Richmont CEO Renaud Adams: ‘Now we control our destiny’

Richmont Mines’ (TSX: RIC; NYSE-MKT: RIC) president and CEO Renaud Adams talked to The Northern Miner about the 187% reserve increase at its two gold mines. Reserves at the Island Gold mine in Ontario grew 206% to 561,700 oz., and at the Beaufor mine in Quebec they climbed 95% to 63,850 oz. 

Adams outlined the company’s 2016 drill plans and Island Gold’s potential, and explained why this year is a special one for the gold producer.

The Northern Miner: Could you comment on the combined 187% increase in reserves that was announced in early February at your two mines?

Renaud Adams: The biggest impact for us is on our flagship Island Gold mine … we put out the results of a preliminary economic assessment (PEA) to extract deeper resources in October 2015, with a full report filed in December. The results showed  tremendous potential to shift this company through the Island Gold mine — increase production and lower cash costs, and all-in sustaining costs — with the view that we are … pre-developing the mine to position it with a long life and the infrastructure in place ahead of the game for 2017–22, as per the PEA.

But the ounces used in the PEA all sat in the resource category — mostly in the inferred category. 

For us the increase not only means we have reached the highest level of reserves in the history of the company, but have also de-risked the operational aspect of Island Gold. We now have 80% of the resources of the PEA that have been confirmed and converted in the reserve category — validating the tonnes and the grades. This is huge for us and is a significant increase, but beyond the significant increase is the validation of the PEA, if you will, by converting the ounces to the reserve category.

TNM: Based on the reserves, Island Gold has a seven-year mine life, correct?

RA: Yes, based only on reserves. We will continue to be pretty aggressive in 2016 and delineate ounces, and convert them to the reserve category … we will keep increasing the life-of-mine based on reserves. But having a mine with a seven-year life — the company just never had this — it is an achievement.

TNM: Could you tell us about the current drilling programs at Island Gold?

RA: In 2015, drilling focused on delineation, converting ounces, de-risking the project and increasing the reserve base … we’re always going to delineate, and we are delineating as we speak. But the focus in 2016 is increasing the resource base … Island Gold is a deposit that has significant exploration upside. In 2016, our objective is to unlock the geological potential and grow the resource base.

We have, I would say, four priorities. Our first priority is to drill east–west and extend the deposit laterally to support a potential expansion of the production. We have already pre-developed the mine down to level 860, and by adding ounces east–west, we are just going to leverage the infrastructure and the capital invested, and increase the amount of ounces per vertical metre.

Our second priority is that we believe the deposit extends vertically up and down-plunge, below 1,000 metres. We are focused on unlocking the potential below … by adding a second phase of mining between 1,000 and 1,500 metres. We drilled holes in 2014 and 2015, and had intercepts that show potential extension of the deposit at depth.

TNM: How many metres of drilling are planned this year at Island Gold?

RA: We are starting on a pure delineation program. We have 50,000 to 60,000 metres of delineation drilling. This is to continue to build the reserve base. We have committed so far 40,000 to 45,000 metres of exploration drilling, which is a phase one for us.

TNM: Are any of those metres part of last year’s 61,000-metre program that Richmont said it would continue this year?

RA: The delineation is all new. It is the second phase of delineation. But the exploration program, up to at least the end of April, continues  from what was announced in 2015.

TNM: What’s significant about the reserve increase at the Beaufor mine in Quebec? What are your plans at the mine this year?

RA: The most important thing is that last year we had just one year in reserves, which we depleted. We now have two years of solid reserves in the mine plan. This comes mostly from a main structure called the “Q zone.” And the priority in 2016 will be to develop and mine the zone [by mid-year], and extend the mine’s life, and drill new zones.

This asset has operated for 20 years, and never really had a lot in reserves. It is a narrow vein system and it is not easy to put a five- to 10-year mine plan based on reserves. But we are focused on extending the life. Our objective is to reach three to four years of mine life in a reasonable time.

TNM: Should Beaufor’s annual production increase with developing and mining the Q zone?

RA: We’re not so much at this time focused on expansion. However, the milling and tailings facility in Quebec can accommodate three times the capacity of the Beaufor mine. That is the upside with the Beaufor mine … should we succeed with exploration and open new zones.

TNM: Is the extra capacity at the 1,200-ton-per-day Camflo mill due to the Monique mine, where stockpiles are almost depleted?

RA: It is actually over now. The stockpile is depleted. We are processing Beaufor, and using the excess capacity as we speak for toll milling. But we maintain the upside that eventually one day we could return to a higher level of production in Quebec.

TNM: How many metres of drilling are planned this year at Beaufor?

RA: At Beaufor we are committed to a minimum of 25,000 metres as we speak. We did about 30,000 last year. We will start with the first phase committing 25,000, and see how it goes.

TNM: How much cash does the company have on hand? Is it enough to fund this year’s drilling and exploration costs, and keep a healthy balance sheet?

RA: We have $51 million as of the end of December. We have a disciplined approach. The difference this year versus last year is that we have significantly advanced. We already have seven years in reserves, we have all the capital invested and the tailings are in place until 2023. The mill is already at a permitted capacity. We have the infrastructure and the development inside the [Island Gold] mine that covers the next three years … with the cash flow, with the current price environment, we can execute and maintain a strong balance sheet and fund our growth … I’m not pretending we are not going to deplete anything this year, but we are never going to put this company in a difficult financial situation, because now we control our destiny, while last year we were ‘go, go, go.’

TNM: Why should investors be interested in Richmont?

RA: For the potential … 2015 was a year where we delivered on every single metric. We demonstrated our capacity to
develop as planned. We have tremendous exploration potential. We will continue to position the Island Gold mine as one of the lowest-cost underground mines in Canada. We continue to see so much upside at this mine and at this company. We are in a good position … once we materialize the PEA, we will see the benefit. 

We have only 58 million shares out there, so the potential for shareholders on a share valuation is tremendous.

This year marks the company’s 35th anniversary. It was founded in 1981. It is also the 25th anniversary as a producer in Canada, and the 20th anniversary of our Beaufor mine as well, and we are going towards the 10th anniversary of [fully] owning Island Gold. It’s a special year for us.