He looked down and realized he was standing on a large gold stone, and that there were coarse bits of gold and boulders strewn everywhere.
Regardless of any future payout — and there will be one — the discovery has already changed the trajectory of the company that up to then was primarily a struggling nickel miner. It has allowed it to pay down a crippling debt load, sent its stock and market value soaring nearly tenfold, and provided enough cash to embark on an ambitious drill program to test how large the gold vein it stumbled into really is.
Small, a fourth-generation miner whose first job was working in a gold mine in Timmins, Ont., where he grew up, said he had never seen anything like the find on Sept. 2 — Father’s Day in Australia — at the Beta Hunt Mine 600 kilometres east of Perth.
More than a month later, the finest gold slabs are on display in the Perth Mint — at least, for the moment. Soon, they will travel to Asia on the first leg of a global tour that RNC Minerals is putting together to drive up interest among collectors and museums that pay a premium for such large specimens.
In total, the company believes it will obtain around $50 million for the haul.
But there is some concern about whether the score is really the tip of the iceberg, or just a lucky strike.
You just don’t find those concentrations of gold. It’s very rare, it’s very rare,
Pierre Vaillancourt, a mining analyst at Haywood Securities Inc.
“Look, you just don’t find those concentrations of gold,” said Pierre Vaillancourt, a mining analyst at Haywood Securities Inc. with a background in geology and finance. “It’s very rare, it’s very rare.”
But he added: “As spectacular as the find is, it only covers a very small area. Most geological professionals that I talk to are not believers. They say these kinds of things happen in this district, and they’re very localized and you’re not going to get much more.”
Mark Selby, chief executive of RNC Minerals, won’t hear of the idea that the find is an anomaly.
“I must have done some good things in a past life,” he said, “to have this much good luck in this life.”
Just weeks earlier, executives from another Canadian mining company had flown down to Australia and toured the Beta Hunt mine as due diligence before buying it.
“I told those guys that there’s $280 million of gold to be found,” said Small, who guided their tour. “I’ve been saying that from day one.”
Every five weeks or so, he flies from his home in Sudbury, Ont., to a remote southwestern corner of Australia. From the airport, he drives two hours through the rugged Australian outback, passing kangaroo roadkill and a series of open pit gold mines, including the so-called Super Pit, on the way,
Compared to those mines, the largest of which produces close to 850,000 ounces of gold per year, Beta Hunt’s annual production of around 60,000 ounces looks puny, especially considering it churns through 2,000 tonnes of rock per day.
Small shrugs off the open pit mines as “big sandboxes,” whereas underground mining puts the workers in contact with the earth and rock they are blasting.
“You’re intimately involved with the ground,” he said about underground mines. “I would stand up in front of the crew for about a year, and say, ‘We are building the largest underground mine in Western Australia. We just don’t know it yet.’”
In reality, RNC for most of 2018 was desperately trying to sell Beta Hunt, even though Small — an engineer by training — thought he had pieced together a geological theory to explain why a motherlode of gold lurked inside the mine.
I must have done some good things in a past life, to have this much good luck in this life
Mark Selby, CEO, RNC Minerals
But gold wasn’t on Selby’s mind at the time. RNC bought the mine in 2016 — when the company was still called the Royal Nickel Corp., the name it still trades under on the Toronto Stock Exchange — because it was a nickel mine, and the company was interested in developing nickel projects.
Even though the company knew there was gold just beneath the nickel zone, the mine quickly proved to be a liability. RNC had assumed about US$10 million in debt from the previous owner as part of the purchase, Selby said.
By the end of last year, the company was having a hard time coming up with the cash to service its debt.
Vaillancourt, the mining analyst, said he made a table of RNC’s debt payments and other liabilities, and quickly realized they seemed never-ending.
“We had balance sheet problems,” Selby said.
This summer, Selby thought he had found a buyer for Beta Hunt. But August, the month shareholders were told the deal would close, came and went without a sale.
The buyers had visited the mine, and Small said he had given them access to all the data they could have possibly wanted. It wasn’t quite clear to Selby what the hold-up was.
And then, out of the blue at 3 a.m. on Sept. 3 — after Small and his team had collected the gold, washed it down and hired a security firm to take custody of it — Selby stumbled out of bed to use the bathroom, and saw a new email from Small on his phone. He opened it to find pictures of the gold strike.
“I almost had my own Wikipedia entry for biggest chump in the mining industry,” Selby said.
He can’t rationalize how the planned sale — which would have been at a price below the value of the gold found on Father’s Day — dragged on so long, except as some type of karmic retribution.
“In a past life, I must have been a cockroach and they were the person who stepped on me,” he said.
These are the kind of discoveries that when you get into mining you hope to do
Within weeks the company had pulled out enough gold to pay down its entire $18 million in debt, according to Selby, and it now has cash on hand to embark on an ambitious drill program to prove that the so-called Father’s Day vein, named after the date of its discovery, wasn’t a fluke.
The company is also going to pursue a listing in Australia to add to its TSX one, so that it can raise money for exploration without having to compete with cannabis and cryptocurrency companies in Canada.
RNC still wants to develop a nickel mine in Quebec, but Selby is under no illusions about why his stock jumped to 89 cents in September from less than 10 cents in August.
The reason is gold, he said, and that’s where the bulk of the company’s value comes from.
It’s a sharp pivot from Selby’s strategy of the past few years, during which he made dozens of trips to Asia seeking partnerships with battery companies for his nickel mine, and trying to determine whether the nickel pig iron roasters in Asia could process North American nickel concentrates.
But Vaillancourt said the company has its work cut out for it if it thinks finding huge amounts of gold will be easy.
“After the big discovery, reality sets in,” he said, “and they have to roll up their sleeves and do a really disciplined systematic study to see what they have.”
Keiko Hattori, a professor at the University of Ottawa’s Department of Earth and Environmental Sciences, said every so often the world hears about a great gold discovery.
“Just because it’s concentrated in one place does not necessarily mean that this will extend for one kilometre,” she said.
Selby remains undeterred.
“I had a subscription to the Northern Miner when I was nine years old,” he said. “These are the kind of discoveries that when you get into mining you hope to do.”
He added, “It’s a little bit of science and a little bit of luck.”