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Rubicon announces capital shortfall, increased mineral resource

By Lindsay Briscoe

Rubicon Mineral Resources’ updated preliminary economic assessment (PEA) indicates, on the one hand, a $100 million shortfall in project capital and, on the other, a 111 per cent increase in mineral resources.

“When current working capital of $118 million is taken into account, there is a shortfall in required project capital of approximately $106 million,” the company printed in a June 25 statement. “Rubicon is currently in negotiations with third parties in an attempt to secure non-equity funding of the shortfall. To assist in the evaluation of funding alternatives, the Company has entered into financial advisory agreements with two investment banking firms.”

When questioned how confident Rubicon is that investors would be willing to help finance the project given current market conditions including the continual slump in gold prices, the company’s chief financial officer Allan Candelario said they are confident they can secure the funding and are evaluating non-equity alternatives.

He added: “Current market conditions have not impacted the construction of our project, however, if the gold prices continue to soften, we will evaluate the situation and make a decision on what is the best way forward.”

Michael A. Lalonde, Rubicon’s President and Chief Executive Officer, added that the company is very pleased with the update which he says demonstrates that the Project has the ability to generate strong cash flow.

“The updated mineral resource estimate exhibits significant improvement in continuity and greater horizontal thickness over the previous mineral resource estimate, making it easier to plan and schedule future potential mining.”

Capital Cost Summary
$millions
Pre-production capital
Mill $94.5
Surface infrastructure $42.7
Underground development $42.7
Shaft, underground infrastructure, and mobile equipment $15.7
Other development (pre-production stope development) $27.7
Royalty purchase of 0.5% NSR $0.7

Total pre-production capital, on a go-forward
basis (including 20% contingency) $224.0

Sustaining capital $425.7

Total project capital $649.

Operating Cost Summary

Cash operating cost components
In stope mining cost Per ounce: $113  Per tonne: $27
Underground utilities Per ounce: $52 Per tonne: $13
Underground services Per ounce: $24 Per tonne: $6
Material handling Per ounce: $37 Per tonne: $9
Surface, general and administrative Per ounce: $128 Per tonne: $30
Processing Per ounce: $84 Per tonne: $20
Lateral operating development Per ounce: $76 Per tonne: $18
Vertical operating development Per ounce: $7 Per tonne: $2
Pre-production lateral development Per ounce: $85 Per tonne: $20
Pre-production vertical development Per ounce: $23 Per tonne: $6

Total cash operating cost before royalties Per ounce: $629 Per tonne: $151
Royalty (1.5%) Per ounce: $22 Per tonne: $5

Total cash costs Per ounce: $651 Per tonne: $156
Sustaining capital cost Per ounce: $194 Per tonne: $47

All-in sustaining cash cost Per ounce: $845 Per tonne: $203

Production and development update

Despite plans to reach 610 m in the first phase, the shaft has already been sunk to 670 m and could go to 710 m. Lalonde says the plan is still to reach 1,400 m in the second phase of shaft-sinking.

“We have 166,000 metres of additional drilling so we certainly have a lot more confidence in the resource,” he added.

The completion of the shaft loading pocket at 680 m as well as the delivery of the SAG and ball mill are expected by the third quarter of 2013 with an average throughput of 1,900 tonnes per day. An extra ball and pebble mill will be added later on to increase throughput. Mill commissioning and production are set for the second half of 2014.

Average annual gold production is expected to reach 165,300 ounces. Annual production is expected to peak at 242,000 in the year 2022 at which point the company plans to upgrade the shaft, install a larger hoisting plant and move to larger skips.

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