Shareholders in Rubicon Minerals (TSE:RMX) (NYSE:RBY) were assured of the Vancouver-based development company’s plans for its 100 per cent owned 65,000 acre exploration ground in Ontario’s Red Lake district at the annual general meeting (AGM) in Toronto Wednesday, with president and chief executive officer Mike Lalonde emphasizing the project's many positives.
“We’re lowering risk, we’re in a politically safe jurisdiction, we’re fully permitted to 1250 tpd, the project is well advanced and advancing further every day. We have a strong record of consultation with the community at large and first nations, financial discussions on closing this funding gap are well underway and we still remain well funded relative to our peers.”
“Compared to our peers as far as timelines to production and funding gaps, we’re still not where we want to be, but compared to the pack, we’re still out front,” said Lalonde.
The lion’s share of the meeting was concerned with the Preliminary Economic Assessment (PEA) report on the company’s Phoenix Gold project in Ontario's Red Lake district, which had been released the day before the AGM. The report more than doubled indicated ounces from the levels recorded in the previous study issued in 2011.
The new study, based on an updated mineral resource, reflects 116,000 metres of additional drilling carried out since the 2011 resource estimate was issued.
Projected gold production for the life of the mine is now 2.19 million ounces, 18 per cent higher than the previous conceptual production plan, according to Rubicon's statement released Tuesday. Annual projected gold output is 165,300 ounces, which is expected to peak at 242,000 ounces in 2022.
“There’s been a substantial shift in our thinking on the resource: 116,000 additional metres went into the drilling, which is 48 per cent additional drilling on the orebody. That’s provided us more information on the resource, and it was important to get it right. You have to get the resource right to wrap a proper plan around it,” Lalonde said when taking questions from the floor, referring to the fact that the updated resource took longer than initially anticipated.
The meeting took place on a day which saw gold futures fall more than $40 on the Comex, to settle at sub $1,230 levels, a fact that was raised in the meeting, and throws into stark relief the fortuitous nature of Rubicon’s reported per-ounce costs. According to the PEA, the underground project is set for a total cash operating cost estimated at $651 per ounce, or $156 per tonne, with average all-in sustaining costs seen at $845 per ounce. Cash flow from operations, after-tax, is projected at $69 million annually.
Pre-production expenses for the project are expected to come in at $224 million, including a 20 per cent contingency, slightly higher than the prior $214 million estimate in 2011 on account of the new longhole stoping method considered in the latest study. With $118 million in working capital, Rubicon thus faces a funding gap of $106 million.
In response to a question that broached the subject of financing at the meeting, Lalonde said the company was “in discussions” in regards to raising the necessary funding, on which he couldn’t elaborate, but emphasized that the company was not looking at share dilution.
And in response to a shareholder question on the current state of play with Wabauskang First Nation, and the application for judicial review of a production closure plan related to the company's Phoenix Gold project in the region, vice president, general counsel and corporate secretary Glenn Kumoi reiterated the company view that the claims were without merit, and said that in practical terms, it made no difference to work at the site. “It’s business as usual and the project is moving forward.”
In closing, Lalonde emphasized the project upside: “We have an advanced gold project, an experienced management team and we’re lowering risk.”
On Tuesday, the CEO said that while the new results are positive, the company still believes there is room for improvement, with the current figures dubbed as conservative. Specifically, he highlighted that the economic model is "very sensitive" to grade, saying that a small increase in grade would be significant, with a 10 per cent boost leading to an almost 30 per cent increase in after-tax net present value.
Shares in Rubicon were trading up on the TSX, reaching as high as $1.32 per share from a close of $1.25 the previous day.
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