Interview with Paul Huet, CEO of RNC Minerals (TSX:RNX)
COVID-19 has affected stock markets across the land. Very few have managed to emerge unscathed, and even the historic safe haven of gold investment has been hit, though the gold price has now recovered nicely and quantitative easing should drive it even hire.
So, RNC Minerals. An amazing operational turnaround in 2019 was lacking one thing: share price growth. RNC Minerals appeared on the cusp of growth, especially given the exciting exploration and optimisation plans in its 2020 guidance, but COVID-19 has heavily impacted the share price.
Investor sentiment is low, and patient investors in RNC Minerals have been left feeling frustrated. However, in this passionate interview, Huet cuts through the COVID-19 crisis, and explains in detail why RNC Minerals could still be a fantastic bet for investors.
RNC Minerals released its Q4/19 results last week, and Huet was keen to emphasise the significance of them. What are the headlines?
• Gold Production: 26,874oz
• Adjusted Earnings: C$14M
• 2H/19 AISC Guidance BEATEN
• NO CHANGE to 2020 Guidance
The operational figures are mightily impressive; there is no way of getting away from that. However, the most encouraging fact of all for investors is that there is NO CHANGE to the 2020 guidance, despite the coronavirus outbreak. This is the clearest indication yet that RNC Minerals currently appears to be available at a steep discount on its true value.
Huet unpacked some of the results for us to provide further reasons to believe. RNC Minerals' 2H/19 gold production figure of 51,090oz comfortably exceeds its own guidance (42,000-49,000oz). The Q4/19 AISC also defeated expectations: US$1,131, a 12% reduction of 1H/19.
The company has reiterated the position in its 2020 guidance: 90,000-95,000oz gold in 2020 at an AISC ≈US$1000/oz, provided COVID-19 has no adverse impact on the company. It will be interesting to see how an ore sorter can further transform these economics and act as a catalyst. Adjusted earnings of C$13.7M FOR Q4/19 are particularly impressive, especially when you consider the full-year earnings for 2019 are only C$15.9M.
RNC Minerals managed to reinforce its balance sheet in 2019, holding a strong cash position of US$34.7 million, net of a US$3 million debt repayment, and working capital of US$26.5 million.
The real promise of share price explosion comes from exploration at the HGO open-pit production pipeline. Recent drilling has created mine life extensions of the Baloo and Fairplay North open pits. RNC Minerals has identified a number of areas at HGO for further exploration: the Aquarius Project, a newly interpreted 5km structure north of Trident, as well as potential open-pit expansions to both the Mousehollow and Hidden Secret projects.
In addition to optimising its Higginsville Mill, RNC Minerals is considering its royalty arrangement with Maverix Metals at Beta Hunt, which stands at 6% on gold and 1.5% on nickel. We have no doubt Huet will deal with this in due course and in the right manner.
RNC Minerals also filed the technical report for the maiden gold mineral reserve at Beta Hunt of 306,000 ounces (3.4 Mt at an average grade of 2.8 g/t) and has produced a revised feasibility study on the Dumont Nickel-Cobalt Project.
RNC Minerals' corporate strategy and business model looks strong. Huet's leadership thus far has been equally strong. The company is moving into a clear growth phase, and there is very little to make us doubt they will deliver. Right now, a share price of c. C$0.30 looks like the market has lost its mind, and when that happens, its time for investors to think about acting.
What did you make of Paul Huet? Do you think he can drive the share price back up? How will the gold price perform for the rest of 2020? Comment below and we will respond.
Company page: http://www.rncminerals.com
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