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Renforth Resources (OTC:RFHRF)(CSE:RFR) is a junior exploration & development mining company which is advancing two high-priority mining projects: the Parbec Gold Project and the Surimeau District Property. Parbec is an advanced gold project close to being monetized, which is expected to occur after its Mineral Resource Estimate is updated during 2022 while Surimeau is an early stage polymetallic (Ni-Cu-Co-Zn) project that is in the discovery & exploration stage. A stripping/trenching/channeling program at the Victoria West target, along with several drilling programs, was completed in 2021. An airborne geophysical survey is expected to be completed during 1Q 2022.
The Parbec Gold 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 Project in order to progress toward proving up the district-scale polymetallic Surimeau Property.
Management's plan is to monetize the Parbec Project, after updating the Estimated Mineral 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.
The net proceeds of any transaction would be employed to fund exploration activities at the company's Surimeau Property 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.
The Surimeau District Property 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.
Since 2020, management's focus on its Surimeau Property has sharpened, particularly the Victoria West target, a 5km polymetallic (Ni-Cu-Co-Zn) surface system located along a 20km magnetic anomaly. Exploration programs have consisted of surface sampling, trenching, channeling and drilling (5,626m).
During the fall of 2021, Renforth conducted a stripping/trenching/channeling exploration program. The channel samples demonstrated elevated nickel-cobalt values, along with segments of elevated values of copper- zinc. In December 2021, a 7-hole (1,203m) drilling program targeted parts of the stripped area where nickel-cobalt and copper-zinc mineralization had been identified during the channeling program. Assay results are pending. An aerial electromagnetic-magnetic geophysical survey is expected to be flown over the entire 20km west-east anomaly from the Victoria West target to the Colonie magnetic feature, along with the Lalonde mineralized target approximately 4km north of Victoria West.
The Surimeau Property appears to have a litany of cost advantages: polymetallic surface mineralization that can be cost-effectively accessed by roads and surface mining methods and that is located in a mine-friendly jurisdiction and near a source of green hydroelectric power. In addition, the Surimeau Property is situated about only 70km from Glencore's Horne Copper Smelter.
Historically, management has acquired prospective properties in an early stage and has proceeded to advance a mining project through the development stages by completing sufficient exploration and resource identification work such that a compelling resource estimation confirms the feasibility of commercial production. Subsequently, management seeks a financial transaction with a mining company that intends to further the advancement of the project, which may include the financing and construction an operating mine.
A recent example is that on August 31, 2020, Renforth sold the New Alger Project for CDN$4.34 million (CDN $500,000 cash and 12,000,000 shares of Radisson Mining Resources, not including a potential $1.5 million contingent cash payment). Renforth first began involved with the New Alger Project in October 2010 through an option agreement and subsequently advanced the property through many exploration efforts, including surface exploration, helicopter-borne (magnetic, VLF and AFMAG) geophysical surveys, stripping & channel sampling programs and several drilling programs. Prior to Renforth's involvement, the New Alger Project did not have an estimated mineral resource. At the time of sale, the project was estimated to contain a mineral resource of 62,600 toz Au (Indicated), along with 188,000 toz (Inferred).
Financially, Renforth Resources is conservatively managed. Expenses are limited to judicious exploration programs and corporate operating expenses. Management compensation is very reasonable. Impressively, portions of the Surimeau Property were staked by the company at a minimal cost. The company does not carry any debt.
Expected Upcoming Milestones
At the Parbec Project, management has initiated a structural study in order to identify the controls on the magnetic diorite that hosts gold. Renforth has assembled a geologist team to compile and analyze all relevant data, including the most recent assay results from the 15,569m drilling campaign completed in 2021. Once the study has been completed and followed up with additional targeted exploration, an updated Resource Estimate is expected.
At the Surimeau Property, Renforth Resources plans to conduct an aerial electromagnetic-magnetic geophysical survey over the entire 20km west-east anomaly from the Victoria West target to the Colonie magnetic feature, along with the Lalonde mineralized target approximately 4km north of Victoria West. The survey's data will be used to generate interpretation maps that will help identify and better define near-surface (up to 150m) anomalies along strike, thereby providing guidance for prospective follow-up exploration work.
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.
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 currently over $23,800 here in January 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 98,100 tonnes in January 2022t. 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.
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.
Valuation
Based on comparative analysis of junior battery metals companies in the exploration-developmental phase, an industry average price-to-book (P/B) ratio of 3.6 indicates a share price target of US$0.12
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