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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.
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). _______________________________________________________________________