By Steven Ralston, CFA
OTC:RFHRF | CSE:RFR
Renforth Resources (OTC:RFHRF) (CSE:RFR) is a junior exploration & development mining company advancing both an Open-Pit Gold Project (Parbec) and a District-Scale Nickel-Copper-Zinc Project (Surimeau), both situated in the southern margin of the Abitibi Greenstone Belt in western part of the Province of Quebec. These two and the company's other lower profile properties are wholly-owned.
The company's flagship Parbec Project is situated on Canada's most prolific geological gold structure (Cadillac Larder Lake–Cadillac Fault Zone aka the Cadillac Break), which is associated with significant gold deposits, particularly those of the O'Brien, Canadian Malartic, Sigma and Lamaque mines. An updated NI 43-101-compliant Mineral Resource Estimate on the Parbec Gold Project was completed in the first half of 2020. Another updated Resource Estimate is expected to be completed by the end of 2021. Management believes that the assay data from the 2020/2021 drilling campaign at Parbec will at least double the 2020 Resource Estimate due to a multitude of factors detailed later in this article.
The Surimeau Property is a polymetallic discovery stage project which holds the potential to host a district-scale nickel-copper-zinc resource. A small, shallow 194m drill program in late 2020 and a follow-up 3,456m 15-hole survey drill program in the spring of 2021 have revealed sub-surface occurrences of both ultramafic nickel sulfide and copper-zinc VMS (Volcanogenic Massive Sulfide) over a 5km strike (Victoria West) on the western end of a 20km geophysical magnetic anomaly. Assay results are still being received due to COVID-related laboratory processing delays.
At Surimeau, management is currently focusing on Victoria West. This fall, Renforth will be conducting a chipping/stripping/trenching exploration program and a drone-enabled aerial magnetic survey.
Nickel is a strategic raw material in the EV (Electric Vehicle) battery industry. There are growing concerns of a disruption in the supply of nickel, which is crucial to the wide-scale adoption of electric vehicles and power grids. Due to growing stainless steel production and the significant incremental demand from the adoption of EVs, the nickel industry is expected to experience significant supply shortages starting in 2023. Some companies (mining, EV battery producers and EV corporations) are expanding into and/or financing the development of the nickel resources that will be needed to implement the migration to electric vehicles.
Management's strategy is to acquire prospective mineral properties, and then through exploration & development (the company's core competencies), prove-up the assets for monetization. Management does not have an interest in pursuing the dilutive process of becoming a small-scale, producing mining company.
An example is the New Alger Property, formerly known as the Thompson Cadillac Mine Property. In January 2013, Renforth Resources acquired a 100% interest in the property, and subsequently proved-up the assets, culminating in a robust updated Resource Estimate in June 2020. On August 31, 2020, Renforth sold New Alger to Radisson Mining Resources (TSX.V:RDS) (OTC:RMRDF) for CDN$4.34 million in securities and cash plus potential future payments.
Select M&A Milestones Achieved
April 2006 JV established with Cadillac Ventures for New Alger Property
January 2013 Renforth Resources acquired 100% of New Alger Property
January 2015 Renforth acquired option to purchase 100% of Parbec Property from Globex Mining
March 2019 Renforth Resources acquired 100% of Parbec Property
August 2020 Renforth sold New Alger Property for CDN$4.34 million in securities & cash
Management's plan is to monetize the Parbec Project (after updating the Estimated Resource this year) and utilize the proceeds to prove up the company's Surimeau Property. The net proceeds would be employed to fund exploration activities at Surimeau in order to help prove up the district-scale Ni-Cu-Zn Surimeau Property. Considering the breadth of the recently completed drilling campaign at Parbec, the upcoming Resource Estimate update should deliver a significant increase in the estimated gold resource.
Management has reached out to potential buyers, the most interesting being the owners of the Canadian Malartic Mine, which has a looming ore inventory dilemma and is contiguous to Parbec with the Canadian Malartic super pit being located approximately 5km southeast of Parbec on trend with the Cadillac Break structure.
Parbec Project
The Parbec Open-Pit Gold Project is adjacent and on strike with the Agnico Eagle (NYSE:AEM) (TSX:AEM) - Yamana Gold (NYSE:AUY) (TSX:YRI) Canadian Malartic open-pit mine, Canada's largest operating gold mine. The current NI 43-101 Open Pit Constrained Resource Estimate (dated June 23, 2020) is 104,500 toz Au at 1.78 g/t in the Indicated category and 177,300 toz Au at 1.77 g/t Inferred.
In March 2021, a 15,596m drilling campaign was completed which better defined the resource within the planned pit walls and proved additional mineralization at depth and immediately adjacent to the pit through both down-dip and step-out drilling, respectively. The Parbec Project is in the latter portion of the Resource Definition stage, with an updated Resource Estimate expected later in 2021.
The Parbec property has the infrastructure to support exploration activities and mining operations: roads that offer access to the project site, green hydroelectric power lines on the property, nearby railroad facilities of the Canadian National Railway and a skilled labor pool in an established mining area with mineral processing and smelting facilities. In addition, the Trans-Canada Highway (Québec Highway 117) passes within three (3) kilometers of the property. Renforth Resources owns 100% of the Parbec Property; however, the property is subject to a 3% Gross Metal Royalty.
Recent Exploration at Parbec
Between September 2020 and March 2021, Renforth Resources conducted a drill campaign at Parbec, which ultimately was comprised of 49 drill holes for a total of 15,596m drilled. The campaign was initially composed of two programs, a fall phase with original expectations that 7,000m would be completed by the Christmas break and a 5,080m winter program to be begun early in 2021. The campaign had several components:
1) infill drilling designed to prove the continuity of gold mineralization for the resource model by targeting gap zones in prior resource model
2) drilling down dip by undercutting previous holes in order to begin to test the deposit at depth
3) twin drilling to enable the consideration of 13,000m of historic holes drilled between 1986 and 1993 in the upcoming update to the resource estimate
The number of drill holes and meters drilled exceeded plan with the fall drill program (September-December 2020) completing 27 drill holes (9,644m) and the winter program (February – March 2021) completing 22 drill holes (5,925m).
Recent Parbec Exploration Milestones Achieved
Sept. 2020 Commenced 12,070m diamond drill campaign at Parbec Gold Project
• Planned to be composed of a 7,000m fall and a 5,070m winter program
Dec. 2020 Completed 9,644m fall drill program (27 drill holes)
Feb. 5, 2021 Commenced 5,070m winter drill program at Parbec Gold Project
March 2021 Completed 5,925m winter program (22 drill holes)
Highlights of the campaign include the following Top Ten assay results, along drill hole PAR-20-105 that discovered of gold mineralization outside the existing resource model. The discovery hole is located in the Pontiac sediments to the south of the Cadillac Break.
In addition, the longest mineralized interval was drill hole PAR-20-116 with 49.6m assaying at 1.46 g/t Au, while the richest interval was PAR-20-112 with 21.45m grading at 5.57 g/t Au. However, the highest assay was a sub-interval in PAR-21-133 with 0.35m grading at 118.7 g/t, which was drilled to twin the historical hole of PAR-88-44. The long intervals have a high probability of increasing the current resource.
The assay work on the Parbec samples has been slow due to impact of COVID-19 on Canadian laboratories, which caused the company to issue assay results in tranches throughout 2021. The delay in being able to report assay results continues, though the results of only six drill holes are still pending.
Management believes that the assay data from the 2020/2021 drilling campaign at Parbec will be able to at least double the 281,800 Au toz estimate of the NI 43-101 completed last year. For reference, the October 2018 Resource Estimate was 37,224 toz Au at 3.47 g/t in the Indicated category and 656,875 toz Au at 2.3 g/t Inferred, which included historical drilling results that were not considered in the 2020 Estimate. The twinning of historical drill holes should bolster the upcoming resource estimate closer to the 2018 estimate. One also should consider that the potential impact of the down dip drilling, since the deepest point of the 2020 open pit-constrained resource is only 225m compared to commercial 400m depth of the nearby open pit at the operating Canadian Malartic Mine.
Given the results of the twin, infill and down-dip drilling, management expectations ought to be met and possibly exceeded. Once all the assay data is available, Renforth will rebuild Parbec's geological model and deliver it, along with the drilling data, for an updated Resource Estimate.
Surimeau Project
The 260-km2Surimeau District Project encompasses six areas of historic polymetallic mineral occurrences, including (from west to east) Huston, Surimau, Victoria West, Lalonde, Fouillac and Colonie, which are noted by the blue balls on the image below. Management is initially concentrating advanced exploration efforts on Victoria West, the western 5km of a 20km geological intrusive complex with high magnetic geophysical anomalies. Furthermore, a 30km trend in the north of the property hosting mineralization is highly prospective.
Select M&A Milestones Achieved
June 2020 Renforth staked 128 claims south of Malartic West and also transferred some claims from Malartic West (which included Victoria West, Lalonde and Colonie) to form the initial 70-km2Surimeau Property
Nov. 2020 Renforth staked 219 new claims to the south & acquired claims to the west (which included Huston and Surimau) expanding Surimeau to 215-km2
April 2021 Surimeau expanded from 215-km2 to 260-km2 with the addition of 81 claims to the west, including the Huston target
Over the last 15 months, management has accumulated the Surimeau claims in a cost-efficient manner through staking and acquiring a number of claims. Prior exploration efforts concentrated on assessing the potential for gold. Though assays, chip sampling and geological formations have indicated the presence of base metals, the previous owners did not pursue the potential of the occurrences of nickel, copper and zinc mineralization.
Based on historic data and the company's field work, the district-sized package hosts nickel, copper, zinc and gold occurrences, thus far identified in two mineralized systems, one approximately 30kms in length in the north and the other roughly 20kms in the central area, both of which were on the Malartic West claims that were part of the formation of the Surimeau Property. At the time, the company was aware of these two ultramafic magnetic features, including the elevated nickel and zinc occurrences situated at the east (Victoria West) and west (Colonie) of the 20km-system. During this prospecting stage, separate nickel sulfide and zinc-rich VMS systems (which are juxtaposed against each other in the same location) were identified along both mineralized arms through grab sampling on surface, particularly during the reconnaissance sampling program conducted in the summer of 2020.
Discovery Stage (Abbreviated Drill Program at Surimeau in November 2020)
Initially, management is targeting the 5km west-end of the 20km central anomaly known as Victoria West, where in November 2020, Renforth deployed a mobile, one-man, track-mounted drill to commence al drill program. The planned 1,000m program ended after 2.5-holes (194m) due to pre-mature equipment failure. However, the core samples from the first two holes (SUR-20-001 & SUR-20-002 situated roughly 220m from each other) visually demonstrated the presence of massive and semi-massive sulfides in the form of sphalerite (zinc sulfide) and chalcopyrite (copper sulfide). Assay results, which were received in 2021, confirmed the presence of nickel sulfide and other metals, in addition to copper and zinc. The hole SUR-20-003 returned values of 0.156% Ni over 13m (including 0.483% Ni over 1m) while SUR-20-001 returned 1.16% Zn and 0.132% Cu over 4.0m followed by 0.147% Ni over 7.9m.
This mere 2.5-hole drill program validated the presence of surface and sub-surface Cu-Ni-Zn mineralization and served as the breakthrough discovery which not only confirmed the presence of zinc-rich VMS system and nickel sulfide deposits, but also, importantly, confirmed that the mineralization correlated well with geophysical anomalies in historic EM surveys. Prior historic drill test holes were not situated near the geophysical anomalies (see EM image below), but were presumably based on surface visuals.
Surimeau Exploration Efforts at Victoria West
Summer 2020 Field work confirmed presence of historically identified surface mineralization
November 2020 Completed 194m (2.5 drill holes) of planned 4-hole 300m drilling program
March-April 2021 Completed 3,456m 15-hole) drilling program at Victoria West
June-July 2021 Completed 775m (4 holes) of planned 4-hole 1000m drilling program
Spring Drill Program at Surimeau (March – April 2021)
In March 2021, Renforth followed up with a 3,456m 15-hole survey drill program over 2.2 kilometers of the approximate 5km strike of the Victoria West target. All 15 holes visually demonstrated the presence of mineralization (chalcopyrite, sphalerite and pyrrhotite). The drill program proved that the mineralization associated with the EM anomaly is up to 250m in width.
The assay data also confirmed management's interpretation that the central anomaly is composed of nickel sulfide ultramafic bodies that occur coincident, and at times intermingled, with copper-zinc VMS occurrences similar to the Outokumpu deposit in eastern Finland.
In preparing for this drill program, the company relied upon historic data from exploration programs (trenching and shallow drilling) conducted between 1940 and1980, along with a high-resolution helicopter-borne geophysical survey completed in 2012 (100m line spacing flown at 40m elevation).
Summer Drill Program at Surimeau (June – July 2021)
In June 2021, management decided to accelerate the exploration of Victoria West with a 1,000m drill program in order to test for deeper intercepts of mineralization. Utilizing the drill pads prepared for the March/April program, a one-man tracked rig drilled four 300m holes at a 45-degree dip, undercutting previously completed 200m holes. All the holes intersected visible nickel, copper and zinc sulfides. The first hole (SUR-21-19) encountered the highest concentration of visible copper intersected to date while the second hole (SUR-21-20) encountered the highest concentration of visible nickel intersected to date. It is interesting that the mineralization apparently appears more robust at depth, portending that assay results, which are expected later in the fall, might be the highest yet.
Simultaneously, field prospecting was conducted targeting outcrops along the 20km central geophysical magnetic anomaly between Victoria West and Colonie, along with Lalonde (which is situated approximately 3kms north of Victoria West).
Fall Chipping & Stripping Program at Surimeau (September – October 2021)
This fall, management plans to further explore the near-surface mineralized system at Victoria West through a chipping/stripping/trenching program. The required permit was granted in September. Initially, chip samples will be extracted from outcrops, after which approximately 9,500 square meters will be stripped (see image below) and cleaned with compressed air to exposed bedrock. The exposed area will then be mapped and sampled. The program is expected to be completed prior to the opening of high-powered rifle hunting season.
Drone-enabled Airborne Magnetic Survey
In addition, this fall, management plans to conduct a drone-enabled aerial magnetic survey to aid in the planning of the next drilling program at Surimeau. The use of drone-mounted survey equipment is cost-effective method that should be able to provide tighter data (since drones can fly lower than helicopters) to help better define, and potentially discover additional, magnetic anomalies along strike.
The Nickel Industry
The nickel industry is expected to benefit from the global transition to electric vehicles (EVs) as well as from economic growth that is expected to drive increased demand for stainless steel, which is currently the largest end-market for nickel. The transition of the energy source for automobiles from fossil fuels to electricity stored in EV batteries is expected to drive an increased demand for Class I nickel, which, within the next several years, will not be able to be met by the current production capacity of existing mining operations nor by current global nickel processing capacity. Therefore, the increasing demand for EV batteries portends robust demand for nickel.
A sampling of the increase in demand being spurred by the mega-trend toward EVs includes:
• To support its EV product lines, Tesla (NASDAQ:TSLA) has built and currently operates three EV battery production facilities, two in the U.S (San Francisco and Sparks, NV) and one in China (Shanghai). Upcoming giga-factories under construction are in Berlin, Germany and Austin, TX.
• In January 2021, General Motors (NYSE:GM) announced plans to offer only EVs by 2035.
• In February 2021, Ford (NYSE:F) announced that its spending on EVs and autonomous vehicles (AVs) is planned to more than double to $29 billion by 2025.
• In December 2019, Volkswagen (Xetra:VOW) stated a corporate goal of producing 1,000,000 EVs annually year by 2023 and 1.5 million a year by 2025. Volkswagen is also targeting that 50% of its North America sales will be fully electric vehicles by 2030. In March 2021, Volkswagen announced plans to construct six battery factories in Europe by 2030 to support its EV goals.
• In March 2021, Volvo (STO:VOLV-B) made a commitment to only make and sell all-electric vehicles by 2030.
• In December 2020, the Government of Japan launched the Green Growth, which includes the goal to produce only EVs (i.e. no gasoline-powered cars) by the mid-2030s.
The number of giga-factories has grown rapidly from 17 in 2019 to 70 in 2020 to 142 in mid-2021.
According to the U.S. Geological Survey (USGS), the vast majority of economic global nickel resources (with an average 1.0% Ni or more) are generally dispersed in two types of ore deposits: laterite (approximately 60% of known deposits) and sulfide (40%) deposits. A variety of techniques are utilized to extract nickel from these ores, but typically, sulfide ores have a higher grade than laterites, and sulfide ores are easier and less expensive to process than laterites.
Nickel production is most often categorized as high-purity Class I nickel (electrolytic nickel, powders and briquettes) and Class II nickel (nickel pig iron and ferronickel). Nickel is an essential component for the manufacture of cathodes in many types of batteries used for both the Electrical Vehicle and Battery Storage segments of the battery industry; however, the nickel feedstock varies depending technology employed by battery manufacturers. Feedstock options include Class I nickel, Mixed Hydroxide Product (MHP), Mixed Sulphide Precipitate (MHP), Nickel Pig Iron (NIP) and matte intermediates, among others.
Currently, the vast majority of nickel demand is derived from the production of stainless steel and super alloys (65% and 12% of consumption, respectively) due to nickel's physical and chemical properties of a high melting point, an ability of being easily alloyed, its ductility and a resistance to corrosion/oxidation. As a result, nickel-based stainless steels and alloys are used in the pharmaceutical, petrochemical, chemical, aerospace, marine and food & beverage industries.
Lithium-ion Battery-related Demand for Nickel
Demand for rechargeable lithium-ion batteries, especially those used to power EVs and to store electric energy, particularly from renewable sources (such as solar panels and wind turbines), is expected to accelerate and become the major driving factor of incremental growth of the nickel market.
In 2021, Benchmark Minerals Intelligence, a leading market intelligence provider, estimates that lithium-ion batteries constitute a $50 billion market in 2021 and expects that market will expand to $200 billion in 2030. Consequently, Benchmark forecasts that this growing demand will increase lithium-ion battery's share of the nickel market from 2.3% in 2020 to 30% in 2030.
According to the International Nickel Study Group (INSG), global demand for nickel is expected to increase 12.0% from 2.405 million tonnes in 2019 to 2.673 million tonnes in 2021, driven by robust demand from manufacturers of stainless steel and strong sales of electric-vehicles (EVs).
Another indication of the looming shortage of nickel is the actions of producers of EV battery and energy storage batteries to lock in supply. A prominent example is Tesla, which in July 2021 entered into a long-term supply contract with BHP Billiton for Class I nickel. Tesla is also securing additional nickel supply through agreements with Prony Resources and Vale.
Environmental Sustainability and the Nickel Industry
The environmental impact of nickel mining and refining operations has come to the forefront as countries and the managements of both upstream and downstream companies focus on addressing net-zero emissions targets. Concerns range from the carbon footprint of powering mining and nickel smelting operations to the remediating the clearance of large areas of land during the mining process and sulfuric acid/the emissions of sulfur dioxide in some processes of refining nickel into intermediate products. As ecological and sustainability efforts become an increasingly significant factor in the nickel market, eco-friendly nickel for use in batteries will command a premium.
The Use of Nickel Cathodes for Electric Vehicles
Rechargeable lithium-ion batteries have become ubiquitous, powering electric vehicles (EVs) and large-scale energy storage systems. The current growth in these applications is being enabled not only by llithium but also by nickel. The expansion of these devices and systems is dependent on several attributes battery technology, namely life span, recharging time, energy capacity and the capability for rapid discharge (enables quick acceleration and rapid recharge).
Nickel Pricing
Nickel metal prices bottomed around $8,300 per tonne in early 2016 as LME stocks peaked slightly above 500,000 tonnes. LME inventories continued to decline to below 200,000 tonnes through September 2019 as some nickel mines were idled, including the Ravensthorpe Mine in Western Australia in 2017, along with reduced mine output from the Philippines. In addition, nickel consumption exceeded nickel mine supply starting in 2016 through 2019.
Nickel prices plummeted from $17,657 per tonne in September 2019 to $11,804 in April 2020 as LME inventories expanded from 157,000 tonnes to roughly 230,000. However, demand for nickel recovered in the second half of 2020 due to rising demand driven to rising EV sales, which drove the price of nickel to $18,500 in February 2021.
After a brief correction in March, nickel prices have rallied from $16,400 to over $19,100 in August as demand increased for stainless steel and EV nickel-cathode batteries. In addition, LME stock has declined from approximately 261,000 tonnes in April to roughly 189,000 tonnes in August. This increased demand that drove lower inventories is expected to stimulate higher prices of nickel in order to incentivize the development of incremental nickel projects.
Conclusion
The Parbec Project is on track to have an updated NI 43-101 Mineral Resource Estimate that will significantly increase the company's gold resource. Thereafter, management is highly motivated to monetize the Parbec in order to progress toward proving up the district-scale polymetallic Surimeau Property.
Surimeau is highly significant to Renforth Resources for three reasons. First, this breakthrough discovery could be indicative of a district-scale nickel-copper-zinc project that is geologically similar to the commercially successful Outokumpu deposit in Finland. Second, the nickel mining industry is coming into favor as nickel demand for EV batteries is projected to outstrip supply within the next five years. Importantly, nickel is more easily and much less expensively recovered from nickel sulfide than from nickel laterite ore. And third, there is a significant valuation disparity between gold and nickel sulfide junior mining companies. Any change in the perception that Renforth has transitioned from a junior gold company to a junior nickel sulfide company potentially would close that gap.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.
