Mining Weekly

TORONTO (miningweekly.com) – Project developer Royal Nickel Corp (RNC) on Monday announced two acquisitions that would transform the company into a cash-generating low-cost nickel, copper and gold producer.

The Toronto-based company’s TSX-listed stock gained as much as 31% on Monday to C$0.21 apiece, after the company announced that it had agreed to buy a 67% interest in private miner Salt Lake Mining (SLM) in a deal valued at about C$7.7-million.

SLM’s main asset was a 100% interest in the Beta Hunt mine, a low-cost nickel and gold producer located in the prolific Kambalda mining district of Australia. Beta Hunt resumed nickel production in 2014 and gold production at the end of 2015.

RNC would issue 32.5-million RNC common shares and C$2.5-million in cash (subject to certain conditions) to close the deal.

In a separate deal, RNC had also signed a definitive agreement under which it would acquire TSX-V-listed base metals miner VMS Ventures through a plan of arrangement, with a transaction value of about C$11.4-million. Vancouver-based VMS held a 30% interest in the Reed mine, a fully ramped-up copper producer, located in the Flin Flon/Snow Lake greenstone belt in central Manitoba. Hudbay Minerals owned the other 70% interest in Reed mine and was the operator.

Under terms of the agreement, VMS shareholders would receive 36-million RNC common shares, about C$3.5-million cash, and a dividend in-kind payment of about 29.98-million North American Nickel (NAN) common shares currently held by VMS.

Upon closing, VMS shareholders would receive consideration representing a value of C$0.081 for each VMS common share based on the 20-day volume-weighted average price (VWAP) of RNC on the TSX and each of VMS and NAN on the TSX-V as on Friday. The offer represented a premium of about 39.3% to VMS's VWAP.

The VMS transaction would be implemented by way of a plan of arrangement under Section 288 of the Business Corporations Act (British Columbia).

“Mining remains a cyclical business. However, most industry participants forget this fact at the top and bottom of the cycle. RNC’s view is that current market conditions provide opportunity to acquire cash-producing assets at cyclically low market prices – acquiring assets at the right time in the cycle can create great value for shareholders,” RNC president and CEO Mark Selby told investors during a conference call.

In 2015, the Beta Hunt mine and a 30% stake of Reed mine totalled about 4 000 t of nickel, 4 000 t of copper, and 3 300 oz of gold. For the current year, combined output was expected to total 3 500 t to 4 500 t of nickel, 4 000 t to 4 500 t of copper, and 35 000 oz to 45 000 oz of gold, as Beta Hunt ramped up gold output.

“RNC will continue to actively review and pursue the acquisition of a number of base and precious metal assets,” Selby stated.

RNC also believed that a nickel supply shortage was developing over the next several years, boding well for its Dumont project, in Quebec, the third-largest nickel project in the world. The project was shovel ready, awaiting financing on the back of increasing nickel prices.