My opinion: Their business model appears very solid - however we've seen an average performance to date...bolstered by a couple of smaller insto's getting out.
At the current gold price US$633, the Reefton Royalty alone will be bringing in AU$4,265,235.20 by as soon as next year so the company won't need to go to the market for funds. Top 20 are holding 75.5% and every indication is that some of them are looking to build bigger positions when the dust settles.
Royalco plan to spend $AU3,900,000 (drilling AU$3,300,000) a year starting momentarily, so assuming gold is $579 + there won't need to be any dilution or cash burn unless we strike a massive deposit. In which case we won't be complaining!
At the current gold price they will actually be making money - not bad for an explorer.
Using IRN as an example, Indophil went from 78,743,004 to 181,137,336 shares between 2002-2003 to raise $25,000,000. In the RCO example a lot of this dilution would be avoided and assuming the same success we'd likely see RCO's share price closer to $5.00 thanks to the royalty streams as well as $8,000,000 payment from OXR assuming a big discovery. As I said a very solid business model.
Despite a disappointing start I feel we should look at this subdued performance as an opportunity instead of a disappointment. Once the smart money takes their positions this could be one of the tightest share registries on the asx. :-)
Pow
RCO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
