(CORRECTED ROYALTY RATE
This is re-post of Post # 29418908 but with the royalty rate corrected to 1.5%. Sorry folks. My earlier post ended up with wrong royalty rate after I failed to notice when editing the bulleted formatting that the digit "1." had dropped off).
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Agreed, thunder54! When you announce a cobalt – nickel – scandium deal and your share price falls by more than half in one day - you know it's a shocker.
The first warning sign was that the deal consideration was not listed in the Highlights. Read on, and the reason becomes clear. After wading through hype about what else was within a radius 85 km away, then through overwhelmingly detailed geology, then through previous exploration (which included hundreds of holes drilled before) … the reader eventually gets to the "Commercial terms …". Whoops – can you believe it??:
* $4M cash;
PLUS
* 1,000,000,000 (yes, that's one BILLION) shares – which would have had an implied value of $17 million the day before the announcement, based on the last sale price of 1.7c before the deal was announced;
PLUS
* a 1.5% gross sales royalty on certain production.
I see that the Company also will issue 62,500,000 shares at an issue price of $0.004 to "Henconner Pty Ltd (or its nominee), in consideration of the Acquisition."
* Capital gains will accrue to that lucky entity at the rate of $625,000 for every 1c that the share price rises from $0.004.
* Even as I write this, after the share price has been slaughtered today (fallen from 1.7c to 0.75c currently), that gesture has an in-built capital gain of 0.35 x $625,000 = $218,750.
* If Riva's share price had remained at the last close of 1.7c, those shares would have had an in-built capital gain of 1.3 times $625,000 = $812,500.
Given that shareholders' funds will also be used to pay the Vendor its cash + shares + royalty as listed above, the Company should promptly disclose:
* the names of each person who has a beneficial interest in Henconner Pty Ltd (or its nominee); and
* what Henconner actually did to earn such a large share issue.
I wonder if it's too late to extend the terms of the banking inquiry…
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