RDG (ASX) Ann: RDG FY24 Annual Report

Originally posted by Blythefan: ↑

After reading the AFR article about the MinRes / RDG loan, I had a bit of a ferret...
RDG Directors;
Andrew Ellison (Chris' brosuf)
Mark Wilson MRE appointee, head of MinRes
Mike Grey. MRE appointee as independent director.

RDG could not be less independent of MRL. Wild to see it listed as its own company.

This puts into context the loan of $117M from MinRes, which was described as 'interest free' but it has a headline 8.25% interest rate, but MinRes has elected not to charge interest.
This is secured against Ant Hill Mn project effectively, which amongst other things, would effectively prevent RDG from financing Ant Hill via third parties (as I'm sure MRL has a lien on the tenement).

RDG does work for MRL, and $75M of RDG's $136M earnings were comprised as contracting work done for MRL.
MRL back-charged $25M for the refurb of Lucky Bay, paid for by the aforementioned secured loan to RDG.
Which is convenient, because MRL subsidiary Crushing Services International has open receivables at end of 2024 FY of $17.8M. The unpaid invoices from CSI are the bulk of the $41.5M in current assets on the books of RDG, which is conveniently $41.4M. I say convenient because it's nice to have your current assets and liabilities at least close if not in favor of assets, but here, on turnover of $136M p.a. the company is a neat $100K in the red. That's threading a very fine needle.

It's also wildly convenient that nett assets of $132.861M matches up with nett equity of $132.881M.

RDG sublet the same lease MinRes has done from Chris Ellison (at reputedly 70% above market rates) at 14 Walters Rd Ozzie Park. At least in this case it's semi-indpendent as far as RDG's independence frok MRL could ever be divined. But! This is a family tradition.

RDG is renting a property in Newman from Grisham Investments (A. Ellison and G Reid trust) for $257K, up from $210K last year; it's on a rolling lease arrangement after signing in 2014 and originally running till 2019. It's worth keeping in mind that this is a 25% increase to lease costs, so the inflation we are seeing in the general economy is hitting hard up in Newman! Poor RDG.

Ultimately, looking at the headline numbers, Lucky Bay is starting to turn around, with $18M revenue, up strongly from last year.

Regardless of how Lucky Bay goes, RDG is entirely dependent on MRL for revenues, and that is dependent on MRL in the post-Chris Ellison period, electing to continuing to forward RDG deferred interest loans, to allow RDG to sub-contract for MRL business (and here we must consider whether the rates charged are market rates or mates rates carefully engineered to get RDG $100K over the line in current assets), and so on.

I would think that a fully independent MRL Board would cut off Andrew Ellison and RDG, bring all work in-house within MRL, thereby cutting RDG out of its major contracts, and begin charging 8.5% interest, which would cost RDG ~$10M p.a. in interest costs. Given the tightness of current assets and liabilities, and the reliance on MRL for contract income, this would be difficult for RDG to manage, I would expect.

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Excellent analysis. I'm surprised by the increase in the MD and Executive's remuneration, especially considering the significant rise in debt owed to MinRes. Without MinRes's support, could RDG even continue operating? Since MinRes is the major shareholder and has substantial loans extended to RDG, wouldn’t it make sense to bring RDG fully under MinRes's business, eliminating the need for a separate board, CFO, and other overhead?

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