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Victoria Gold Corp T.VGCX

Alternate Symbol(s):  VITFF

Victoria Gold Corp. is a Canada-based gold mining company. The Company is engaged in the operation, exploration and acquisition of mineral properties. Its flagship asset is its 100% owned Dublin Gulch property, which includes the Eagle Gold Deposit, the Olive Deposit, Raven Gold Deposit, the Wolf Tungsten Deposit, the Potato Hills Trend, including the Nugget, Lynx, Popeye, Rex-Peso, East Potato Hills, Eagle West, Falcon, as well as other targets. The Dublin Gulch Project is situated in central Yukon, Canada, approximately 375 kilometers north of the capital city of Whitehorse. The property covers an area of approximately 555 square kilometers, is accessible by road year-round and is powered by the Yukon energy grid. The Eagle and Olive deposits include probable reserves of approximately 3.3 million ounces of gold from 155 million tons of ore with a grade of 0.65 grams of gold per ton. It also holds Brewery Creek property, as well as the Gold Dome and Grew Creek exploration properties.


TSX:VGCX - Post by User

Comment by HoneyBadger77on Dec 27, 2023 5:06pm
100 Views
Post# 35801823

RE:RE:RE:Convertible Debt Presentation - German Gold Show

RE:RE:RE:Convertible Debt Presentation - German Gold ShowMy guess as to what's holding VGCX share price back right now is mainly short selling, tax loss selling, investors waiting for Q4 production results, Q4 earnings uncertainty, price of gold uncertainty, and concern with the current debt and if they can trust VGCX management to follow through with serious debt repayment in 2024.

Regarding a theoretical convertible debt deal with QRC (and I stress I have no knowledge that such a deal is even in the works), the terms of any deal would of course impact VGCX share price, with the extent of the impact depending on how favourable the terms are for VGCX. 

Since VGCX already has extended their repayment timeline and has an adequate time frame to repay its' debt, I suspect that the terms would be somewhat reasonable, but from the comment made by QRC CEO Warren Gilman in his presentation about any next deals being done would be at a double digit interest rate of at least 10% and with the Fed expected to lower rates by about 1% in each of 2024 and 2025, I wouldn't consider a 10% rate a favourable deal for VGCX.

Also, I don't believe a convertible debt deal would include a specific share price but instead an agreed percentage discounted share price.  My understanding of the way a convertible debt deal would work, as an example for let's say $100 million US of VGCX debt, would be as follows:

- VGCX receives $100 million US from Queen's Road Capital (QRC) at let's say a 10% interest rate over a 3 year term.

- VGCX is then required to make an annual interest payment of 10% of $100 million US or $10 million to QRC at year end for each of the 3 years of the term (so a total of $30 million US in interest for the 3 years).  QRC uses this interest to pay dividends to its' shareholders.

-  At the end of the 3 year term, QRC would have the option to receive their final payout in cash or shares of VGCX (or perhaps a combination of the two).

- In the meantime, VGCX takes the $100 million from QRC and pays off the existing Term Loan, etc or maybe only a portion and uses some portion for an extensive 2024 Drill program at Raven.  This would give VGCX 3 years to prove up more ounces without having to worry about a debt default in the short term.  It would probably also allow VGCX to not have to do forward gold sales or hedging to mitigate debt repayment risk.   If the drill results at Raven continue to be prove positive, then VGCX will likely be able to clearly define and likely increase their Proven and Probable reserves which could add significant value.  In addition, if gold prices stay elevated and their production gets to their 190K and 200K targets in 2024 and 2025 respectively, VGCX will be making a very good profit which should drive the share price significantly higher than where it is today.  

-  The trade off is that in addition to QRC receiving an annual interest rate payment, the deal will likely include a provision for QRC to receive a final cash payment or opt to convert the debt to VGCX shares ar a pre-determined discount rate that could be up to 50% of whatever VGCX shares are trading at at the time.  So definately a WIN-WIN for QRC.

So the questions that immediately come to mind for me are:

- Is VGCX in a position where they even need to do a convertible debt deal?  I say no they're not and I believe they should just stay the course with debt repayment in 2024 even if it means paying down a bit less debt so they'll have adequate funds available for a 2024 Raven Drill Program which JM mentioned he believes they need in order to fully understand the Raven target.

- If VGCX does a deal, how much future profit would VGCX potentially be giving up and is it favourable to VGCX shareholders?  Well that will depend of the deal terms of course but I suspect QRC would be the big winner of such a deal given that they would receive about $30 million in interest and if they opted for converted shares at even a 25% discount such a deal would not likely be favourable for VGCX shareholders given where I suspect VGCX share price will be by 2025.

In my view, VGCX is not some start up company desperate for funding but rather a nearly 200K ounce annual producers with plenty of potential and future value.  QRC knows it and knows this is a low risk venture for them and I suspect would be licking their chops to get VGCX to agree to a deal.  Gillman mentions his investors are a group of billionaires and I can assure you they're not going to put up their cash for QCR to loan out unless it's worth their while.

I've already expressed my views to JM on this topic just in case and so if there's something in the works and he proceeds I wil be very disappointed with him, unless any deal is so favourable for VGCX shareholders that we'd be crazy not to take it.   And that I highly doubt would be the case!

 My opinion only, please DYODD.

HB77  


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