How much gold.......does RNC need to find to justify the current shareprice (C$0.73)? Here is my
conservative analysis:
First, the fully diluted market cap. = 477*0.73 = C$348.2m
Next, deduct net cash (this is a little "rough & ready" and, conservatively, does not allow for any extra cash from further option/warrant exrcises. Based on the Q2 FS, I estimate net debt then was ~C$16m. Since then cash from gold recovered (less 10% total royalty) + warrant exercises announced = ~C$53m, so net cash = ~C$37m now (does not allow for other cashflows since the end of Q2, hence rough and ready).
That leads to an EV of ~C$311m.
Next step: what do we value their "gold in the ground" at? I will choose a figure of US$400/oz. This is on the high side if future grades drop to the low 10s of g/ton but low if what is found is at bonanza grades.
C$311m/(400*USDCAD) = ~600koz [to be very conservative I have ignored the value of any of RNC's other assets, which is probably unfair]
How does that figure look to me? Well it is high compared to their last official resource estimate:
https://www.rncminerals.com/2018-04-26-RNC-Minerals-Announces-Update-in-Mineral-Resource-at-its-Beta-Hunt-Mine of 239koz indicated + 208koz inferred resource - and that resource is at a grade of only 3.2g/t, which couldn't be valued anywhere near $400/oz. OTOH they have found over 30koz of high grade material in the last month alone and claim that they now understand the prospectivity of their geology much better (and hence where to drill & mine). So achieving 600koz over the next few months doesn't seem too large a stretch to me... and, of course, if they find more, as we all hope, that will justify a higher share price.
These are the sorts of calculations professionals (and potential buyers of the asset) will run (but in a much more refined manner) to make buying decisions - and is why it is so important that RNC gets drilling, so that proper resource estimates can be made, testing their new geological model. Until the explo is done and some official resource upgrades are released the shares are likely to remain highly volatile, as there is so little hard information (mainly speculation) to make buying or selling decisions on.
Any experienced gold investor will know that it's the combination of oz and grade (and fiscal terms and political risk - both of which are excellent in WA) that's crucial to valuing a gold resource. So far, we've only got a very small 60m3 sample of exceptional material (plus hints from previously extracted "specimens" elsewhere in the mine) to go on.
Feel free to correct any errors you feel I've made in my calculations/assumptions.
Cheers,
Mark