Royal Nickel Corp. RNKLF

REPOST with HGO COST MODIFICATION & MORE

[pierreg]

REPOST OF https://ceo.ca/@pierreg01599501?c40990053153 WITH HGO COST MODIFICATION AND @Lexcon FACTUAL CLARITY FOR LINE OF CREDIT AND CONCLUSION:

First, what are the purchase costs of HGO and its add-on? Then, what are mill replacement costs according to Russell Starr? Finally, what is the value of HGO gold in the ground?

HGO COSTS = total consideration of CAD 48,904,000 (from Business acquisition report)+ $350,000 (credit facility cash cost) + $141,250 (administration fee) + $1,500,000 (Capital expenditures) + around 1 million shares. Also,  0.83% per month interest on capital facilty incurred for HGO purchase as per https://ceo.ca/rnx?3855337bf153 . Finally, as per August 26th 2019 Business acquisition report with liabiliites of 27,481,000: Amounts payable 6,327,000 + Asset retirement obligation 20,571,000 + Deferred tax liability 579,000 + Other non-current liabilities and provisions 4,000.
Total 78,376,250 + 1 million RNX shares + 0.83% per month interest on capital facilty incurred for HGO purchase.

https://www.rncminerals.com/2019-06-11-RNC-Minerals-Completes-Acquisition-of-Higginsville-Operations#assets_all:
HGO Acquisition: On June 10, 2019, RNC completed the acquisition of HGO from Westgold Resources Limited ("Westgold"). On closing, RNC paid Westgold AUD $25.0 million in cash and AUD $21.0 million in RNC shares (satisfied by the issuance of 49.8 million RNC common shares), for total consideration of AUD $50.0 million (including the AUD $4.0 million deposit previously satisfied in RNC shares). The cash portion of the HGO purchase price was funded by a new senior secured $35 million debt facility entered into by RNC. This facility will also fund working capital requirements of the combined business.

https://ceo.ca/rnx?3f7091ceb5eb as per @Lexcon:
« one thing to note....it is a $35m "credit facility" not a loan. That would be like a home equity line of credit....the $35m is the max they can borrow over the term of the facility.

No where does it state how much they have actually drawn down on the facility. Since they already had $10m earmarked from the bought deal it makes sense they probably drew down $15m to make the closing...the remaining part is a line of credit for operations for the next 12 months.

As such, they are not paying 10% annual interest (paid monthly) on the whole $35m line of credit, they will only be paying interest on the amount borrowed.

Hit a couple of more pockets, like the one 7m below FDV they are driving toward and this credit facility can be paid down very quickly. To assume that the total cost of the facility is $4.5m is absurd and false.

The cost at present is $350k (1% cash fee) plus a bit over 1 million shares (0.2% of OS). »

FACTUAL CLARITY FOR LINE OF CREDIT by @Lexcon as per https://ceo.ca/rnx?f7fccf6def58:
« In that old post my understanding at the time was a $35 mm line of credit.                             
In the interest of factual clarity it should be pointed out that in the 2Q financials they clarified that $35mm was actual a $25mm bridge loan (term and rate unknown) and then a $10mm revolving credit line that was fully drawn on at end of 2Q.»

An administration fee of $141,250 (inclusive of HST) as per June 17th 2019  Material contracts - Credit agreements .

Capital expenditures relating to the Mill at the Higginsville Operations and integration of the Mill with the Beta Mine (including crusher product screen, replacement of secondary crusher, refurbishment of mill thickener, replace auto lubrication system on mill).$1,500,000 as per the Preliminary short form prospectus published September 3rd 2019.

REPLACEMENT COSTS OF THE MILL :


https://ceo.ca/rnx?581803a78e67 :
Russell Starr: « the replacement costs of the mill that we bought is probably 120 M $. »
https://www.rncminerals.com/2019-06-11-RNC-Minerals-Completes-Acquisition-of-Higginsville-Operations#assets_all:


HGO GOLD IN THE GROUND:

1,224,000 Measured & indicated OZ
681,000 Inferred
367,000 Proven & Probable

https://www.munknee.com/how-to-value-a-junior-miners-gold-in-the-ground/ :
• US$20 per ounce Inferred
• US$30 per ounce for M&I
• US$160 per ounce for P&P

1,224,000 Measured & indicated OZ * 30 USD = 36,720,000 USD
681,000 Inferred * 20 USD = 13,620,000 USD
367,000 Proven & Probable * 160 USD = 58,720,000 USD
Total gold in the ground 109,060,000 USD

CONCLUSION:


It is ill advised to consider the HGO purchase without considering the mill replacement cost  nor the gold in the ground. When RNC Minerals will be in full production the benefits from reduced AISC will continue adding to the bull case of HGO acquisition.