Very good CRUX Investor video June 11th, my transcript Very good CRUX Investor video as Matthew Gordon interviewed Mark Selby of RNC Minerals June 11th 2019, video & my transcript:
Video tittle: NEW: RNC Minerals Press Release - Higginsville Acquisition Closed & CREDIT FACILITY
Link: https://www.youtube.com/watch?v=hVhB5H4zI3M
My transcript:
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Matthew Gordon: « Hello and welcome to on CRUX Investor […] we picked up the phone this morning to Mark Selby CEO of RNC Minerals. We've got him on the line. How are you Mark? »
Mark Selby: « Good Matthew, how are you? »
Matthew Gordon: « Fantastic, we saw this press release. We thought we'd take the chance to call you. So, thanks very much for taking the call. You completed the Higginsville transaction, congratulations. »
Mark Selby: « Thank you, very good to get here. »
Matthew Gordon: « Well done, know that was not easy and there's a paragraph in there which talks about the credit facility. I wanted to talk to you about that, just so I could understand it a little bit better because you've carefully crafted nine separate moving parts in a quite compact paragraph. So, can you just talk as broadly through that and I'll pick up on some questions if I may? »
Mark Selby: « Yeah, that's great. So, again we wanted to do a chunk of this financing in a non diluted way. So, we ran a process. It was very competitive; the terms were several points better than I was expecting. So, the 10% interest rate and then just the 1% fee and 2% fee and shares. Oftentimes, for companies at this stage in this type of facility which is a bridge facility, you'd be looking at 20 or 25 or 30 percent warrant coverage. So, we're quite happy with where we landed. Fundamentally it gives us the maximum amount of flexibility. So, access to 35 million dollars as we go through the process now, finishing the resource, getting a mine plan done and then re-ramping the mine up it gives us all the flexibility we need. We don't have to pay any of the principal back until twelve months from now and then, we have the right to extend it for another six months. There's no hooks in this at all. There's no covenants other maintaining sort of it's just in the business as we said we were going to. »
Matthew Gordon: « Okay, so I mean I have my ex banker hat on. I mean for company which doesn't have a reserve yet I think it's reasonable but I just want to understand kind of how you got there. So, you've taken 35 instead of 25 that's to give you a bit of headroom, wiggle room? »
Mark Selby: « Yeah, again because the key thing is, we spent most of the last two years prior to the Father's Day Vein living on a very tiny cash balance. Right now, we want to have a nice big cash balance which just gives us the flexibility to do what we need when we need to do it right and drive the business forward without having to worry about where next week's cash is coming. »
Matthew Gordon: « Okay, so it's a kind of 12 to 6-month facility. Don't pay the capital back until the end. You've got interest payments ten percent per annum but you pay those monthly. You've got cash flow so, it's not an issue and the fees I think fairly standard I mean what would you say to people are saying well like why give away 2% share fee, why would you do that? »
Mark Selby: « Oh I mean again it's just part of the package and at the end of the day I get often the sweeteners that people ask for. Can end up being much high again, 20 25 30 percent warrant coverage so 7 to 15 million dollars worth of warrants. »
Matthew Gordon: « Right so it was it was a competitive tendering process that you went through to get to this point. »
Mark Selby: « Yeah, exactly »
Matthew Gordon: « Okay, well thanks for the explanation. I mean I thought that was a case but it's worth checking and also, investors are always keen to saying how you got to where you got to and also, you had a bit of a bump at the end of last week off the back of last week's news. I hope you got some more news coming have we? »
Mark Selby: « Again we're continuing to mine in that area and again, I can't tell whether it's a day from now, a week from now, a month from now that will bump into it but as I said we still got multiple levels to mine through. So, there's lots of potential to be realized sooner than later there in terms of more high-grade gold. The resource update’s on track to be released at the end of Q2 which is now just about three weeks away and the initial indications look good and then, we’ll be putting the updated mine plan and reserve update out during Q3 and then, we'll be pushing forward on Dumont as well, so the feasibility study update stuff. »
Matthew Gordon: « So, fantastic, there's obviously two big pieces of news to come out and hopefully a few exciting little morsels in between. We shall wait and see. »
Mark Selby: « Sure and maybe just one additional point. I know a couple questions that came up from shareholders. People wonder why we didn't name the lender in the release. That was at their request. They typically do private company, so they're not used to releasing their name in the terms of their deals publicly and as such they just wanted to not have both those things in public at the same time. The key thing for us and one of the reasons we went with them is because they have a great track record lending to small and medium-sized companies and helping provide them capital to grow over multiple years. This is hopefully the beginning of a longer-term relationship. We've worked well with Auramet in the past and then and our other lenders. Auramet is going to continue to provide a working capital facility to finance our inventory on our ramps and we look forward to working with these guys going forward. That being said, as we move into our next phase, once we have a reserve in place and a multi-year production plan, we should be able to get even lower cost capital at that point in time and we'll look at those options later this year. »
Matthew Gordon: « Fabulous and you said there were two points? »
Mark Selby: « That was why we did it and why we chose them. »
Matthew Gordon: « Beautiful, okay thanks for sharing that with us. »