Rubicon (RBY/RMX.TO) Update (October 05, 2015)

by FI Fighter on October 5, 2015

in Precious Metals Updates

When it comes to junior mining stocks, well, what can I really say? These shares are volatile so it’s extremely important for a speculator to stay on top of the latest news and developments. Just recently, I recommended Rubicon Minerals (RBY/RMX.TO) as a Top Pick, and this morning, the stock is down ~40% on some very bad news. Not looking so good now…

So, the timing couldn’t be any worse… Another reason why it’s prudent to purchase these shares in tranches and to spread out any individual risk by buying into a basket of stocks! In this case, Rubicon’s Phoenix Gold Project is an advanced-stage development with production scheduled for Q1 2016. Despite that fact, mistakes and problems can and still do occur…

Here’s a major update today, from Seeking Alpha:

Screen Shot 2015-10-05 at 6.51.20 AM

From Rubicon Minerals:

Rubicon Minerals Corporation (TSX:RMX)(NYSE MKT:RBY) (“Rubicon” or the “Company“) has been ordered by the Ministry of Environment and Climate Change (“MOECC“) on September 30, 2015 to temporarily suspend mill operations at the Phoenix Gold Project (the “Project“) to treat elevated ammonia levels, discharge sufficient water from the tailings management facility (“TMF“), and to upgrade the TMF, under specific timelines. The initial order received on September 8, 2015 ordered Rubicon to commission new interim and permanent ammonia treatment systems for the effluent held in its TMF and discharge a portion of treated effluent. It also ordered Rubicon to undertake other operational and reporting obligations, including construction upgrades to the TMF. The initial order was amended by the MOECC on September 14, September 18, and September 30, 2015 to allow the Company time to upgrade its facilities in order to discharge treated effluent. 

The Company has been utilizing alternative technologies to address the ammonia levels in the TMF. Rubicon has made progress with respect to treating the effluent and believes it can resume mill operations in a timely manner. Rubicon discharged an initial volume of treated effluent on September 30, 2015. 

At the current time, underground development, construction and trial stoping continue uninterrupted. 

“The Rubicon Management team and the Board of Directors take these matters seriously and are committed to operating at the highest environmental standards,” stated Michael Winship, interim President and Chief Executive Officer of Rubicon. “We have made progress towards treating the elevated ammonia levels in the effluent and have made it a priority to resolve these issues in a timely manner. Our underground operations continue uninterrupted during this time and we hope to resume mill operations shortly once we have met all the requirements outlined by the MOECC.”

I also mentioned the importance of following the right management team, which is why I chose to speculate in the likes of: Bob Quartermain, Keith Neumeyer, and Mark O’ Dea. As in pertains to Rubicon Minerals, I didn’t know much about CEO Michael Lalonde at the time, but I gave management the benefit of the doubt in part because of their past extensive experience working in the Red Lake Gold District. Further, because the Phoenix Gold Project was so close to production, I wrongly assumed that any major hurdles remaining had already been cleared…

When Mr. Lalonde was first hired on as Rubicon’s CEO, it appeared to not only be the correct move, but also the “last piece of the puzzle”:

From Mineweb (April 30, 2012):

As it grows from junior explorer to junior gold miner Rubicon Minerals (TSX: RBY) pulled a deeply experienced mine operator away from Goldcorp’s upper echelons to take its top position.

Rubicon said Monday that Goldcorp’s director of underground mining, Michael Lalonde, was coming on board to take over as president and CEO.

He replaces David Adamson who has moved Rubicon from discovery through development, most recently raising some C$200 million to build Rubicon’s flagship Phoenix gold project in Ontario’s Red Lake gold district.

It is a transition that can be awkward for a junior-miner-to-be, sometimes for lack of experienced managers on the market or alternatively for recalcitrant incumbents loathe to let upper positions go. Not so for Rubicon.

In Lalonde Rubicon gets an old hand at running underground mines such that Phoenix will be and one of the top managers operating in the Red Lake district. Among Lalonde’s credits are running Goldcorp’s Red Lake mine, known for its stellar grades over 20 g/t gold, and overseeing development of its Cochenor gold project, also in the Red Lake district. 

Outgoing President and CEO David Adamson will hold onto the CEO title for six months while Lalonde learns the ropes at Rubicon and will then take over the chairman position on Rubicon’s board.

In an exit interview Adamson told Mineweb that leading Rubicon has been a matter knowing your strengths and surrounding yourself with people that complimented your weaknesses. 

Lalonde has “all the pedigree that is necessary to lead the company,” Adamson said. Lalonde, he said, knows the Red Lake district backwards and that it was time for an “operative man” to take command.

TD Securities analyst Daniel Earle commended Adamson for making the move. 

“Tremendous credit must be given to David Adamson in our view,” Earle said in a note to clients. “We initiated coverage of Rubicon Minerals in mid-2008 after the discovery of the F2 gold system (at Phoenix) was made in March of that year following a decade or so of exploration under his leadership in the Red Lake camp. In our experience, David has always acted in the best interests of all shareholders and we believe this is another clear example of that.”

Earle said Lalonde was joining Rubicon at a “crucial time” and brought “significant technical and development experience and leadership.”

For Lalonde, coming with his Red Lake background, the Phoenix gold project will be familiar territory. It is planned as a high-grade, 1,250-tonne-per-day underground mine with life of mine production to be around two million ounces over a dozen years. 

With financing in place, and construction well underway, production days are not far off for Rubicon. And as Adamson put it, Lalonde is the “last piece of the puzzle.

 

Turns out, that was a mistake.

At this time, Mr. Lalonde has been replaced as CEO and Michael Winship has been installed as interim President and CEO.

Here’s an overall summary:

Summary Effect of the Orders

The net effect of the orders is to temporarily suspend mill operations and the discharge of mill process wastewater to the TMF until the interim ammonia treatment system can be commissioned and proven effective to the MOECC’s satisfaction. Based upon the current advice of our engineering consultants, this process is expected to take two-to-four weeks. The Company’s engineering consultants are also reviewing the water balance of the TMF and there is the potential that the required discharge of treated effluent could be significantly lower than 140,000 m3, due to low precipitation during the recent months and other factors. The Company is required to meet its discharge obligations no later than November 30, 2015. Rubicon will provide additional updates with respect to the progress of its activities. 

Underground Activities and Trial Stoping Continue Uninterrupted 

All underground development, construction, and trial stoping activities are continuing during the suspension of mill operations. Mineralized material from trial stoping will be stockpiled on surface in anticipation of the resumption of mill activities. Underground development and construction activities continue and the Company will provide a Project update, including the results of the trial stoping, within the coming weeks.

 

We’ll see how this story unfolds over the upcoming months…

 

Full Disclosure: I am long RBY. I am HOLDING shares for now.

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