RNC financing puts focus on Dumont nickel-cobalt project

RNC Minerals [RNX-TSX] on Friday June 1 announced plans to raise up to $6 million from a private placement of 40 million units priced at 15 cents per unit. The company said Haywood Securities Inc. has agreed to lead a syndicate of agents hired to sell the private placement units, including Laurentian Bank Securities Inc., Canaccord Genuity Corp. and Red Cloud Klondike Strike Inc.

Each unit will be comprised of one share of RNC and one share purchase warrant. Each warrant will entitle the holder to purchase one share at an exercise price of 21 cents for 30 months following closure of the offering.

The agents have been offered a green shoe option to sell up to an additional 15% of the offering units at the offering price. Closing of the offering is expected to occur by June 14, 2018.

RNC also said Friday it has entered into a US$13 million bridge financing facility with Auramet International LLC due May 15, 2019.  The facility will eliminate the majority of debt repayment commitments during 2018, RNC said.

The facility is repayable from certain capital raising events, including the sale of the Beta Hunt gold and nickel mine in Australia.

“The facility is a critical step in repositioning RNC’s central strategic focus on the advancement of the Dumont Nickel-Cobalt Project, which contains the world’s largest undeveloped reserves of both cobalt and nickel,” said RNC President and CEO Mark Selby.

RNC was an active trader Friday, easing 11.7% or $0.02 to 15 cents on volume of 2.68 million.

RNC recently said it is working to secure $1 billion to develop the Dumont Project, which is located near Amos, Quebec. It hopes to start the construction phase next year.

RNC is headed by a group of former executives of the nickel giant formerly known as Inco Ltd. The Canadian mining icon and its Sudbury, Ontario operations were acquired by Vale [VALE-NYSE] of Brazil in 2006.

RNC owns 50% of the Dumont project with private equity firm Waterton Global Resource Management holding the balance.

When in production, the Dumont Mine is expected to rank as the fifth-largest nickel sulphide operation in the world by annual production. Only the mining operations at Norilsk (Russia), Jinchuan (China), Sudbury, Ontario, Canada), Voisey’s Bay (Newfoundland and Labrador, Canada) will be larger, the company said.

“With many market participants expecting explosive growth in nickel and copper demand from the electric vehicle market over the coming decade, RNC continues to be approached by a number of strategic investors, offtake partners, and financiers who could provide financing to begin construction,” the company said recently.

Selby said Dumont is the only deposit of this scale that is not currently in operation and not owned by a major mining company (the other eight largest deposits are owned by companies that include Glencore, Vale, Norilsk, Sumitomo Corp. and Jinchuan).

“Given market concern regarding future cobalt and nickel supply for electric vehicles, and nickel prices at the $5.50 to $6 a pound level, RNC believes it is well positioned to significantly advance Dumont in 2018,” Selby said.

The RNC CEO went on to say that in the company’s view, Dumont compares favourably with many Australian nickel-cobalt projects, which have seen significant increases in market value during 2017. He said Dumont contains larger nickel and cobalt reserves, has completed a feasibility study, is fully permitted and is a sulphide deposit, rather than a laterite deposit.

With 3.15 million tonnes of nickel sulfide and 126,000 tonnes of cobalt, it ranks as the world’s largest undeveloped reserves of both metals. Production is forecast at 73 million pounds of nickel annually and 2.3 million pounds of cobalt in concentrates.

The recovery of nickel and cobalt will be achieved using proven, conventional milling technology, rather than more technically challenging pressure acid leach technology.

However, any construction decision remains subject to financing.

According to a July, 2013 technical report, the initial capital cost is estimated at $1.26 billion, including $320 million for the mine and $550 million for the processing plant. Dumont is expected to produce 2.8 billion pounds of payable nickel over 33 years from an open pit operation.