There has been some interesting commentary regarding this...

There has been some interesting commentary regarding this takeover and an emerging binary discussion whether BRB shareholders “must” accept or otherwise risk owning an orphan asset, etc. I believe it its somewhat more nuanced and my thoughts are:

1. BRB as a stand-alone. I concur with others that the recent changes in costs, etc has impacted the relative economics of developing, although I disagree that the development door is effectively shut to BRB. With circa $75m, BRB has optionality and so the question is can BRB show a realistic development pathway that delivers >$120m (the current market cap).

If we revisit the original Open Pit study for Lake Roe, it was showing a pit shell to 215m depth to capture 427,000oz / produce 400,000oz and generate a pre-tax cash flow of $385m over 4 years. That was based on a toll processing solution and a gold price of $2,500/oz. If we inflate costs at, say, 20% and use an average $2,750/oz gold price, on my estimation this modelling would still show a pre-tax cash flow of $330m - $350m (maybe circa $250m after tax or double current market cap).

So, it appears at a high level there remains for BRB a starting development pathway (before considering underground mining options thereafter) that, relative to current market value, is shareholder value accretive.

2. If we look then at RMS, it is having the same stretched economic challenges with its Rebecca project. It really needs to support a large investment in a high volume mill, but the Rebecca ore body as currently defined does not really allow for that. The addition of Lake Roe ore solves for that, and I understand makes the Rebecca economics much more attractive.

RMS is already “all in” on Rebecca by virtue of the money spent in acquiring it – so they must find a development solution.

The acquisition of BRB solves for this and (with a full takeover) does two significant things:

- They get access to a large additional ore body (Lake Roe) with significant extension potential for a very attractive price (currently circa $50m).

- The takeover is also a quasi capital raise in that it would deliver an additional $75m which would go a significant way towards supporting the project development.

3. The combination of RMS and BRB would, on the face of it, seem to be your classic “1 + 1 = 3” equation. However, if RMS does not get to 100%, it becomes a less than perfect solution, in that:

- BRB’s cash would have to be preserved for BRB use – so would be spent developing the Lake Roe open pit.

- BRB would maintain its own operations, staff, Board, listing fees, audit costs, etc – ongoing costs that could be vastly stripped out in a full takeover.

- RMS would probably need to raise additional cash to develop the Rebecca mill to the size it requires.

- The BRB ore would then be processed through this mill under a market based toll processing arrangement, with the final economic P&L of its mining then being available to BRB shareholders (of which RMS would be the major shareholder). RMS would then rely upon dividends to extract value from BRB.

- RMS would always need to be wary of the conflicts of interest in dealing with BRB and the Board of BRB of their obligations in dealing with minority interests. Everything would be subject to heightened levels of scrutiny just because of the inherently high conflict of interest aspects in almost every decision being made by the RMS controlled BRB board.

All very complicated at the end of the day and which may be resolved via a higher offer to get recalcitrant shareholders over the line. It suggests there is a quite logical case here for RMS to put a further $XXm of value on the table to get unfettered access to $75m cash, fully strip costs out of BRB on a full merger and then deal with the mining operations for the two ore bodies in a way to maximise utilisation rates, minimise costs, etc.

4. Open to other’s thoughts, but the above leads me to conclude that RMS needs BRB probably as much as BRB needs the Rebecca project to create the best Shareholder outcomes for both parties.

If this holds true, then it would not surprise if RMS does revisit its original offer in coming weeks to maximise its chances of moving to 100%. I don’t think just getting to a point of control over BRB really provides the solution that RMS is seeking and allow for the most efficient development of their Rebecca project. It could well be a false saving to not increase the offer and then persevere with the outcome with its attenuate higher overall costs.