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Follow up on Royal Nickel at 39 cents: Stockhouse TickerTrax

Danny Deadlock Danny Deadlock, TickerTrax
0 Comments| May 17, 2013


Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $99). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.

Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.

For experienced investor, Ticker Trax provides and extra set of eyes and ears (idea generation) and for those learning to invest in micro cap stocks, we provide stock picks and market education.

Subscribers receive; (1) new research (stock picks) weeks in advance of being featured on this weekend column (2) exclusive access to our list of junior gold exploration companies (critical for peer valuation), (3) exclusive access to our list of Cash Rich micro cap companies (our Virtual Vulture Fund), which contains 80 companies with almost $3 Billion. Both tables are updated monthly.

NSR sale for $15 million & upcoming developments

This weekend is a follow up to my initial March 28th report: 

Royal Nickel (TSX: T.RNX, Stock Forum 39 cents)  

Shares outstanding: 94 million/ Market cap: $37 million

Cash approx. $19 million

Primary asset:  The world’s third-largest nickel reserve 

Small resource companies remain under tremendous pressure and not surprising, the outside investment community is paying little attention to Royal Nickel. That may be a mistake. 

May 13th RNX closed a 1% net smelter royalty (NSR) sale for $15 million to RK Mine Finance - part of the Red Kite Group with $3.5 billion under management. 

This important fund raising development had no positive impact on its share price - even though it was the equivalent of 15 cents per share. There are two very important aspects to this: 

1) Royal Nickel raises $15 million with zero share dilution 

2) RK is paying $15 million for 1% of future production. This company wouldn't pay $15 million for the right to revenue over a chunk of moose pasture. They obviously did extensive due diligence and feel confident this could become a mine. 

If you review my March 28th report (link above) you may see the importance of this NSR sale. Our speculation here remains Q3 and Q4 2013. We want to see the final results of the bankable feasibility study (BFS), which is targeted for release mid-year. Then cross our fingers the Chinese come in and finance mine development. 

History of many resource companies shows that if a takeover or major financing (or partnership) occurs, it will be within three to six months of a positive BFS. The primary reason for this... it removes a huge amount of risk and liability from the board of directors of the company attempting the takeover or providing the financing. 

Click to enlarge

This remains an attractive speculation in the $0.30’s but complete more intensive due diligence through their most recent corporate presentation. It provides details on the nickel project along with their important strategic alliance with Tsingshan of China. 


Disclosure: Danny Deadlock owns 30,000 shares of Royal Nickel (TSX: T.RNX). _______________________________________________________________________ 


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