RNC Minerals [RNX-TSX; RNKLF-OTCQX], aka Royal Nickel Corp., shares were active Tuesday March 26 after the company announced a $12 million bought deal financing, and a purchase option on a gold processing facility in Australia.
RNC said the potential purchase of the Higginsville mill and mining operations from Westgold Resources Ltd. [WGX-ASX] could help to unlock the value of RNC’s Beta Hunt mine in Western Australia.
“The Higginsville mill would provide a significantly lower cost milling alternative for Beta Hunt [RNC expects that processing cost savings would be in excess of $15 per tonne, or a 35% reduction] , and add an expected 40,000-50,000 ounces of gold production in 2019.
RNC said it will make a non-refundable option payment of A$4 million, payable immediately in RNC shares, for an exclusive 40-day period to complete due diligence. Closing would occur 30 days later if the purchase option is exercised.
Upon closing, RNC would pay a further A$21 million in RNC shares and A$25 million in cash for a total consideration of A$50 million [including the A$4 million deposit satisfied in RNC shares].
RNC shares fell 12% or $0.07 to 52 cents on volume of 8.24 million, making RNC one of the most actively traded stocks on the TSX, Tuesday. The shares trade in a 52-week range of $0.07 and $1.18.
RNC recently attracted international attention following news of a once-in-a lifetime gold strike in a structure known as the Father’s Day Vein at Beta Hunt. The company said it had extracted 9,250 ounces of gold, worth $15 million, from a 130-tonne cut of rock about 500 metres underground at the mine.
The find included a single 95-kilogram chunk that contained 2,400 ounces of gold, worth about $3.8 million. A second 62-kilogram stone contained 1,620 ounces.
“The combination of the Higginsville mill with the production potential of our Beta Hunt mine provide significant synergies, underpinned by the 35% per tonne cost saving or in excess of US$100 /oz versus our current toll milling arrangements,” said RNC President and CEO Mark Selby.
“The transaction would transform RNC’s gold operation in Western Australia to a multi-mine operation anchored by the 1.3 Mtpa HGO mill, the exciting high-grade and substantial resource potential at Beta Hunt, and a large land position in the Kalgoorlie gold region,” Selby said.
Meanwhile, a syndicate of underwriters led by Haywood Securities Inc. and Cantor Fitzgerald Canada Corp. have agreed to purchase 24.5 million common shares of RNC on a bought deal basis for 49 cents per share. The deal is expected to generate gross proceeds of $12 million.
The underwriters have been granted a 30-day over-allotment option, allowing them to purchase an additional 3.8 million shares to cover over allotments.
Net proceeds will be used for exploration drilling at Beta Hunt and to fund the cash component of the purchase price arranged in the option deal with Westgold.