MOTHER­LODE OF GOLD OR FLUKE?

Once-fail­ing miner casts aside doubters as it em­barks on am­bi­tious drill pro­gram

The London Free Press - - FP LONDON - GABRIEL FRIED­MAN

They say these kinds of things hap­pen in this dis­trict, and they’re very lo­cal­ized and you’re not go­ing to get much more.

TORONTO — Kevin Small knew some­thing was up, which was why he was driv­ing a pickup truck into the dark abyss of an Aus­tralian un­der­ground mine, oc­ca­sion­ally swerv­ing into turnouts to dodge 55-tonne trucks haul­ing giant loads of rock.

A team of his se­nior col­leagues had sum­moned Small, head of Toronto-based RNC Min­er­als Corp.’s Beta Hunt Mine, for rea­sons they de­clined to share over the ra­dio sys­tem that ev­ery­one in the mine used.

Af­ter 15 min­utes, he ar­rived at his des­ti­na­tion, about 500 me­tres be­low the sur­face. Three col­leagues stood mar­vel­ling at a rock face that had been blasted open. Huge rib­bons of gold streaked the sur­face and there was more gold ly­ing on the floor than the en­tire mine had pro­duced in months.

Small saw a wedge of gold leaf nearly an inch thick, dan­gling from the rock face and yanked on it. “At first, it wouldn’t budge, but slowly you start to bend it and it came off in my hand,” he said. “It was like a plate of gold. I couldn’t be­lieve it was that thick. Nor­mally you don’t see gold get­ting that thick.”

He looked down and re­al­ized he was stand­ing on a large gold stone, and that there were coarse bits of gold and boul­ders ev­ery­where.

Re­gard­less of any fu­ture pay­out — and there will be one — the dis­cov­ery has al­ready changed the tra­jec­tory of the com­pany that up to then was pri­mar­ily a strug­gling nickel miner. It has al­lowed it to pay down a crip­pling debt load, sent its stock and mar­ket value soar­ing nearly ten­fold, and pro­vided enough cash to embark on an am­bi­tious drill pro­gram to test how large the gold vein it stum­bled into re­ally is.

Small, a fourth-gen­er­a­tion miner who grew up in Tim­mins, Ont., said he had never seen any­thing like the find on Sept. 2 — Father’s Day in Aus­tralia — at the Beta Hunt Mine 600 kilo­me­tres east of Perth.

More than a month later, the finest gold slabs are on dis­play in the Perth Mint. Soon, they will travel to Asia on the first leg of a global tour that RNC Min­er­als is putting to­gether to drive up in­ter­est among col­lec­tors and mu­se­ums that pay a pre­mium for such large spec­i­mens.

In to­tal, the firm be­lieves it will get around $50 mil­lion for the haul. But there is some con­cern about whether the score is re­ally the tip of the ice­berg, or just a lucky strike.

“Look, you just don’t find those con­cen­tra­tions of gold,” said Pierre Vail­lan­court, a min­ing an­a­lyst at Hay­wood Se­cu­ri­ties Inc. with a back­ground in ge­ol­ogy and fi­nance. “It’s very rare.”

But he added: “As spec­tac­u­lar as the find is, it only cov­ers a very small area. Most ge­o­log­i­cal pro­fes­sion­als that I talk to are not be­liev­ers. They say these kinds of things hap­pen in this dis­trict, and they’re very lo­cal­ized and you’re not go­ing to get much more.”

Mark Selby, chief ex­ec­u­tive of RNC Min­er­als, won’t hear of the idea that the find is an anom­aly. “I must have done some good things in a past life,” he said, “to have this much good luck in this life.”

Just weeks ear­lier, ex­ec­u­tives from an­other Cana­dian min­ing firm had flown down to Aus­tralia and toured the Beta Hunt mine as due dili­gence be­fore buy­ing it.

“I told those guys that there’s $280 mil­lion of gold to be found,” said Small, who guided them. “I’ve been say­ing that from day one.”

Ev­ery five weeks or so, he flies from his home in Sud­bury, Ont., to a re­mote south­west­ern cor­ner of Aus­tralia. From the air­port, he drives two hours through the rugged out­back, pass­ing a series of open pit gold mines, in­clud­ing the so-called Su­per Pit, on the way.

Com­pared to those mines, the largest of which pro­duces close to 850,000 ounces of gold per year, Beta Hunt’s an­nual pro­duc­tion of around 60,000 ounces looks puny, es­pe­cially since it churns through 2,000 tonnes of rock per day.

Small shrugs off the open pit mines as “big sand­boxes,” whereas un­der­ground min­ing puts the work­ers in contact with the earth and rock they are blast­ing.

“I would stand up in front of the crew for about a year, and say, ‘We are build­ing the largest un­der­ground mine in Western Aus­tralia. We just don’t know it yet.’”

In re­al­ity, RNC for most of 2018 was des­per­ately try­ing to sell Beta Hunt, even though Small — an en­gi­neer by train­ing — thought he had pieced to­gether a ge­o­log­i­cal the­ory to ex­plain why a mother­lode of gold lurked in­side the mine.

But gold wasn’t on Selby’s mind at the time. RNC bought the mine in 2016 — when the com­pany was still called the Royal Nickel Corp., the name it still trades un­der on the Toronto Stock Ex­change — be­cause it was a nickel mine.

Even though the com­pany knew there was gold just be­neath the nickel zone, the mine quickly proved to be a li­a­bil­ity. RNC had as­sumed about US$10 mil­lion in debt from the pre­vi­ous owner as part of the pur­chase, Selby said.

By the end of last year, the com­pany was hav­ing a hard time com­ing up with the cash to ser­vice its debt.

This sum­mer, Selby thought he had found a buyer for Beta Hunt. But Au­gust, the month share­hold­ers were told the deal would close, came and went with­out a sale.

Small said he had given the buy­ers ac­cess to all the data they could have pos­si­bly wanted. It wasn’t quite clear to Selby what the holdup was. And then, out of the blue at 3 a.m. on Sept. 3, Selby stum­bled out of bed to use the bath­room, and saw a new email from Small on his phone. He opened it to find pic­tures of the gold strike.

He can’t ra­tio­nal­ize how the planned sale — which would have been at a price be­low the value of the gold found on Father’s Day — dragged on so long.

Within weeks the com­pany had pulled out enough gold to pay down its en­tire $18 mil­lion in debt, ac­cord­ing to Selby, and it now has cash on hand to embark on an am­bi­tious drill pro­gram to prove that the so-called Father’s Day vein, named af­ter the date of its dis­cov­ery, wasn’t a fluke.

The firm is also go­ing to pur­sue a list­ing in Aus­tralia to add to its TSX one, so that it can raise money for ex­plo­ration with­out hav­ing to com­pete with cannabis and cryp­tocur­rency firms in Canada.

RNC still wants to de­velop a nickel mine in Que­bec, but Selby is un­der no il­lu­sions about why his stock jumped to 89 cents in Septem­ber from less than 10 cents in Au­gust. The rea­son is gold, he said, and that’s where the bulk of the com­pany’s value comes from.

It’s a sharp pivot from Selby’s strat­egy of the past few years, dur­ing which he made dozens of trips to Asia seek­ing part­ner­ships with bat­tery firms for his nickel mine.

But Vail­lan­court said the com­pany has its work cut out for it if it thinks find­ing huge amounts of gold will be easy. “Af­ter the big dis­cov­ery, re­al­ity sets in,” he said, “and they have to ... do a re­ally dis­ci­plined sys­tem­atic study to see what they have.”

Selby re­mains un­de­terred. “I had a sub­scrip­tion to the North­ern Miner when I was nine years old,” he said. “These are the kind of dis­cov­er­ies that when you get into min­ing you hope to do.”

He added, “It’s a lit­tle bit of sci­ence and a lit­tle bit of luck.”

COUR­TESY KEVIN SMALL

Kevin Small, head of Toronto-based RNC MIn­er­als’ Beta Hunt Mine, pulls on a chunk of gold at the nickel miner’s prop­erty in Western Aus­tralia. The dis­cov­ery, seen as “very rare” by ob­servers, has helped the firm turn around its for­tunes, dec­i­mat­ing its debt and lift­ing its stock.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.