RESERVOIR MINERALS INC V.RMC

New Haywood Comments

[psj567]

Haywood released a new coverage note on Lundin Mining today and had several comments on RMC and an entire subsection entitled Cukaru Peki Valuation / Reservoir ROFO Considerations. Comments include:

1. "The US $ 262.5 million price underpinning the purchase agreement is arguably low....Hence the next approx. 50 days could prove to be very interesting for the ultimate ownership structure/valuation of Timok-- in part depending on the near-term availability/cost of capital to RMC." 
2. There are "a number of levers RMC could potentially look to pull in order to exercise its ROFO," including but not limited to equity financing, debt financing, streaming, strategic partnerships or a combination thereof.
3. The ROFO is likely being viewed by other third parties as an opportunistic means to gain significant exposure to Timok.
4. If RMC exercised its ROFO through a full equity funding at about $6 per share and at 100% dilution, Haywood's valuation of RMC would increase to $10.50 plus per share. "Details [of financing] aside, we would argue Reservoir is facing a significant value-add proposition."
5. The Timok region has attracted the attention of Majors as evidenced by Freeport wanting to maintain majority ownership of the porphyry and of any new discoveries and by Rio Tinto's recent JV Agreement with Reservoir on RMC's neighboring Tilva project.
6. " In our opinion, Timok (Cukaru Peki) is one of the highest profile discoveries made in recent decades, underpinned by a defined high-grade epithermal resource directly adjacent to large-tonnage porphyry potential and a Major JV partner soley funding (in the case of Reservoir) ongoing exploration."
7. "Lundin has stated it will be its top-priority development focus going forward" if RMC does not exercise its ROFO first instead.
8. Between the epithermal resource and porphyry, a 65 year mine life is envisioned.

In summary, the coverage note on Lundin  is exceptionally positive on RMC and makes clear that RMC is currently significantly undervalued in light of the value of the asset and the value of RMC's ROFO.