgold SKO mine / mill purchase option pro forma 120+koz gold annually RNC - Waterton 50/50 JV to advance Dumont and grow nickel business Dumont project: structurally low cost, large scale, shovel ready nickel project 3rd largest nickel reserve in the world and 5 th largest nickel sulphide discovery ever Copper Producer 2017 Production Guidance: Copper: kt; Gold: koz (30% basis) Low cost production 2016 AISC US$1.49 Ongoing cash flow from January 2017 Exploration projects in Northern Quebec and U.S. Carolina Gold Belt Qiqavik - new high grade gold mineralization discovery adjacent to West Raglan Project West Raglan Advanced high grade Ni-Cu-PGM Multiple exploration properties in highly prospective Carolina Gold Belt 15

16 Corporate Overview Share Structure 1 : Basic Shares Outstanding: million Options (average exercise price: C$0.41) 28.2 million Deferred/Restricted Share Units 7.4 million Warrants (average exercise price: C$0.49) 17.2 million Compensation Warrants 1.5 million Contingent Shares 7.0 million Fully Diluted Shares Outstanding: million Directors and Officers Share Ownership: ~4% Large Shareholders: Eric Sprott ~10% Oppenheimer Funds, Inc. ~4% Balance Sheet Highlights: Cash and Cash Equivalents 2 : C$4.8 million Market Capitalization 1 : C$83 million 1. Shares outstanding, fully diluted shares outstanding, shareholdings and market capitalization as at March 31, Cash and cash equivalents as at December 31,