Resource Capital Gold Corp GDPEF

tax-loss credits again

[LeftBook]

Another kick at the can.
 

 

RCG seems to be two stories. A junior gold miner and a shell of tax loss credits ("credits").

 

It has two investors. Long term investors in the junior miner space. Traders looking to cash out the credits.

 

The former might see the credits as a freebie, $0 value, a way off-set risk, that might come into play when Dufferin is operational or when a property is sold for a profit.

 

The later might be looking for a way cash out the tax loss credits. Sellers of tax-loss credits could have taken the most out of the company in the fall of 2016 when it  was trading around 27c. They would have maximized their credits. In that sense the credits, at the time, were worth $15M to the seller.

 

The value of the credits has been decreasing with dilution 

From 15/45 = 33.3c in 2016 to 20/175 = 11.4c in 2018

(the caveat always being able to cash out)

 

 

It is open question what the credits are worth on the open market now.

 

A company with existing operations and taxes payable should see them as the easiest dollars to mine.

 

 

***

 

 

June 2016

0.8M assets

- 3.4M liabilities

= -2.6M shareholder equity

 

(-2.6M +  0M credits)/45M = -5.7c/sh long-term

(-2.6M + 15M credits)/45M = 27.5c/sh cash-out

 

 

*** 

 

 

June 2017 

25.1M assets

- 16.6M

=8.5M shareholder equity

 

(8.5M +  0M credits)/123M shares =  6.9c/sh long term

(8.5M + 15M credits)/123M shares = 19.1c/sh cash-out

 

 

*** 

 

Sept 2018

32.9M assets

- 20.0M liabilities

= 12.9M shareholder equity

 

(12.9M +  0M credits)/175M shares =  7.4c/sh

(12.9M + 20M credits)/175M shares = 18.8c/sh

 

***

 

Dec 2018

31.3M assets

- 18.3M liabilities

= 13M shareholder equity

 

(13.0M +  0M credits)/175M shares =  7.4c/sh

(13.0M + 20M credits)/175M shares = 18.9c/sh

credits valued at 50c on the dollar (just a guess)
(13.0M + 10M credits)/175M shares = 13.1c/sh

At some point the hagggling will be about the combined value of Dufferin and the credits. And not the bits and pieces.
 

***

 

[damianchosenone]

Leftbook I'll tell you something: there were 10 meetings at Pdac. Most of the groups meeting dont even have cash to buy or invest in Rcg. A few groups do and know that Sprott Lending and Cra are only 2 groups that need to be paid off as secured creditors. So about 10to 12 million. Companies will not offer more than that and Sprott londing wants their money back. They probably are willing to

[damianchosenone]

Sprott won't cry too much as he needs tax losses to offset gains. If it was worth it he would have invested in rcg by now!

[damianchosenone]

Leftbook: Who wants or needs those credits? Atlantic Gold corp does not want anything to do with RCG; from what I have heard Anaconda doesn't either, unless they get the proeprties for real cheap. There are no other companies in Atlantic Canada that have enough money to purchase RCG. So that leaves it as in big trouble!!!

[LeftBook]

someone could pocket $20M 1) by applying the $20M of tax credits to offset taxable gains with a stroke of pen or  2) mine ($20M/$89.2M) * 216,000oz = 48,000oz of gold at Dufferin over two years. And would require a sizeable amount of energy, labour, cash to pull that off. ditto for Goldboro

[LeftBook]

A purchaser would effectively pay 1)  $13M for Dufferin after applying $12M of tax credits 2)    $0M for the mill after applying    $3M of tax credits 3)    $0M for exploration assets after applying $1.3M of tax credits 4)    $0M for the reclaimation bond after applying $1M of tax credits etc

[LeftBook]

It is easy to say that the company could be reduced to a "useless" shell. That useless shell may even have $0 on the balance sheet. But it would also have over $20M of tax credits And that shell is worth more than a buck what is the value ?

[damianchosenone]

If rcg cant sell for what sprott lending wants and we dont pay off the debt to unsecured creditors we have 0 properties and debt and go bankrupt

[LeftBook]

if RCG takes $13M haircut, (a complete loss on all the improvements), and sells the assets for $18.3M to settle $18.3M of liabilities then the useless shell would have a $0 balance sheet. Let's say that $13M haircut is fully added to tax credits. The empty shell now has $33M of tax credits. Let's say the empty shell is scooped up for $13M. The buyer is paying 13/33 = 40c on the dollar

[damianchosenone]

Leftbook: I'm telling you all the assets will sell for 10 million or less.

[LeftBook]

Damian, I thought you said that there might be a $13M offer for Dufferin. Did the rumour fail to pan out ? --- $10M for the assets would leave it bankrupt. That's one scenario. Check. C'est la vie. Back to the others. --- I prefer to keep the math simple. Hence the $0 shell with $33M of tax credits. That's $18.9c/sh of tax credits. I assume that you would be good risking 1.5c/sh

[damianchosenone]

That offer was made up! I asked again and they couldn't tel me where they got it from and heard froma friend who spoke to Jack that there were no offers. Secondly, I spoke to someone that knows what happened at the  PDAC meetings and they said that RCg will be lucky to get 10 million. here were the reasons why: 1). Many of the groups/investors meeting at PDAC didn't have money to

[LeftBook]

thanks for the clarification looking forward to an update

[damianchosenone]

We will not get more than 10 million for the properties. They will offer what the secured creditors are due!

[damianchosenone]

Leftbook: you sound way too optimistic with your numbers; we will be lucky to come out a she. At that point we have no money and will have to take a long time to find a ceo and a property and get a financing and dilute 10 to 1 the shares. Right now nobody has money to buy rcg and use the tax credits. Name one company that can?