Canada’s Royal Nickel Corp (RNX.TO), capitalizing on discount asset prices as commodity markets swoon, announced two cash and stock acquisitions on Monday that transform the mine developer into a cash-generating nickel, copper and gold producer.
Royal Nickel Chief Executive Mark Selby said the company will acquire a 67 percent stake in Australia’s privately-held Salt Lake Mining Pty Ltd, in a deal worth $7.7 million, and 100 percent of Vancouver-based VMS Ventures Inc (VMS.V), in a separate transaction worth $11.4 million.
Salt Lake Mining owns the Beta Hunt Mine, a low-cost nickel and gold mine in Western Australia. VMS’s main asset is a 30 percent stake in Reed Mine, a Manitoba copper mine that is 70-percent owned and operated by HudBay Minerals (HBM.TO).
“When you’re close to cycle lows is the time to be picking up the assets. You never know for sure when you’re at the bottom, but I think we’re pretty close,” Selby said.
“We’re basically picking these things up for a fraction of the cost to put them into production.”
In 2015, production from Beta Hunt Mine and a 30 percent stake of Reed Mine totaled approximately 4,000 tonnes of nickel, 4,000 tonnes of copper, and 3,300 ounces of gold.
In 2016, combined production is estimated at 3,500-4,500 tonnes of nickel, 4,000-4,500 tonnes of copper, and 35,000-45,000 ounces of gold, as Beta Hunt ramps up gold production.
Royal Nickel expects to announce more such modest deals, Selby said.
“It’s these markets that create opportunities,” he said. “Picking up assets close to the bottom is one of the ways to really create value for shareholders.”
Toronto-based Royal Nickel, which expects a nickel supply deficit to emerge later this year, is developing the new Dumont mine in Québec.
Project finance efforts will resume when nickel prices move above $5 a pound, Selby said. The price of nickel on Friday was $3.88 a pound.
Dumont is expected to produce 33,000 tonnes annually for the first five years, and 54,000 tonnes per year thereafter, with a mine life of more than 30 years.
Update: Royal Nickel has received royalty and equity financing from New York-based private equity firm Orion Mine Finance. This includes $12.4 million in financing announced in June 2015.
(Reporting by Susan Taylor; Editing by Alan Crosby)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of VMS Ventures Inc