RE:RE:RE:NML RTO @Contrarian,
Excellent point, and something I didn't touch on in my previous post about the Abaxx deal.
The carrying cost for mineral properties in Newfoundland & Labrador escalates substantially once you get past holding them for 20 years. Obviously the government wants to incentivize production and disincentivize hoarding of the properties (see below for the fee schedule on mineral claims).
LabMag, Howell's River North and Howell's Lake are all in year 19, and hit their 20 year renewal in May of 2022. Sheps & Perrault, are only a couple years behind that. Once they get past year 20, it will cost $563,200 per year to hold just the LabMag claims (LabMag Claims are 256 contiguous claims). The Howell's River North and Howell's Lake Taconite claims (about 235 continuous claims) will cost about $525k per year to hold as well. Combined that's about $1.1 million a year to hold those properties, and this doesn't include the fees to hold onto Sheps, Perrault Lake, KeMag, KeMag East, or Lac Ritchie. The total carrying cost for all these properties could easily exceed $2.5 million per year starting in 2021.
~Fee Schedule for N&L Mineral Claims~
https://www.gov.nl.ca/iet/files/mines-exploration-guidelines-claims-brochure-2015.pdf
The minimum annual assessment work required to be done on a licence is:
$200/claim in the first year
$250/claim in the second year
$300/claim in the third year
$350/claim in the fourth year
$400/claim in the fifth year
$600/claim/year for years six to ten inclusive
$900/claim/year for years eleven to fifteen inclusive
$1200/claim/year for years sixteen to twenty inclusive
$2000/claim/year for years twenty one to twenty five inclusive
$2500/claim/year for years twenty six to thirty inclusive.
The renewal fees are:
for year five $25/claim
for year ten $50/claim
for year fifteen $100/claim
for years twenty to thirty $200/claim/year
If NML shareholders vote down the RTO and approve the Tata deal, then NML would likely have around $9.5 million left in the bank (keep in mind it would cost $500k to walk away from the RTO). If you assume that NML would have corporate expenses of around $800k a year (you can reduce that down to $500k if the Tacora royalty results in $300k per year), then they'd have about 3 additional years to shop the Taconites before they ran out of funds (i.e., carrying cost of $2.5 million + Corporate expenses of $500k= $3.0 million).
So the question to NML shareholders is thus...Would you rather hold onto the taconites in hopes of finding another JV partner with the chance of going bankrupt in three years, OR would you prefer NML take a private placement and own 17.8% of a high growth business that will debut on November 30th? On one hand you are basically bleeding out all your cash and resources slowly in hopes that a white knight will come along and save NML, on the other hand you are using NML's assets as leverage to build a high potential business that we wouldn't have otherwise had an opportunity to invest in.
Given this context, I think the risk reward ratio favors an investment in the new business initiative. I'd rather take a good opportunity now, than wait a few years and potentially have nothing. That of course is my opinion, and I respect the opinion of others on the board as well.
Best,
James