Pat McKeough recently replied to an Inner Circle Member who asked about a Canadian penny mining stock that has made a big discovery.
Royal Nickel changed its name to RNC Minerals to reflect its expansion into gold and copper, as well as nickel. The company has a stake in a major nickel development project in Quebec, but a recent discovery at a gold mine in Australia caused the company’s shares to jump. That mine also yielded record output in the most recent quarter. The company is looking for ways to maximize shareholder value with this gold mine, says Pat. At the same time, he notes, the Quebec nickel project is not yet in production and is not liable to be while nickel prices remain low.
Q: Pat, could I get your opinion on Royal Nickel? Much appreciated.
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A: ROYAL NICKEL (symbol RNX on Toronto; www.royalnickel.com) operates under the name RNC MINERALS. It changed its name in 2016 to reflect its evolution into a company that develops gold and copper assets as well as nickel.
RNC shot up at the start of September 2018 after the miner revealed it had unearthed about 9,250 ounces of high-grade gold from a single dynamite blast at its Beta Hunt mine in Western Australia. The gold came from a 130-tonne cut of rock.
The find—discovered in just four days—equals more than 560 pounds (255 kilograms) of gold. Its total value is about $10 million. The rocks were situated about 500 metres below the surface in an area just three metres wide and three metres high.
The largest rock weighs about 198 pounds (90 kilograms). It’s covered in an estimated 2,300 ounces of gold worth about $3.8 million. The second-biggest piece was just under 132 pounds (60 kilograms), with an estimated 1,600 ounces of gold lodged within the quartz specimen. That gold was valued at about $2.7 million.
RNC plans to auction off some of the most impressive specimens, because collectors in North America and around the world are known to pay as such as a 50% premium for rare specimens. As well, RNC recently announced that it mined a record 31,360 ounces of gold at Beta Hunt in the third quarter of 2018, a 199% increase from same period a year earlier, and a 135% increase from the second quarter of 2018.
Penny stocks: Dumont nickel project could be the world’s fifth largest in annual production
Given the significance that the discovery has for the exploration and value of Beta Hunt, RNC has decided to consider all alternatives, including a sale of the site. Its aim is to maximize the value for shareholders. As a result, the company is no longer in exclusive discussions with a preferred bidder for Beta Hunt.
RNC’s main development project is the Dumont nickel project in Quebec. It holds a 28% stake. If the mine goes into production, the company believes it will rank as the world’s fifth-largest nickel operation in terms of its annual production. That’s right behind Canada’s Sudbury and Voisey’s Bay operations, which are the world’s third- and fourth-largest nickel operations. However, nickel prices are low right now and that will continue to hold back a production decision.
The company also has a 27% stake in the producing Reed mine in Manitoba’s Flin Flon-Snow Lake region. In addition, RNC holds 36% interest in gold explorer Orford Mining. That firm has assets in Quebec and the Carolinas.
Recommendation in Stock Pickers Digest: Royal Nickel is okay to hold, but only for highly aggressive investors.
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