Ann: Pre-Paid Royalty Mandate, page-20

Attacking the messenger because you don't like the message?

I'll answer the one question you asked. Huge capex relative to market cap is relevant because if you have to do a traditional capital raise to fund some of that capex then you need to issue new shares. If you have a large market cap, then you can raise a good amount of equity with minimal dilution. If you have to raise $100m on a < $10m market cap then that's just not happening because you'd never find someone to participate in an equity deal like that and current holders would mutiny... so you raise a little bit, hope the share price improves, raise more, hope the share price improves, repeat until you have a project or a partner or a sale. Only they didn't do that, they struck a royalty deal.

This royalty deal when it comes out will not be all the capital required to get to some kind of developed state where they could have a joint venture or sell the project, they'll need more funds to progress for keeping the lights on, and for developing the mine. Doing an early royalty deal makes it potentially harder to raise capital because the project is worth a bit less if someone has a deal to take a cut of the revenue. Banks and private equity don't usually lend to small market cap explorers/developers. The whole reason they engaged "next pumpers" was to try and boost the market cap prior to raises. They had 0.6 quarters of funding left in the last quarter, they had to get funds desperately.

Why does a royalty deal make the project worth less? Because the top line is affected. Say they sell 2% of revenue on this deal (just as an example) and somehow HVY makes it into production. in 2021 RDG made $1.5m gross profit on $25m revenue. If they had to pay a royalty that's 1/3 of profit (500k). So that's why it acts as a higher ranking "debt" because it comes off revenue and not profit, so even if the mine is loss-making, they still get paid in full, and even if the project is sold to someone else because HVY goes into liquidation, they still retain their rights to the project and get paid.

Deep down you know these are real issues, which is why you've resorted to cheapshots rather than a counterargument. The easiest way to dismiss a harsh truth is to pretend it's not worth your time to even consider it.

Anyway, have a nice day!