Analysis Late November 2023What do we know, think we know, and...

Analysis Late November 2023

What do we know, think we know, and what is the likely outcome moving forward.

1 - The failed BBI JV has been terminated

2 - The BBI Rail Agreement has expired and It is believed that BBI have not requested a further extension.

3 - It appears from the BBI website that NC no longer has ownership and that BBI is 100% Todd owned. The News tab on the website was removed some months ago. The BBIG website appears to be a website from a company going absolutely nowhere.

4 - I noticed that when SM was talking about potential ports nearer to our deposits Balla Balla was not mentioned as a likely port. Although, when asked about BB, SM said that if they decided to build a port RH would be interested in talking to BBI about it (but until asked specifically about BB it wasn’t mentioned as a potential port).

5 - We have seen the appointment of a new MD that included performance shares (something that was seemingly impossible prior to the BBI JV being terminated).

6 - We have seen a highly secretive old regime totally flip and changing its name to Red Hawk Mining whilst starting to behave like a more normal company. A company that is prepared to engage with shareholders.

7 - We have seen more informative Quarterly reports and what was once a rarity, informative presentations. We have seen RH promote itself with the press unheard of when the company direction was with the Todd/BBI regime.

8 - We have seen RH develop a comprehensive Scoping Study for production, road haulage and shipping RH’s Iron Ore.

9 - We have seen new staff employed to develop the project with some key players able to earn performance shares upon reaching certain targets. (Unfortunately shareholders have not be advised on the targets that must be achieved in order for those shares to be issued). However, it is clear that the Board must be in agreement with those targets (including OCJ and TIO). Let’s not forget that it appears not to be in TIO’s DNA to allow team members to participate in performance shares. Also it could appear not to be in their DNA to be part of an ASX listed company without the view of prising that company from other shareholders hands.

10 - The board has just had a clean out. TIO no longer have two representatives on the Board. Importantly Woolly, the architect of what was TIO’s (failed) vision for Flinders (with BBI) is gone. Whilst the conspiracy theorists would argue that this is just another ploy to prise away RH IO from minority shareholders, I’d suggest it is the final sign that TIO have given up and want out. Arguably too much attention and too much pain thanks to many minority shareholders that never gave in.

11 - We saw the Stockfeed article and the words “it only takes a phone call’. RH is, IMO, FOR SALE, and failing that will go into production. With the company’s apparent recent TIO controlled history of releasing no news, and absolutely no positive news, could anyone imagine that the article was written without full TIO support? It appears to me that the company believes its best chance of selling is by being successful in at least demonstrating that it can make good profits should the company get to production. This puts very real pressure on third parties as once the high grade Ore is mined and sold no one else can get their hands on it. Also certain third parties will be sharp enough to see that their cost for shipping our deposit are likely to be around USD $30/t less than RH’s proposed road haulage operation. That’s an enormous amount of money they could make upon a successful acquisition!

12 - Of note is SM performance shares are vested if there is a change of control in RH. That probably applies to the other performance shares for key employees but shareholders haven’t been advised of this.

So, what does the future hold? The $6b question!

My thoughts. RH will go full steam towards production. If it gets to production it will be highly profitable particularly if IO is well above the Platts forecast of US$89/t used in the Scoping Study. Which it is, and currently at just under US$130/t. If IO price averages around US$120+/t RH could make enormous profits and pay great dividends to their long suffering shareholders. About time!

If we get taken out, we get taken out. But it won’t be for peanuts IMO! It also won’t be TIO taking us out IMO. The sale price will need to be agreed by TIO and OCJ and I think it would need to be many times higher than the current market cap. Could anyone imagine TIO and/or OCJ accepting anything below a billion dollars all up?

Whatever happens RH is looking real good IMO and there is the prospect of a closer port becoming available around 2028.

What shareholders believe is in their best interest will depend on individual situations. Everyone has their own opinion about value albeit production (dividends) or sale price. It’s not really the time for that discussion.

The resident conspiracy theorists will continue their conspiracy theories no matter until either production or sale (and still complain!).

The above analysis is just my brief assessment of the current situation. It may be mostly right or partially right, partially wrong or completely wrong, so do your own research and best of luck.

All constructive feedback or critique is welcome.