Rambler’s Ming takes wing

The Ming copper-gold mine on Newfoundland’s Baie Verte Peninsula officially moved into commercial production on Nov. 1, and Rambler Metals and Mining (RAB-V, RMM-L) says the first 9,000 to 10,000 tonnes of copper concentrate will be shipped from the port at Goodyear’s Cove in December.

The initial six years of mine life will be based on the underground mining of Ming’s massive sulphides, which hold a reserve of 1.5 million tonnes grading 1.62% copper, 2.40 grams gold per tonne and 10.90 grams silver per tonne for 24,252 contained tonnes copper, 115,549 contained oz. gold and 525,139 contained oz. silver.

The massive sulphide zones are parallel, plunging deposits separated by 250 metres, and they remain open both up and down-plunge. But 100 metres below is a lower footwall deposit containing an indicated resource of 18.3 million tonnes grading 1.43% copper for 261,258 contained tonnes copper at a 1% copper cut-off grade. 

“It’s a much bigger deposit amenable to bulk mining,” chief executive George Ogilvie explains in a telephone interview from St. John’s, N.L. “There is close to US$3 billion in untapped potential revenue sitting in the ground in the lower footwall, and it would take the Ming mine from a six-year mine life to something approaching twenty years.”

Because the lower footwall deposit is a lower grade, it would have to be mined as a larger rate of production to get the benefits of economy of scale — probably at a rate between 3,000 and 4,000 tonnes per day, Ogilvie estimates. A recent preliminary economic assessment of the footwall zone demonstrated a net present value in excess of US$250 million and an internal rate of return of 18%, and it concluded that over the first five years, it would involve a capital investment of about US$231 million. 

With the lower footwall deposit in mind, Ogilvie and his team brought in Tinma International as a strategic investor. The privately held Chinese company holds 16% of Rambler and could become a major offtake partner in the future.    

“They’ve been involved in the copper business for three decades, but their source of copper in the past has always been second-hand scrap, and what they were finding was that getting access to scrap metal was becoming more and more difficult, and it was putting pressure on their facilities in China to find more processing material,” Ogilvie explains. “This is their first foray into a mining company with primary access to copper at the production source.”

If the footwall deposit goes ahead, Ogilvie says, it would produce between 50,000 and 60,000 tonnes of copper concentrate a year. And assuming that the concentrate grade runs at 30% copper, this would produce around 15,000 to 18,000 tonnes of contained copper metal annually, he calculates. And at US$8,000 per tonne copper, which is where the price is right now, that adds up to about US$140 million in annual revenue.

Rambler already has an offtake agreement with Transamine Trading S.A. for the first 80,000 tonnes of copper concentrate that the Ming mine’s massive sulphide zones will produce. That agreement would take care of production from the Ming mine during its first five or six years of operation. But if the company mines the lower footwall deposit, it could sign a new offtake agreement with Tinma, or renegotiate an agreement with Transamine.

“We have given ourselves the flexibility for renegotiating our copper concentrate agreement with our current partner Transamine, or a different partner, and using that as a substantial block for financing the lower footwall zone,” Ogilvie says. “Given the volatile financial markets, small companies that can be very nimble and have lots of financial opportunities available to them put themselves in a better position to get a better deal for their shareholders.”

Rambler also has the flexibility to produce either a gold doré or a copper concentrate with precious metals in response to changing market conditions and commodity prices. Now the management team is considering whether it should build a second crushing and grinding circuit to allow more flexibility in its production mix, because its current circuit processes either gold or a copper concentrate — it can’t do both at once. 

Rambler already owns a gold mill 40 km from its property that it picked up in 2009 for $3.5 million. (Ogilvie estimates the book value of the mill at the time of acquisition was closer to $30 million.) When Rambler sent ore through the mill for five and a half months last year, it produced 15,000 oz. gold and generated $25 million in revenue. “Not bad, for a company with a market cap of about $70 million,” he says.

“The Rambler orebody is so unique that if the gold price keeps rising, this copper mine with good precious metal credits (between 6 and 8 grams gold in concentrate and between 40 and 80 grams silver in concentrate) could turn into a gold mine overnight,” he maintains. “We have over 200,000 oz. gold sitting in this resource — so it’s great flexibility to have.”

If management and the board build a second crushing and grinding circuit to take advantage of that flexibility, he adds, the construction project, including permitting, could take up to 18 months.  

In the meantime, Rambler expects to strengthen its cash position through free cash flow from operations at the mine, and a portion of the free cash flow will be used to pay off the company’s $7.5-million debt owing to the Sprott Resource Lending Partnership under an existing credit facility.  

In other developments, the company recently bought a 1% net smelter return royalty (NSR) held on the mine by Ming Minerals, reducing its remaining NSR to 1.5%. This is in addition to the gold-only royalty held by Sandstorm Gold (SSL-V). In March 2010, Rambler negotiated a US$20-million financing from Sandstorm to bring the mine back into production.

Historical production from the Ming deposit is estimated at 2.1 million tons grading 3.5% copper and 2.4 grams gold (from mining carried out from surface to vertical depths of 750 metres along a 1500-metre plunge length). Mining came to a halt in 1982 when workings reached an historic neighbouring property during low copper prices.

At press time Rambler was trading at 60¢ within a 52-week range of 32.5¢ and 62¢. The company has 142 million shares outstanding.