Royal Nickel Corp. RNKLF

Rob Buchanan and the company rationale for the financing

[pierreg]

Rob Buchanan of RNC Minerals and the company rationale for the recent financing. From most recent reply to oldest. @Matthew6v20,  @BayStreetBagger & @Grissy thank you for sharing feedback you got.

@Grissy https://ceo.ca/@grissy?fa5b2575dc52:

«I don’t think I received your earlier email. Below are a few points of explanation of the rationale for the financing and the change in terms:

•             Following the senior management transition and completion of the Higginsville Gold Operations (HGO) acquisition, the Management and Board of Directors of RNC Minerals felt it prudent to strengthen our balance sheet. Rather than continuing to complete small ‘band-aid’ financings, we opted to secure $18 million in equity financing which would provide us with adequate funds to advance our internal growth initiatives. The funds are predominantly sourced from long-term, large institutional investors which have shown a propensity to add to their positions in the market and support companies like ours for the long-term.

•             With the recent positive sentiment in the gold sector, RNC and its financial advisors attempted to take advantage of a window in the equity market with an $18 million “bought deal” offering of common shares at $0.40 per share. Unfortunately, given the tight pricing of the financing relative to the reference price, the underwriters were unable to attract a complete book of the desired long-term investors under the offering. This meant that the underwriters would be left owning a meaningful position in our shares following completion of the deal, which would put significant pressure on our stock price following closing.  Furthermore, the pricing was not sufficient to attract the long-term institutional investors RNC Minerals was looking for to take the Company to the next level. 

•             With this in mind, our underwriters proposed to revise the deal terms to include a half-warrant as part of the financing. The revised terms are for an offering of $18 million (the same amount as the original financing) in units at a price of $0.40 per unit (each unit consisting of one common share plus one-half of one warrant, with each whole warrant exercisable into one common share at a price of $0.50 for a period of 24 months from closing). We and the underwriters have received expressions of interest from long-term institutional investors to participate in the financing on these terms, allowing us to successfully fill the entire book, with no shares anticipated to be left unsold at closing.

•             Furthermore, the ‘cost’ of this incremental warrant will be partially offset by a reduction of the underwriters’ fees by 25%. 

•             We look forward to a successful closing of this $18 million financing and furthermore to delivering on a number of       goals we have set out for ourselves to maximize shareholder value:
o             Maiden production guidance at our consolidated Australian operations
o             Continued cost reduction and streamlining of our operations, realizing the numerous synergies acquired with HGO
o             Development of a mine plan for our consolidated Australian operations
o             Continued focus on gold, while allowing our shareholders to realize value in our nickel assets
o             More consistent market messaging as a gold focused company

We are excited with the recent growth and stability of our Australian operations, and we look forward to providing additional news on upcoming catalysts to our shareholders in due course.

Regards,
Rob »

@BayStreetBagger https://ceo.ca/rnx?c503d4a86db1:

«Hello Rob.

Not sure if my email from earlier went through or not as it doesn't show up in my sent folder. Therefore, I will try to duplicate it as best I can.

I am sure that your inbox is full of emails from retail investors this morning. I am also sure that those emails may contain a certain amount of confusion and/or rage in regards to this mornings news release.

I have been an investor in Royal Nickel since April 2013. That is not a typo.
I have been fortunate enough to have bought in at levels lower than that current share price and therefore do not have any paper or real loses at this time. .

However, I, like many other retail investors, deserve and full and complete explanation as to why management decided to amend an already bought deal to the benefit of Haywood but not to the existing retail investors. If Haywood was having problems selling the bought deal that shouldn't be the problem of retail investors, let Haywood suffer for a little while. Where's our warrants? Where's are sweetheart deal? Where's our explanation? We are supposed to be getting to the point of free cashflow shortly, why the need to dilute further with these warrants?»

@Matthew6v20  https://ceo.ca/rnx?92675e4ef484:

« I had a 35 minute phone call with Rob this morning. Very much appreciate his time. 

His explanation was that they aren't sure if they will need the funds, but they are ramping up production, and they didn't want to get themselves into a spot in a few months where they needed financing, and everyone knew they needed financing. He said they were torn over it but the board thought it would be the best course of action as they start producing to avoid any cash setbacks.

I told Rob that it made shareholders feel like they didn't value us, and they valued institutional investors more by diluting our shares when they didn't need to. He wrote it all down and said he was going to take it to Huet.. said the majority of people are just calling with being angry/ belligerent. 

The LOC is already maxed. 

When we were talking about Mikey's interview with Graeme; I said I was a little nervous about why Sloan didn't give investors more assurance that they would be bringing AISC down.. and he said, that's just how Graeme is. He's working on the plan now, and he's not the type to disclose something until it's done.. I said, "Well, I think the CEO should likely follow that same example. I can't imagine Huet would ever make that mistake again?" he said, No he won't; he is hearing how people are calling him a liar and that's not how he wants to be portrayed.

He said that the R&D and banking side of Haywood are completely separate by law.

So both when Pierre asked those questions; he wouldn't have been privy to the fact there was an offer already available.

He said the mine plan guides will be coming out for the rest of 2019 shortly which everything will flow from that.

Also near term is the 45101 reserve.

The main reason for the financing is they are ramping up production and the board felt better with a buffer even if it isn't needed, rather than being in a position to raise financing. They had an offer on the table today. He said the market doesn't give favorable offers when you NEED financing.

I still think they shouldn't have done it, but that's why they did it. I'm not defending it.

Haywood isn't looking to make a $18MM deal at all time highs.. The offers come in when they know there is value. 

I asked about Selby and why he resigned.. I asked if it was because the board didn't agree with his direction, or if it was because he wasn't a gold guy.. He kind of hummed for a bit and didn't give me much but he just said that Selby is more base medals and Huet is a Gold guy who has been around mines and gold production for many years. 

I asked, "How long before cash flow positive?" He said he didn't know; the mine plan guides would go a long ways towards knowing that.

I said "with 1MM in reserve and expanding at depth.. why do you think the market is having a hard time with it?" he said because of the balance sheet. That the balance sheet is the number one thing on their agenda.. getting costs down, and ramping up revenue. That's the #1 agenda.

He said they're taking drilling from beta now and moving to the open pit.. He said; "we will be expanding that (Beta) resource for many years; our goal now is to get production up so we can produce more efficiently at both sites". 

Another thing he said was that he the main way to bring AISC down is to mine more, so that's why they are ramping up. He said the main costs are relatively flat at the mine, so they more they can mine, the better.

He said the ASX listing should be coming in the first part of 2020.

They are determining what to do with Dumont. The name is confusing to some investors and they know that. They don't know if it's going to be a spin out or sale, but they know that it doesn't make sense to have it. They are a GOLD company now.

You're welcome friends. I'm sure more answers will come up as I read throughout the next few days, but that's all I have for now. I also want to disclose that I'm not a seasoned investor like some of the others here, so you may see me asking questions that seem obvious, but I'm just trying to learn as much as I can. Have a nice day! »