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March 15, 2019 Initiating Coverage

Matthew O’Keefe Associate: Michael Wichterle matthew.o’[email protected] [email protected] (416) 849-5004 (416) 849-5005

Sales/Trading — Toronto: (416) 363-5757, (866) 442-4485

See disclosure and a description of our recommendation structure at the end of this report.

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Company Profile: RNC is junior gold producer and base metal developer. Its principal assets are the Beta Hunt gold mine in Western Australia and a 28% stake in the world class Dumont Nickel-Cobalt Project located in the Abitibi mining camp in Quebec.

RNC MINERALS CORP. Come for the Gold, but Stay for the Nickel

INVESTMENT THESIS

We are initiating coverage of RNC Minerals with a Buy rating and $1.20/shr target price. The Company owns and operates its Beta Hunt gold mine in Western Australia and holds a 28% stake in the Dumont Nickel-Cobalt Project in Quebec, Canada. Beta Hunt has some of the highest grade gold zones in the world and RNC is pursuing more targets under a new geological framework. The Dumont project is one of the world’s largest undeveloped and permitted nickel and cobalt projects.

VALUATION

We apply a sum-of-parts NAV approach in valuing RNC including 1.25x NPV5% for Beta Hunt and 0.25x NPV8% for the Dumont Nickel-Cobalt project. The stock offers good upside potential trading at 0.45x our NAV and target price. We expect the stock to rerate higher as the Company releases results from its ongoing exploration drill program and with the next discovery of high grade specimen gold zones. It also carries significant leverage to stronger nickel and gold prices.

HIGHLIGHTS

▪ Growing Gold Producer: The Beta Hunt Mine produced 74koz of gold in 2018 and is gearing up for over 100koz annually from 2020 with additional upside from specimen gold discoveries.

▪ Specimen Gold All Over the Place: The 2018 discovery of specimen gold at Beta Hunt delivered ~31koz of gold from just 130t of material. This is driving a new exploration model and we expect more discoveries across the property.

▪ Nickel Exposure Too: The Dumont Nickel-Cobalt Project is a rare, Tier 1, shovel-ready nickel sulphide project located in pro-mining Quebec, Canada. It will produce 90Mlbs of nickel, 4.0M lbs of cobalt, and 19,000oz of PGMs in concentrate annually. At US$8.00/lb nickel, we see the project generating an after-tax NPV8% of $1.55B and an IRR of 18.2%

▪ Catalyst for 2019: Upcoming catalysts for Beta Hunt include drill results from 40,000m program (ongoing), a new resource and the restart of mining (H2/19). Also, an updated Feasibility Study on Dumont Nickel (Q2/19).

Recommendation: BUYSymbol/Exchange: RNX-TSXSector: Metals & MiningAll dollar values in C$ unless otherwise noted.Current price: $0.53

One-year target: $1.20

Target return: 126%52-week Range: $0.07 - $1.18

Financial SummaryMarket Cap ($M) $248.4Cash on hand ($M) $10.0Debt ($M) $0Basic Shares O/S (M) 468.6Fully Diluted Shares O/S (M) 512.2Avg. Weekly Volume (k) 938

2018E 2019E 2020E 2021EGold Produced (koz) 51.6 37.0 102.6 107.0Cash Cost (US$/oz) $1,120 $756 $778 $810AISC (US$/oz) $1,307 $939 $824 $846EPS ($0.04) $0.02 $0.09 $0.08CFPS $0.00 $0.02 $0.09 $0.09

Free CFPS ($0.01) ($0.00) $0.08 $0.08

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mailto:[email protected]

RNC Minerals Corp. March 15, 2019

Matthew O’Keefe, (416) 849-5004 2 of 20

COMPANY OVERVIEW

RNC is junior gold producer and base metal developer. Its principal assets are the Beta Hunt gold mine in Western Australia and a 28% stake in the world class Dumont Nickel-Cobalt Project located in the Abitibi mining camp in Quebec. The company is led by President, CEO and Director, Mark Selby who has over 20 years experience in finance and corporate development with various companies, including Quadra Mining and Inco Limited. Its experienced Board is led by Chairman Paul Huet, former CEO of gold producer Klondex Mines and Lead Director Scott Hand, former head Chairman and CEO of Inco.

In Q3/18 the Company made headlines as mining at Beta Hunt intersected a zone of spectacular specimen gold at the Father’s Day Vein discovery (Exhibit 1) which delivered more than 25koz of gold from an area the size of a small room. The discovery and resultant cash flow allowed RNC to pay down its debt, and embark on much needed exploration program aimed at i) increasing and upgrading the resource at Beta Hunt and ii) following its newly defined geological model to target and drill more high grade specimen gold zones. It has also stepped up development which should allow production to increase significantly over the next 24-months.

Exhibit 1: Beta Hunt Coarse “Specimen” Gold

Source: RNC Minerals

The Company currently has has ~468.6 common shares outstanding and ~5120.2M on a fully diluted basis. Upon completing an equity issue in December 2018, the Company raised gross proceeds of $9.15M at $0.46/shr and has estimated cash on hand of $10M. The stock is widely held with management and Board holding ~2.5%. The single largest shareholder is billionaire mining investor Eric Sprott with 10.3%.



THE BETA HUNT GOLD MINE

Mine Overview: The Beta Hunt Mine is a low-cost gold mine located in the prolific Kambalda mining district about 600 km east of Perth, Western Australia (Exhibit 2). The Kambalda mining district in Western Australia is a long-established major mining centre with excellent existing infrastructure, a skilled local workforce, and several nickel and gold processing mills (Exhibit 3).

Exhibit 2: Beta Hunt Location Map


The Beta Hunt mine was discovered in 1966 as a nickel prospect producing 153,500 tonnes of nickel through 1998. It passed through several hands ultimately ending up with Gold Fields Ltd (GFI-JSE, not covered) where it was placed on care and maintenance and acquired by Salt Lake Mining (SLM, private) in 2013 for A$10M after securing gold mining rights from Gold Fields. The mine restarted nickel production in 2014 and began gold production in November 2015. The mine decline and workings at Beta Hunt are well-developed (the deepest point ~800 m below the portal) running along the length of the deposits and parallel to the controlling structures (Exhibit 4). In 2016 RNC acquired SLM for a total of 56.8M RNC common shares and C$2.5 M in cash. RNC stopped nickel production in Q3/18 and continues to focus on ramping up gold production. The mining tenements on which the Beta Hunt Mine continue to be held by Gold Fields and RNC operates the Beta Hunt Mine by virtue of a sub-lease agreement.



Exhibit 3: Google Maps Image of Beta Hunt Area


Exhibit 4: Extensive Underground Workings at Beta Hunt & Major Zones




Reserves & Resources: The gold resource as at December 31, 2017 at Beta Hunt is 2.353Mt grading 3.2g/t (Indicated) and 2.040Mt grading 3.2g/t (Inferred). The bulk of this is in in the Western flanks and in the A Zone shears. The ongoing 40km+ drill program should increase the resource considerably.

Exhibit 5: Gold Resource at Beta Hunt


Exploration Upside: The Beta Hunt mine is somewhat unique with the rare feature of hosting both nickel and gold resources in adjacent discrete mineralized zones (Exhibit 4). Geologically, it sits within in a sequence of mafic/ultramafic and felsic rocks on the southwest flank of the Kambalda Dome. Nickel mineralization is hosted mainly by altered ultramafic rocks while gold mineralization is confined to the Lunnon Basalt below the ultramafic contact. Gold mineralization occurs mainly in three broad, steeply dipping, north-northwest striking quartz vein systems; A Zone, the Western Flanks and Fletcher/Beta (Exhibit 6). These vein systems are interpreted to be the channelways for rising ore fluids, with the interaction with iron rich basalt and sediments causing gold deposition. Infill drilling of these shears along strike and down dip is the main focus of the current delineation program and will drive resource expansion. The Father’s Day vein and other ultra-high grade specimen gold discovery zones have recently been linked to the intersection of these shears with a layer of pyritic sediment that is traceable across the property and is a second focus of the ongoing drilling with potential to add significant ounces from very small volumes.

Exhibit 6: Cross Section Showing Major Geological Features


Category

Tonnes Grade Gold Tonnes Grade Gold Tonnes Grade Gold

Kt g/t oz Kt g/t oz Kt g/t oz

A Zone 672 3.4 75,000 997 3.1 97,000 1,669 3.2 172,000

Western Flanks 1,513 3.0 145,000 812 3.3 85,000 2,325 3.1 230,000

Western Flanks East 136 3.7 16,000 84 3.3 9,000 220 3.5 25,000

Beta 32 3.3 3,000 147 3.4 16,000 179 3.3 19,000

Total 2,353 3.2 239,000 2,040 3.2 207,000 4,393 3.2 446,000

TotalIndicated Inferred



As part of RNC’s review of historical data, a significant number of historical, high-grade gold intersections were identified outside existing resources (Exhibit 7). These intersections occur mostly down-dip, along strike and parallel to existing gold resources. Overall there is good scope to add over 3Mt of material at grades exceeding 4 g/t just from the Western Flanks and A-Zone, in our view.

Exhibit 7: Map Showing Major Mineralized Trends & Drill Highlights


Exhibit 8: 3D View of Beta Hunt Resources and Key Resource Targets




Specimen Gold - Father’s Day Vein Just the Beginning: In September 2018 RNC Minerals announced a new high-grade gold discovery at its Beta Hunt Mine called the "Father's Day Vein" discovery where, initially, 9,250 oz of high grade “specimen” gold was produced from a 44 m3 cut (130 tonnes) on 15 level at the Beta Hunt Mine (averaging 2,200 g/t). It was ultimately updated 27,000 – 30,000 oz of high-grade gold. The discovery was associated with the intersection between the A-zone vertical gold-bearing shear and a pyritic sedimentary layer which is theorized to have acted as a highly effective chemical trap resulting in the deposition of high grade specimen gold.

Exhibit 9: Fathers Day Vein Coarse Specimen Gold (in situ)


RNC has since taken steps to test the theory that the newly identified property-wide sedimentary layer carries the potential for further high grade discoveries with drilling that commenced in Q4/18. This potential was confirmed by the first set of holes at Western Flanks which intersected the sediment layer in one small section of the shear that yielded a 7,621 g/t intersection of coarse gold and is located within 45 m of existing development. A second high-grade intersection was found located in the A Zone shear just 7 m below the Father's Day Vein. Both successes highlight the potential for further high grade coarse gold from across the property. As part of the ongoing +40,000 m drill program the Company has successfully identified the pyritic layer across all major shears and continues to refine its 3-D model and high-grade targets.

Early Results Encouraging: Early results from the ongoing 40,000m drill program are encouraging. At Western Flanks, multiple wide drill intersections (5.32-39.00m) highlight the large scale potential of this shear which contains significant 4 to 6 g/t intervals (Exhibit 10). Drilling at A-Zone continues to extend the resource, with multiple intersections exceeding 4 g/t, including two intersections in excess of 6 g/t and 5.5 m at the margins of the existing resource (Exhibit 11).



Exhibit 10: Western Flanks - Current Drilling


Exhibit 11: A-Zone Current Drilling


Future drilling in the current program will increasingly focus on infilling and extending resources in the A-Zone and Western Flanks. An updated resource expected to be produced by the end of the Q2/19. Once the resource drilling is completed in Q2/19, the remaining drilling will test several exploration targets, including the Fletcher Trend.



Beta Hunt Mine Operations: Since taking over operation in 2016, RNC has moved mining to focus 100% on gold and ramped up mine production towards 2,000 tpd. In 2016 it mined 28koz of gold increasing to 37koz in 2017 and a significant jump to 74koz in 2018, largely due to ~31koz recovered from the high-grade Fathers Day discovery. RNC limited production in Q4/18 and continues to do so in the first half of 2019 to focus on exploration and prepare for a new stage of growth. Its currently engaged in an exploration program aimed at i) increasing and upgrading the resource at Beta Hunt and ii) following its newly defined geological model to delineate more specimen gold zones. Costs at Beta Hunt are high at about A$80/tonne mining and A$50/tonne for haulage and toll milling. Gold ore is trucked to a number of gold mills in close proximity to the mine, including to the St. Ives Gold Mining Company (SIGMC) Lefroy Mill ~15 km away where material is batch processed in a conventional gold circuit. RNC is credited with the recovery actually achieved which has historically ranged from 94-96%. There are two royalty obligations at Beta Hunt including:

i) Government Royalty: 2.5% of recovered gold to the Western Australian state government

ii) Maverix Metals Royalty: A 6% gross revenue royalty plus a 1.5% NSR on gold production to Maverix Metals (MMX-TSXv, BUY, $3.00 target, Mike Kozak).

As a result Beta Hunt is currently a high cost producer with 2017 All-in Sustaining Costs (AISC) per gold ounce produced of US$1,424/oz. The step-up in production in 2018 should see costs drop to ~US$1,307/oz produced. The future looks much brighter. We expect the ongoing +40,000m drill program will grow the base resource by several million tonnes allowing mining at an average grade of ~4 g/t just from the main shears. This should drive base production of 80-90koz annually with AISC in the US$977/oz range. Additional gold from high grade, specimen gold zones should add a significant kick to this production. With a proven geological model and demonstrated success in delineating new, high-grade coarse gold zones, we conservatively model an additional 20koz of gold annually. As shown in Exhibit 12 below, this sees the production stepping up from of 74koz in 2018 to over 100koz per year from 2020. The additional high- grade, low-cost ounces should drive AISC down below US$900/oz of gold produced.

Exhibit 12: Cantor Model Summary - Beta Hunt Mine

Source: Cantor Fitzgerald

Beta Hunt Mine (100%) From 2021

LOM (yrs) 11

Throughput (tpd) 2,000

Gold production Koz/yr 106,974

Mining+G&A Cost ($/t) $80

Tolling Cost ($/t) $50

Sustaining Capital ($M/yr) $5.0

AISC ROM Gold (US$/oz) 977

AISC Total Gold (US$/oz) 846

LT Gold Price (US$/t) 1,325

NPV5% ($M) $362

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Further Mine Optimization/Upside: Current haulage and toll milling costs are about A$50/tonne. Investigations by the Company on purchasing a mill suggest a unit cost savings of ~A$15/t. This cost reduction would increase our NPV by ~$60M against an associated capex estimate of $25-35M for an existing mill.

Leverage to High Grade: We have assumed for our model that RNC is successful in finding an additional 20koz annually in small but ultra-high grade / specimen gold zones. However, this may prove to be conservative given that the Father’s Day vein was over 25koz and the team appears to have a solid exploration model that should lead to further discoveries more regularly. A change of 5,000 oz to this component of production impacts our mine NPV by 11% or ~ $40M (Exhibit 13) demonstrating the significant impact of these discoveries.



Annual Specimen Gold Contribution

361.9 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

NPV $M 201.0 241.2 281.5 321.7 361.9 402.1 442.4 482.6 522.8 563.0 603.3

Change % -44% -33% -22% -11% 0% 11% 22% 33% 44% 56% 67%



THE DUMONT NICKEL COBALT PROJECT (28%) RNC is a 28% owner and operator of the Dumont Nickel-Cobalt Project located near the town of Amos in the mining-friendly province of Québec, Canada (Exhibit 14). Private Equity group Waterton Global Resource Management owns the balance of the project in two of its funds that total over $1.7B. The joint venture’s objective is to establish a pure play nickel company with multiple projects operating in stable jurisdictions so we would expect the project to be spun out sometime in the future in pursuit of that goal.

Exhibit 14. Dumont Nickel-Cobalt Project Location Map


The Dumont Nickel Cobalt Project is one of the world’s largest undeveloped, permitted and shovel ready nickel an cobalt sulphide deposits. When in production, the project is expected to rank as the fifth-largest nickel sulphide operation in the world by annual production behind the mining operations at Norilsk (Russia), Jinchuan (China), Sudbury (Ontario, Canada), and Voisey’s Bay (Newfoundland and Labrador, Canada). The Dumont deposit has proven and probable reserves of 1,177 Mt grading 0.27% nickel plus minor cobalt and minor palladium and platinum (PGMs) for 6.9 Blbs of contained nickel, 278Mlbs of cobalt and over 1Moz of PGMs (Exhibit 16). This reserve will support over 30-years of mining. The measured and indicated resource is about 30% larger at 1.7Bt at the same grade. In addition, the inferred resource adds another 500 Mt at 0.26% Ni. Once in operation, the mine will produce nickel for over 30 years based on reserves alone but the life could almost double with the conversion the additional resources outlined. Construction and operation of the mine and processing facilities will be made easier by its location within the Abitibi mining district where there is excellent infrastructure including roads, rail, a skilled workforce and access to low-cost power.



Exhibit 15: Dumont Project - 2nd Largest Nickel Reserve Globally


Exhibit 16: Dumont Project Reserves & Resources

Source: RNC Minerals, Cantor Fitzgerald

In 2013, RNC released results of a Feasibility Study conducted on the Nickel Project prepared by Ausenco. Based on Mineral Reserves of the 1.18Bt the Feasibility Study outlines a conventional open pit mine and concentrator with initial throughput of 52.5 kt/d with expansion in Year 5 to 105 kt/d. Over the 30-year project life it should have average payable production of 85Mlbs of nickel, 1.8M lbs of cobalt, 12,000oz of palladium and 5,000 oz of platinum annually. The initial capital cost for the project is estimated at $1,268M with expansion capital of $997M. C1 Cash Costs are estimated to be US$4.31 per /lb of nickel net of by products. The study determined that project generates an after-tax NPV8% of $1,330M and an IRR of 15.9% at metal price assumptions of US$9.00/lb Ni and US$14.00/lb cobalt at a US:CAN FX rate of 0.90. Attractive Concentrate: One aspect of the Dumont project that stands out is that while its nickel grade is on the low side relative to peers, it produces a very high grade nickel concentrate of ~29% making it attractive to smelters who would pay a premium for it. Based on a study by CRU Research, for a 29% nickel concentrate the nickel payability is estimated to be 94%, or 25% higher than the top end of the estimated current 70-75% market range for nickel sulphide concentrates (Exhibit 17).

Dumont Ni 2013

Category Tonnes Ni Co Ni Co

kt % % Mlbs Mlbs % Mlbs

Reserves

P&P 1,178,600 0.27 0.0106 6,942 278 0.294 7,637

Resources

M&I 1,665,600 0.27 0.0107 9,750 394 0.292 10,735

Inferred 499,800 0.26 0.0101 2,862 112 0.285 3,142

Total 2,165,400 0.26 0.0106 12,612 506 0.291 13,877

Category Tonnes Pd Pt Pd Pt

kt g/t g/t koz koz % Mlbs

Reserves

P&P 1,178,600 0.019 0.009 716 328 0.009 225

Resources

M&I 1,665,600 0.02 0.009 1,008 461 0.009 317

Inferred 499,800 0.014 0.0060 220 92 0.006 68

Total 2,165,400 0.03 0.0116 1,228 553 0.008 385

NiEq

NiEq



Exhibit 17. Extremely Desirable Concentrate


Dumont Nickel Cobalt Project - Cantor Model: Our model for the Dumont Project is based on the recent 2013 Feasibility Study with the main difference being our more conservative long term nickel price of US$8.00/lb and a more favourable exchange rate of 0.78 CAD:USD. Otherwise the model relies on inputs from the study that includes a Phase 1 project processing 52.5ktpa ramping up to 105ktpa to produce 85Mlbs/yr at a cost of $3.07/lb of nickel net of cobalt and PGM by-products. Total upfront capex for the project is $1.283B with expansion in year 5 requiring an additional $983M. Sustaining capital of $813M or about $24M/year over the 31-year LOM. Under our assumptions we calculate an after-tax NPV8% of $1.55B and an IRR of 18.2% (Exhibit 18). Optimization work has continued and an updated feasibility is expected in Q2/19. We note that at current metal prices, the project is uneconomic requiring a nickel price of just over $6.00/lb to break-even. As discussed below, the medium and long-term prospects for the nickel price is good, supporting our long-term $8.00/lb nickel price assumption.

Exhibit 18. Project Summary (2013 Feasibility Study vs Cantor Model)

Source: Cantor Fitzgerald, Company Reports

PROJECT SUMMARY - Dumont Nickel (100% Basis; 30+ year Project)

2013 DFS Cantor

Production

Throughput (ktpd) 52.5 - 105 52.5 - 105

Nickel (Mlbs/yr) 84.1 84.4

C1 Cash Costs Net (US$/lb) 4.30 3.07

Capital Expenditures

Upfront ($M) 1,268 1,283

Expansion ($M) 997 983

Sustaining ($M) 823 813

Economics

LT Nickel Price (US$/lb) 9.00 8.00

CAD:USD 0.90 0.78

NPV8% ($M) 1,137 1,553

IRR 15.9% 18.2%

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C1 Cash Costs (US$/lb Ni) AISC net (US$/lb)



Upside Potential - Alternate Roasting Approach: Since 2012, RNC has worked with the Tsingshan Group ("Tsingshan”). Tsingshan is the second largest Chinese stainless steel company and one of the leading innovators in the development of vertically integrated nickel pig iron ("NPI") and stainless steel production operations. It is the largest and among the most innovative producers of NPI and the first company to construct large-scale integrated plants that produce stainless steel directly from laterite ore. The partnership has demonstrated significant upside potential from roasting a sulphide concentrate as alternate downstream processing compared to traditional smelting and refining (Exhibit 19). Based on the testwork, Dumont concentrate is expected to generate a high-grade ferronickel at 55-60% nickel content that compares favourably to typical ferronickel products containing 15-40% nickel. This alternate processing option has the potential to provide higher recoveries, lower costs, and greater flexibility than conventional smelting and refining. Significant potential benefits to producers of suitable nickel sulphide concentrate feed such as RNC’s Dumont Project include: - Lower costs due to simpler processing compared to traditional smelting and

refining - Higher payabilities than traditional smelting and refining

- Greater flexibility for more potential partners and customers

Exhibit 19. RNC’s Sulphation Roasting Approach


Potential Spin-out: As RNC has gained traction and success as a gold story, the Dumont project is no longer a good fit and not realizing its full value. After delivery of an updated Feasibility Study, targeted for Q2/19, we expect the Company to consider spinning out the asset into a Newco, particularly if the nickel market or project gains further momentum. This could also be a way to unlock value as there are very few publically traded nickel projects and none that we have seen that are of this scale and permitted.



NICKEL OUTLOOK

Nickel pricing has been on an upswing in recent months but remains low relative to the long-term average (Exhibit 20). This is in part driven by accelerated destocking through 2018 and we expect this to continue which should drive prices higher over the longer term. That said, volatility may continue given ongoing uncertainty of the macroeconomic backdrop of a Chinese economic slowdown and the continued trade tensions with the United States.

Exhibit 20. Nickel Price and Visible Inventories; Long Term and 12-mo

Source: Bloomberg, Cantor Fitzgerald

The long-term prospects for the nickel space and the nickel price is positive, supporting our long-term $8.00/lb nickel price assumption which is in-line with the average nickel price over the last 15-years. Overall, demand for nickel remains robust, underpinned by stainless steel (~70%) and a growing interest from the EV battery sector. Demand has continued to grow over the past five years from ~1.75Mt in 2013 to ~2.25Mt in 2018 representing a CAGR 5.4% including a notable acceleration from 2016 to over 7% annually (Exhibit 21). Supply continues to grow at 6%-7% annually but largely out of riskier jurisdictions (mainly Indonesia). Indonesian nickel pig iron (NPI) has driven growth in the last decade but cost pressures, environmental constraints and lower ore grade should see the pace of growth slow. Outside of Indonesian NPI projects, there are very few projects and just three of size (>20kt annually); Dumont in Quebec, Enterprise in the Zambia (First Quantum FM-TSX; not covered) and Kabanga in Tanzania (Barrick GOLD-NYSE, not covered and Glencore GLEN-LON, not covered) but it will take higher prices to incentivise their construction.

Exhibit 21. Nickel Supply and Anticipated Demand

Source: Glencore



VALUATION AND TARGET

We apply a sum-of-parts NAV approach in valuing RNC minerals to arrive at our 12-month target price of $1.20/shr. For the Beta Hunt Mine we apply a premium 1.25x multiple to NPV5% to capture exploration upside potential and specimen gold production. For RNC’s 28% interest in the Dumont Nickel Cobalt Project, we apply a steep 0.25x discount multiple its proportionate NPV8% value given that, although it is permitted, it is not currently financed and (just) sub-economic at current metal prices. Corporate adjustments include cash and 12-month, in-the money options and warrants. Our resultant NAV8% and target price is $571.6M or $1.20/shr.

Exhibit 22. NAV Summary for RNC Minerals


Leverage to High Grade: As discussed above, our assumed 20koz contribution from ultra-high grade / specimen gold zones may prove to be conservative. A change of 5,000 oz to this component of production impacts our target price by $0.10 per share (Exhibit 23) demonstrating the significant impact of these discoveries. It also shows that even without more specimen gold discoveries, the base mine production drives a $0.79 per share target price; a healthy premium to the current share price.



KEY RISKS Commodity Price Risk: The main commodity exposure for RNC Minerals is gold for its Beta Hunt Mine and nickel for its 28% owned Dumont Nickel Cobalt project. Our price assumptions are viewed to be reasonable and we remain positive on the long-term price of gold and nickel.

(C$ million, unless otherwise indicated)

Mining Assets Ownership Valuation

($M) $/sh

Beta Hunt 100% 1.25x DCF5% 452 0.96

Dumont 28% 0.25x DCF8% 109 0.23

Total Mining Assets 561.1 1.19

Financial Assets

Cash and Investments 10.5 0.02

Debt - 0.00

Net Financial Assets 10.5 0.02

Net Asset Value 571.6 1.21

Target NAV per Diluted Share 1.20

Basic shares outstanding (MM) 468.6

Diluted shares outstanding (MM)1471.5

Fully diluted shares outstanding (MM) 512.21Includes 12-mo ITM options & warrants

NAV

Annual Specimen Gold Contribution

361.9 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

NPV $M 201.0 241.2 281.5 321.7 361.9 402.1 442.4 482.6 522.8 563.0 603.3

Change % -44% -33% -22% -11% 0% 11% 22% 33% 44% 56% 67%

Target Price ($/shr) $0.79 $0.89 $1.00 $1.11 $1.21 $1.32 $1.43 $1.53 $1.64 $1.75 $1.85

Change % -35% -26% -18% -9% 0% 9% 18% 26% 35% 44% 53%



Financing Risk: RNC is currently fully financed, in production and debt free. However, should RNC not meet its production goals or look to fund its portion of the Dumont Nickel-Cobalt Project further financing would be required. As such we see financial risk as moderate.

Technical Risk: Our valuation is currently based on our assumption that ongoing drilling at Beta Hunt will drive an expanded and improved gold resource. It is also based on a dated 2013 Feasibility Study for the Dumont Nickel project. As such we see technical risk as moderate.

Jurisdictional Risk: The province of Quebec is one of the top mining jurisdictions in the world with a pro-mining culture, low cost power, and a supportive government. Australia is also a top mining jurisdiction and the Beta Hunt mine is in an established mining district with all necessary infrastructure and services. As such we see jurisdictional risk as low for both projects.

CATALYSTS:

We see the following catalysts over the next 12-months that should drive the stock higher towards our target price:

Beta Hunt Exploration Results - ongoing: The Company is engaged in a +40,000m drill program at Beta Hunt to expand and improve the current resource as well as further target ultra high grade specimen gold zones.

Dumont Project Feasibility - Q2/19: The Company continues to look at optimization opportunities for the world class nickel project and is expected to release an updated feasibility study in Q2/19.

Beta Hunt Resource Update - Q4/19: Following the drill program RNC will compile and release an updated resource which we expect will be see a significant increase in size and average grade.

Beta Hunt Mining Re-start - Q3/19: Mining operations have slowed as the company pursues development and aggressive exploration. It is expected to resume in the second half of 2019.

CONCLUSION

We are initiating coverage on RNC Minerals with a Buy rating and a $1.20 price target. We apply a sum-of-parts NAV approach in valuing RNC minerals to arrive at our 12-month target price. The stock is currently trading at a discounted 0.45x multiple to NAV and we expect this to rerate higher as the Company releases results from its on going exploration drill program and with the next discovery of ultra-high grade specimen gold zones. As the nickel price continues to improve, investor focus should return to the Dumont Nickel-Cobalt Project driving the stock upward as well.



SUMMARY

RNC Minerals Corp. - Summary SheetRating BUY Basic Shares (MM) 466.2 Cantor Fitgerald

Target Price $1.20 Diluted Shares (ITM / FD) (MM) 512.2 Matthew O'Keefe

Share Price $0.53 Basic Mkt Cap (C$MM)Basic Mkt Cap (C$MM) 248.4 416-849-5004

Potential Return 126% Enterprise Value (C$MM) 238.4 matthew.o'[email protected]

BALANCE SHEET RESOURCE SUMMARY

C$MM, Jun30.YE 2018E 2019E 2020E 2021E 2022E Beta Hunt Mt Grade (g/t) Gold (oz)

Assets M&I 2.4 3.2 239,000

Cash 16.7 16.2 53.5 89.0 125.6 Inferred 2.0 3.2 207,000

Other Current Assets 23.8 7.1 7.1 7.1 7.1 M&I+I 4.4 3.2 446,000

Current Assets 23.8 23.3 60.6 96.1 132.7 Dumont Nickel Mt Ni (%) Co (%) Ni (Mlbs) Co (Mlbs) NiEq% NiEq (kt)

Non-current Assets 44.9 52.5 55.3 56.9 57.8 Reserves (P&P) 1,179 0.27 0.011 6,942 278 0.32 8,332

Total Assets 68.7 75.8 115.8 152.9 190.6 M&I Resource 1,666 0.27 0.011 9,750 394 0.32 11,720

Liabilities Inferred 500 0.26 0.010 2,862 112 0.31 3,422

Current Liabilities 35.1 35.1 35.1 35.1 35.1 Total M&I+I 2,165 0.26 0.011 12,612 506 0.32 15,142

Long Term Debt 0.4 0.4 0.4 0.4 0.4

Other Liabilities 1.9 1.9 1.9 1.9 1.9 OPERATING STATISTICS - BETA HUNT MINE

Total Liabilities 37.4 37.4 37.4 37.4 37.4 Production 2017A 2018E 2019E 2020E 2021E

Shareholder Equity 31.3 38.5 78.5 115.6 153.2 Throughput (tpd) 1,475 1,422 625 1,900 2,000

- - - - - Gold Grade (g/t) 2.2 2.6 4.0 4.0 4.0

INCOME STATEMENT Gold Production (oz) 35,307 51,551 36,992 102,576 106,974

C$MM, Jun30.YE 2018E 2019E 2020E 2021E 2022E Additional Coarse Gold (oz) - 31,139 10,000 20,000 20,000

Total Revenue 91.4 64.5 181.0 181.7 181.7 Total Gold Produced (oz) 37,027 73,801 38,939 107,974 112,605

Operating Costs 56.9 38.7 109.5 114.4 115.1 Effective grade (g/t) 2.17 4.48 5.38 4.91 4.86

G&A 6.4 8.0 8.0 8.0 8.0 AISC run-of-mine (US$/oz) 1,424 1,580 1,200 961 977

Exploration - 3.0 2.0 2.0 1.0 AISC total gold (US$/oz) 1,424 1,307 939 824 846

Other 8.9 - - - -

EBITDA 24.9 16.3 64.7 60.7 61.7

Depreciation 6.3 1.4 3.2 3.4 4.0

Unusual/Other Items 12.6 2.8 6.4 6.8 8.1

EBIT 18.6 14.9 61.5 57.3 57.6

Interest Expense - - - - -

EBT (1.5) 25.9 71.5 67.3 66.6

Taxes (5.6) (7.8) (21.4) (20.2) (20.0)

Other (18.1) (26.5) (52.9) (50.4) (49.0)

Net Income (Reported) (14.0) 7.1 40.0 37.1 37.7 PROJECT SUMMARY - Dumont Nickel (100% Basis; 30+ year Project)

Net Income (Adjusted) (14.0) 7.1 40.0 37.1 37.7 2013 DFS Cantor

EPS (Adjusted) ($/sh) (0.04)$ 0.02$ 0.09$ 0.08$ 0.08$ Production

Average shares (MM) 468.6 468.6 468.6 468.6 468.6 Throughput (ktpd) 52.5 - 105 52.5 - 105

Ni (Mlbs/yr) 84.1 84

CASH FLOW STATEMENT C1 Costs Net (US$/lb) 4.30 3.07

C$MM, Jun30.YE 2018E 2019E 2020E 2021E 2022E Capital Expenditures

Cash Flow from Operations Upfront ($M) 1,268 1,283

Net Income (14.0) 7.1 40.0 37.1 37.7 Expansion ($M) 997 983

Non-Cash Items 13.8 1.4 3.2 3.4 4.0 Sustaining ($M) 823 813

WC changes (13) - - - - Economics

Total CF Operations 0.4 8.5 43.2 40.5 41.7 NPV8% (US$M) $1,137 1,377

CF Operations($/sh) 0.00$ 0.02$ 0.09$ 0.09$ 0.09$ IRR (%) 15.9% 18.2%

Cash Flow from Investing

Capital Expenditures (3.6) (9.0) (6.0) (5.0) (5.0) NET ASSET VALUE Target Price Breakdown

Other Investments (8.1) - - - - Asset Valuation (NAV ($M) $/Share NAV Valuation

Total CF Investing (11.7) (9.0) (6.0) (5.0) (5.0) Beta Hunt 1.25x DCF5% 452.4 $0.96 Per share Multiple Value

Cash Flow from Financing Dumont (28%) 0.25x DCF8% 93.1 $0.23 Mining Assets $1.19 1.0x $1.19

Debt Financing - - - - - Other - $0.00 Financial $0.02 1.0x $0.02

Equity Financing 10.6 - - - - Total Mining Assets 561 $1.19 Total $1.21 $1.21

Options & Warrants 10.1 - - - - Pro-Forma WC 11 $0.02 Target Weightings

Repayments & Costs (15.0) - - - - Debt - $0.00 NAV 100% $1.21

Total CF Financing 3.6 - - - - Net Financial Assets 11 $0.02 P/CF (FTM) 0% $0.00

Change In Cash (7.7) (0.5) 37.2 35.5 36.7 Total $572 $1.21 TARGET PRICE $1.20

Free Cash Flow (3.2) (0.5) 37.2 35.5 36.7 INPUT PRICES

2018E 2019E 2020E 2021E 2022E

VALUATION DATA Key Commodities

2018E 2019E 2020E 2021E 2022E Gold (US$/oz) 1,268 1,300 1,325 1,325 1,325

P/E NM 35.0x 6.2x 6.7x 6.6x Nickel ($US/lb) 5.00 6.50 7.00 7.50 8.00

P/CF 566.1x 29.1x 5.7x 6.1x 6.0x Cobalt 35 20 30 30 35

P/NAV 0.44x Platinum 900 900 900 900 900

EV/EBITDA 9.6x 14.6x 3.7x 3.9x 3.9x Palladium 1,400 1,400 1,400 1,400 1,400

FCF Yield NM NM 0.1x 14% 15% Key Currencies

Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0% CDN:USD 0.76 0.75 0.78 0.78 0.78

Source: Consensus data - Factset, Historical Data – Company Filings, Forecasts/estimates – Cantor Fitzgerald Canada

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KEY MANAGEMENT & BOARD

Mark Selby, President & CEO. Mr. Selby has over 20 years of experience in finance and corporate development at various companies, including Quadra Mining and Inco Ltd. Prior to joining RNC in 2010 as Senior Vice President, Business Development, was Vice President, Business Planning & Market Research, at Quadra Mining.

Paul Huet, Executive Chair. Mr. Huet has over 30-years mining industry experience. He was President, CEO and Director of Klondex Mines from 2012 to 2018.

Scott Hand, Lead Director: Mr. Hand served as Chairman & CEO of Inco Ltd from 2002 to 2007 having joined Inco in 1973. Serves of the boards of Universal Helicopters Newfoundland & Labrador (a Labrador Inuit owned company) and a number of private resource companies.

Tim Hollaar, CFO. Mr. Hollaar has over 20 years of experience in mining industry finance positions.

Kevin Small, VP Project Development: Mr. Small has 28 years experience in underground mine operations in precious and base metals and a successful track record in mine management including at Kirkland Lake Gold and St. Andrews Goldfields.

John Leddy, VP Business Development & General Counsel. Mr. Leddy has 20 years of experience as a business lawyer and in private equity, specializing in M&A, capital raising / structuring and other strategic transactions and is a former Partner in Business Law Group (M&A) at Osler, a leading Canadian corporate law firm.

Johnna Muinonen, VP Nickel. Ms. Muinonen has 9-years experience in technical and operating mineral processing, most recently in the project management group at Vale Inco.

Alger St-Jean, VP Exploration. Mr. St-jean was a Senior Geologist at Xstrata Nickel and has over 20-years of experience in the mining industry, primarily focused on nickel.

Christian Brousseau, Project Director. Mr. Brousseau has 20-years experience in engineering and construction in the Canadian mining industry and formerly held senior project roles at Detour Gold, Osisko and Falconbridge.

Peter Goudie, Director. Mr. Goudie served as Executive Vice President, Marketing, at Vale Inco until February 2008 and Executive Vice President, Marketing, at Inco from January 1997 to January 2007.

Wendy Kei, Director. Ms Kei serves on the boards of Ontario Power Generation Inc. and Guyana Goldfields Inc. Previously served as CFO of Dominion Diamond Corp. and held various senior management roles with Counsel Corporation, PricewaterhouseCoopers LLP and Sunoco Inc.

Frank Marzoli, Director. Mr. Marzoli is also Chairman, President and Chief Executive Officer of Marbaw International Nickel.



Disclaimers

The opinions, estimates and projections contained in this report are those of Cantor Fitzgerald Canada Corporation. (“CFCC”) as of the date hereof and are subject to change without notice. Cantor makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; however, Cantor makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this report or its contents. Information may be available to Cantor that is not herein.

This report is provided, for informational purposes only, to institutional investor clients of Cantor Fitzgerald Canada Corporation, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. This report is issued and approved for distribution in Canada, CFCC., a member of the Investment Industry Regulatory Organization of Canada ("IIROC"), the Toronto Stock Exchange, the TSX Venture Exchange and the CIPF. This report is has not been reviewed or approved by Cantor Fitzgerald & Co., a member of FINRA. This report is intended for distribution in the United States only to Major Institutional Investors (as such term is defined in SEC 15a-6 and Section 15 of the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major institutional investor. Major Institutional Investors receiving this report should effect transactions in securities discussed in the report through Cantor Fitzgerald & Co.

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Potential conflicts of interest

The author of this report is compensated based in part on the overall revenues of Cantor, a portion of which are generated by investment banking activities. Cantor may have had, or seek to have, an investment banking relationship with companies mentioned in this report. Cantor and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although Cantor makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

Disclosures as of March 15, 2019

Cantor has not provided investment banking services or received investment banking related compensation from RNC Minerals Corp. within the past 12 months.

The analysts responsible for this research report do not have, either directly or indirectly, a long or short position in the shares or options of RNC Minerals Corp.

The analyst responsible for this report has not visited the material operations of RNC Minerals Corp. No payment or reimbursement was received for related travel costs. .

Analyst certification

The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein.

Definitions of recommendations

BUY: The stock is attractively priced relative to the company’s fundamentals and we expect it to appreciate significantly from the current price over the next 6 to 12 months.

BUY (Speculative): The stock is attractively priced relative to the company’s fundamentals, however investment in the security carries a higher degree of risk.

HOLD: The stock is fairly valued, lacks a near term catalyst, or its execution risk is such that we expect it to trade within a narrow range of the current price in the next 6 to 12 months. The longer term fundamental value of the company may be materially higher, but certain milestones/catalysts have yet to be fully realized.

SELL: The stock is overpriced relative to the company’s fundamentals, and we expect it to decline from the current price over the next 6 to 12 months.

TENDER: We believe the offer price by the acquirer is fair and thus recommend investors tender their shares to the offer.

UNDER REVIEW: We are temporarily placing our recommendation under review until further information is disclosed.

Member-Canadian Investor Protection Fund. Customers' accounts are protected by the Canadian Investor

Protection Fund within specified limits. A brochure describing the nature and limits of coverage

is available upon request.

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