Resource Capital Gold Corp GDPEF

Most recent updates - at least that I have

[lmcbain]

I had a chance to touch bases with Jack and assuming the information I received is correct, here is a little more perspective on things:

• 1st - in court yesterday the DIP was approved and the NOI Stay Proceedings extension was granted, so a success on both fronts.
• I was originally told that Sprott Lending was being cooperative / helpful and that  they were NOT the ones who caused the company to believe that the route of the NOI was required. After the paperwork was submitted and became public record, there was some question raised as to whether or not that was true, given that the did indeed file a Demand for loan repayment.
  • in discussing this with Jack, the Demand that was filed after the NOI and not before and was a reaction, not a cause. The information I was provided indicated that it was essentially a mandatory step once the NOI was filed.
• Sprott Lending providing the additional $2M can be looked at 2 ways:

1. they could use it to help bury the company by increasing the debt level to a point where even with concessions RCG could never dig out
2. they were being cooperative / helpful by providing a lifeline for the company to use to facilitate the NOI process and also the funds to keep the asset (Dufferin) in the best possible condition, thereby helping to maintain maximum asset value.

• I will choose (in the short run) to hope that option 2 reflects what is going on. One thing he did make clear is that the $2m is for admin / legal / etc and for asset maintenance and not really anything else.
• In the discussion that I had, Jack indicated that he believed the generation of $10m or a little above, could facilitate a proposal that would have the potential to float. This would of course require an accepted proposal that restructured the debt and paid it off at a lower ratio payment : actual debt and would potentially include some form of shares for debt swap as well.
• I also raised a question about the suggestion that there could be as much as 3000 fairly readily available oz for recovery, that includes "up to" 2000 recoverable from the tailings, as well as another 1000 or so from the stopes. "IF" this is correct, it would potentially reflect as much as $3.5 million in gross profit (using approx $400 an oz as a cost base - remember, not new mining, just processing). This does not factor in an increase in operating costs resulting from the use of a contractor instead of staff.
  • I had originally thought this oz projection was outlandish and that there would be no way that 2000 oz of recoverable gold could still be in the tailings. I was under the impression they had already been reprocessed once since RCG took over, which is why 2000 oz seemed ridiculous, but apparently they haven't been done yet - although why they haven't beats the hell out of me..
  • The belief is that the processing recovery rate to date (historic included) has been quite poor and that the grade in the tailings may be higher than would be considered normal.
  • Jack did admit that based on what he has heard from those involved, that 2000 may be rather optimistic and that somewhere between 1000 and 1500 is probably more realistic, but admits it is all just educated guesses.
  • it should also be noted that in order to commence those recovery efforts, RCG needs permits, which at present they do not have, but they have applied. 
• I asked about best / worst  case scenarios that he believed could be achieved:
  • Best case - the recovery effort is approved, the permits are granted and the company kitty receives the funds from this, additionally, Dufferin (most likely) is sold for somewhere between $7m and $10m and the combination of the 2 income streams allows the company to table a restructring proposal that is accepted and manage to then retain Tangier and Forest Hill and even the exploration extensions and the company moves forward based on these assets.
  • Worst case - the recovery plan is not allowed to proceed and they have to sell all assets to generate enough cash to facilitate a restructuring. The result would be a clean shell, along with a non-saleable asset in the tax credits. With no other asset, at that point the company would have to go looking for a new core asset to leverage. Expect RCG to remain halted thru all of this.
• Jack continues to maintain that he does not see a wholesale bankruptcy and the complete dissolution of the company as a probable end result - only time will tell.
• Jack did also indicate admission that when an investment offer from some existing shareholders was brought to the table, that it was poorly handled, but not ignored - even though no attempt at reaching out to the potential investors was made. 

I hope this is useful to some of you. I know that there is a group who believes Jack is simply not being honest, which may be the case - only time will tell. So keep in mind that he is the source for a great deal of the aforementioned information, when assessing it.

Salut,
Leigh McBain