Sandstorm Metals & Energy Ltd STTYF

Royal Coal Shaky

[greenandgold]

Careful out there. There a ticking bomb in the SND portfolio. I've been looking at all the portfolio companies--all of them are fine except for Royal Coal, which looks like it's in big trouble. If I had to make a bet, I'd bet it's not going to survive.
*
Sure, Royal Coal recently raised its average sales price to $76.44 per ton, but their cost of production was $94.16 per ton last quarter (it was much worse the previous quarter). It's unclear that they'll be able to close that gap. They are attempting to trim costs by buying equipment and the load-out facility (instead of leasing) but some costs are unavoidable. Tires, diesel fuel, and labor are all more expensive than in 2010. A increase in the market price of coal would help a lot.  
*
Royal Coal has maybe $500,000 in cash, tons of debt, and their market cap has been hammered to just $7 million. Will they need to do a financing at these levels? Unclear.

[elmothefearless]

The question is, if RDA goes bankrupt, do SND's commodity streams stay in place?  My inkling is they do.  However there may be a risk that as part of a restructuring, whoever comes in to buy RDA asks SND to take a haircut on the commodity streams.  That being said SND has contractual terms that they will be repaid the full sum of their investment within 5 years - so I don't

[TrueBull]

Hi G&GI dont see the worry in Royal Coal.  is there something you see that others dont?  they seem to be doing all the right things to reduce costs, and they escaped all theire old legacy contracts.  that 76.44 number is AFTER they pay SND. I have been following them from the begining of the year, and it seems like they have worked out all the kinks.  I talked to management

[TrueBull]

....also, the market cap on Royal Coal is 14.3 mil.  NOT 7 mil. as you stated....please do your homework

[greenandgold]

"Is there something you see that others dont?" I tell you what I see and what others (i.e. the market) see in Royal Coal: a company that's declined from a high of 35 cents earlier this year to 6 cents at the close yesterday. That's a loss of roughly 83%. If the company's so darn profitable then why are shareholders fleeing like rats off a ship? Some downward trends can

[Greenandgold.]

I predicted this RDA disaster in September:   "Careful out there. There a ticking bomb in the SND portfolio. I've been looking at all the portfolio companies--all of them are fine except for Royal Coal, which looks like it's in big trouble. If I had to make a bet, I'd bet it's not going to survive. * Sure, Royal Coal recently raised its

[Greenandgold.]

Now we know find out how "guaranteed" those minimum cash flows to SND actually are. Worthless! * I do expect SND guys to work some magic with the RDA properties they end up owning. Perhaps palm them off to Novadx, which seems to be doing well operationally?

[Greenandgold.]

Classic post from TrueBull on RDA: I dont see the worry in Royal Coal.  is there something you see that others dont?  they seem to be doing all the right things to reduce costs, and they escaped all theire old legacy contracts.  that 76.44 number is AFTER they pay SND. I have been following them from the begining of the year, and it seems like they have worked out all the kinks

[elmothefearless]

Yep, good call.  I'm glad in many ways.  I think this will now be sorted out over the next month or two.  Considering the negative impact and overhang RDA has had on SND, and the relatively nominal amount of cash flow expected to be earned by them, good riddance! 

[Margret]

Well the agreement gives them rights to the assets of RDA, without it they would have gotten nothing. They have minimum cash flow guarantee of $3 million for 2011 coming from Novadx and from the last Novadx news release sounds to have been paid, otherwise they should have said something about it. RDA is a small percentage of SND. I think the markets overreact to it. At least that fear is

[skucount]

Looks to me Watson just lost $11 million of shareholder assets.  Assests in BK never worth what they are on paper.

[Margret]

OK after selling all my shares, I will now short $1 million worth of shares at the market open tomorrow.