RE:RE:RE:Sprott lending planned bankruptcy
I doubt Greg Gibson was in a position “to screw” Sprott Lending into investing too much or to cause RCG to go bankrupt. It doesn’t fit the time line or the context.
Gibson would have gained substantial insights into Dufferin and RCG during the bulk sampling program. It was apparent from the outside that the company was cash starved and that bulk sampling program would be limited. If anything he was handed a project in a challenging position.
Greg Gibson was appointed director and chair of the technical committee director for RCG in March 2017 before bulk sampling and resigned in November 2018 after the completion of the bulk sampling. The credit facility was established during the bulk sampling program.
Sprott Lending is in the business of lending money to resource companies. If a borrower defaults on the loan it seeks legal avenues as senior creditor for compensation. Acquiring the properties from a creditor below the value of the loan was always a possibility. They run their business accordingly. Sprott Lending established a credit facility in Dec 2017 mid way through the bulk sampling program that was producing gold in line with expectations.
RCG CEO George Young, CFO Jack Cartmel, and the board would have known the default risk when establishing a credit facility with Sprott Lending in Dec 2017 and should conducted business accordingly.
It is not clear if the credit facility with Sprott Lending increased or decreased the value of RCG.
It is not clear if the improvements and the execution of a bulk sampling program increased the value of Dufferin.
That said RCG attempted to raise $5M of securities at 9c in March 2018 shortly after establishing a credit facility and partway through a cash starved bulk sampling program. Fully subscribed it would have decreased the default risk somewhat. It was insufficient to allow the bulk sampling program to run to completion. It was insufficient to start production. The private placement went undersubscribed at $650,000.
Bottom line RCG never raised enough cash to purchase and develop Dufferin into production.
Defining the resource better to be shovel ready may or may not have be a better approach for Dufferin.
Sprott Lending had no say in the running of RCG and the development of Dufferin.
If anything RCG let the fox into the hen house. It is hard to complain to the fox that all the hens are gone.
The company was a shell plus tax credits before making a play in Atlantic Canada. It could be the same had it played its cards better.
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Notes:
RCG acquired Dufferin and the mill for $9.8M and Tangier Forest Hill for $1.5M.
RCG raised $18.3M between June 2016 and June 2018 at 14c.
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To rebuild RCG from the ground up as-it-was would have cost $55.3M
9.8M Dufferin + Mill
1.5M Tangier + Forest Hill
$24M Improvements
$20M tax credits
= 55.3M
RCG owned the tax credits. It raised share equity and borrowed the rest against a credit facility. There was a $10M short fall.
$20M tax credits owned
$18.3M raised shareholder equity
$7M credit facility
= 45.3M
The tax credits would have brought value to the company had it reached production. They seem to be valueless until production. Perhaps an option play at best prior to production.