$RNX:Cash flow, debt, next drill results and more Good post by Darp Research AKA @Geodan in reaction to SA article https://seekingalpha.com/article/4252614-rnc-minerals-building-base about RNX debt, cashflow, people that short, next drill results and Executive Chairman:
«Hi @Dan Stringer Thanks for the article. Many good points. If the info on Higginsville is correct think it is a very good deal. Think the reason for the drop is not that investors dislike the HGO deal.
My thoughts for drop are two things. First CEO said in PR when they paid off all the debt in late September that not only did the FDV pay off all the debt but it would fund completely Beta Hunt drilling and operations for the foreseeable future. That means at least a year maybe two. What ended up happening was in 3 months they only had a million cash left and had to sell stock to get cash, then again they needed money even without the HGO deal in March.
RNC is my #1 position, but try to stay objective. This was a major miscalculation by the company. They did not have to repay all the debt and rather obviously now should have kept about 1/2, the best of the debt they had, and got a LOC line of credit to cover the debt they repaid. If they did that would not have had to sell stock for cash and dilute in January and maybe even to this day. One of the most important things a company does is project cashflow in the future to make sure they will not run out. They either did not even do that or did it poorly when they made the decision to pay off all debt days after FDV. They have to be honest with themselves to make sure this never happens again. One more point they may get $5 million or more for nuggets and had months to sell them and prefered to parade them around instead of selling them. That added to the stock dilution since that cash was not generated.
The second reason the stock dropped was the way the stock was sold. It was sold to parties that immediately shorted it to remove risk of owning the stock. Millions of shares were sold (shorted) Tuesday when the bought deal was done. @lexcontrols , @kbaba, myself and others that have commented on this article closely track IB, Etrade and Fidelity in terms of how much stock is shorted and there is no doubt the way RNC did the deal caused immediate shorting in the millions of shares that drove down the stock. The stock has been quiet since the deal. So artificial stock supply was generated and depressed the stock. A separate issue is the shorts have paid massive interest on RNKLF to lend it for months, sometimes over 100% interest. I and others here have made a lot of money lending to them often getting over $100 a day and think some have got over $300 a day. Today think the original shorts are mostly out and the shorts we have today that are mostly using Fidelity to lend are new shorts generated by the financing.
That said concur with your points on RNC and expect multiple bonanza grade drill hits in next drill report as they focus holes on the best spots they have discovered.
There is another significant development Paul Huet is now Executive Chairman. He turned little into a lot at Klondex and fast. This may be a major development to help RNC going forward. He is an expert at narrow vein high grade mining. . »