The shareholder equity of $12.95M on the RCG balance sheet seems to be reasonable.
This is based on a sum of the parts analysis. I replace some of the items in the balance sheet carried at cost with estimates of the market value.
Key points in my analysis. Your mileage may vary.
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A)
Total Assets 31,292,937 are unaltered.
B)
The liabilities are unaltered.
The shareholder equity are unaltered at $12.958M
C)
From the Trustee's report 6.3.3. The value of the Dufferin Mine and the Tangier and Forest Hill exploration properties will ultimately be determined by exposing them to the market.
ANX acquired the Goldboro project for ~$15/oz in May 2017. This suggests the following market values ...
Tangier 326,700oz $4.90M
Forest Hill 173,200oz $2.60M
Combined the explorations assets have a potential market value $7.5M. That is significantly more than the $1.28M carrying cost on the balance sheet.
The sale of the properties could be used to cover liabilities incurred in the development of Dufferin. RCG has significant tax credits to cover related capital gains if needed.
D)
Dufferin Development Property pg 20 of June 2018 Annual Report
9,870,602 Purchase Price in 2016
+ 6,750,602 improvements 2016
= 16,584,306 Balance June 2017
+ 7,872,214 improvements 2017
= 24,456,520 Balance June 2018
+ 1,197,178 improvements 2018
= 25,653,698 Balance Dec 2018
The original purchase price in 2016 is a first order estimate of Dufferin’s value. There were $6.751M of improvements to get it ready for bulk sampling. I use the June 2017, pre-bulk sampling, number as an estimate of the asset value for Dufferin.
There are $9.07M of improvements recorded for the Development property since June 2017. I use a smaller number, $2.849M to represent the improvements carried out during bulk sampling. The smaller number partly serves as a plug variable to complete the asset side of the balance sheet.
bulk sampling 2,849,149
In this treatment the development property has been given a $6.22M or 25% haircut. This haircut may reflect the idea that some have of cheap ounces. The RCG number might be a better reflection of value. That said, a haircut to the development property may result in increased tax credits for RCG if Dufferin is sold separately.
E)
RCG has roughly $20M of tax credits.
They are an off balance sheet item.
They are included as $0 item the balance sheet as a reminder.
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The replaced items are indicated with an asterisk, "*".
ASSETS
Cash 10,559
Receivables 44,254
Prepaid expenses 63,401
Net fixed assets (RCG) 19,910
Land (MGC) 99,270
Reclamation bond 1,070,000
Plant and equipment 3,053,588
Tangier 4,900,500 * (C)
Forest Hill 2,598,000 * (C)
Dufferin June 2017 16,584,306 * (D)
bulk sampling 2,849,149 * (D)
tax-credits 0 * (E)
Total Assets 31,292,937 (A)
LIABILITIES
Accounts payable 7,270,353
Promissory notes 103,551
Credit facility 8,244,300
Asset Retirement 569,535
Deferred tax liab. 2,147,000
Shareholder equity 12,958,198 (B)
Other 0
Total Liabilities 31,292,937
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Notes:
1)
pg 7 Dufferin, Tangier, Forest Hill ounces indicated in Goldboro slide deck
May 2017 – Acquired [Goldboro] project for ~$15/oz.
Dufferin 208,000 $3.12M
Tangier 326,700 $4.90M
Forest Hill 173,200 $2.60M
Total 707,900 $10.62M
2)
Balance sheet items as of Dec 31 2018
Exploration assets 1,278,257
Development property 25,653,698
3)
TRUSTEE’S FIRST REPORT TO COURT
February 15, 2019
https://www.pwc.com/ca/en/car/resource-capital-gold-corp-et-al/assets/resource-capital-gold-corp-et-al-014_021519.pdf
4)
It does not include the $2.2M DIP financing of Feb 20, 2019.
5)
Dufferin
https://www.rcgcorp.ca/assets/docs/financials/063018-YE.pdf