RESERVOIR MINERALS INC V.RMC

New Haywood Comments

[psj567]

Haywood released a new coverage note on Lundin Mining today and had several comments on RMC and an entire subsection entitled Cukaru Peki Valuation / Reservoir ROFO Considerations. Comments include:

1. "The US $ 262.5 million price underpinning the purchase agreement is arguably low....Hence the next approx. 50 days could prove to be very interesting for the ultimate ownership structure/valuation of Timok-- in part depending on the near-term availability/cost of capital to RMC." 
2. There are "a number of levers RMC could potentially look to pull in order to exercise its ROFO," including but not limited to equity financing, debt financing, streaming, strategic partnerships or a combination thereof.
3. The ROFO is likely being viewed by other third parties as an opportunistic means to gain significant exposure to Timok.
4. If RMC exercised its ROFO through a full equity funding at about $6 per share and at 100% dilution, Haywood's valuation of RMC would increase to $10.50 plus per share. "Details [of financing] aside, we would argue Reservoir is facing a significant value-add proposition."
5. The Timok region has attracted the attention of Majors as evidenced by Freeport wanting to maintain majority ownership of the porphyry and of any new discoveries and by Rio Tinto's recent JV Agreement with Reservoir on RMC's neighboring Tilva project.
6. " In our opinion, Timok (Cukaru Peki) is one of the highest profile discoveries made in recent decades, underpinned by a defined high-grade epithermal resource directly adjacent to large-tonnage porphyry potential and a Major JV partner soley funding (in the case of Reservoir) ongoing exploration."
7. "Lundin has stated it will be its top-priority development focus going forward" if RMC does not exercise its ROFO first instead.
8. Between the epithermal resource and porphyry, a 65 year mine life is envisioned.

In summary, the coverage note on Lundin  is exceptionally positive on RMC and makes clear that RMC is currently significantly undervalued in light of the value of the asset and the value of RMC's ROFO.

[cd673]

Great post thanks for sharing. I think it pretty much validates that everything we collectively pieced together here on the board makes sense and is the likely play. Now we just have to wait and see if things get executed as we hope and that there are no bumps in the road. I think their Target price post dilution is a little low considering half of the high grade is worth 16 bucks a share to

[Buckshot26]

Great post, thank you.

[thorgb1]

Only 49 days at the most to find out which way it goes. Personally, as noted in the Haywood write up, I think they will have multiple options to get the money to match the Lundin offer. Equity offering makes no sense at this point, no need to dilute and the money will be cheap for a project if this magnitude. I think they will have multiple term sheets in play offering them money, and likely also

[cd673]

Let's assume they do not have the BFS yet. And if that's the case especially given some of the purchase price is going to go out the door rather than investing in the project, how would you envision they would get money without dilution? I would absolutely love it if that could happen but I'm not sure in this market. Thoughts? What sort of deal shape and terms?

[rob926]

Last I heard was that we are expecting a scoping study but a BFS is a year or two down the road if Freeport was to finish it. If we had a BFS I think Freeport would have to give it to us and we would have a different story right now. I'll bet anyone who helps with financing will want a buch of warrants and maybe a conversion provision at a set price in the future. I'm good with all of it

[Buckshot26]

It is really fun to speculate on this as I can say without a doubt that in all my years of investing in this space I have never seen a deal like this one. Has anyone spoken to Chris or Simon?  Usually they get back to me quickly but this time around they appear to be MIA.  Probably a good sign that they don't feel the need to be promotional and hopefully they have better people to

[cd673]

Great post and good to hear from you again buck. I agree it would be nice if someone loaned them the money.one way I could even imagine is Lundin lends them the money and they go 50 50 on the high grade and 50 50 on 46% of the low grade which would mean no dilution and we pick up more of the high grade plus we know Freeport likes them so it will be clean with them operating. Of course Lundin has