RDG -- what is the next chapter?

Cause and effect !

Last weeks cancellation of both the Non Executive Directors options and the cancellation of the CEO's performance rights is highly unusual given each and quite some time to run.This could simply be an accounting exercise or potentially lead to something else in the near future.

There are 2 fundamental questions to be answered for RDG;

1) The "Elephant in the room"...can RDG start to pay back its loan in September to Min Res? ..indicatively yes ..see working below.
2) If Min Res exercises its control over the the company and Executive Directors - what does that mean and what does it look like?

I have tried to work from facts rather than too may assumptions and have pretty much all numbers from ASX announcements and Annual report FY24.

ASX - December 2021 RDG reports an NPV for Australian Garnet of $483 million and 29 year mine life.

ASX - FY 24 Annual Report
Australian Garnet NPV $283 million
Garnet sold $19.4 million dollars
Average Price $372.54
All in cash costs $245.99

Therefore a rough margin of $125 per tonne with back calculations of 52,000 sold
At 52,000 tons sold plant running at 40% of name plate capacity of 130k tons after being commissioned in August 2022.
Repairs and improvements to the plant have been carried out since July 24 with the bulk of the work completed early this year.

Debt facility from Min Res has been drawn on a number of times and now is at $130 million.
(Its important to note that a 600 MW wind turbine farm is included in this number)
Interest rate is 8.125 % and no interest has been accumulated.
Debt repayments commence September 2025.

This table simply uses the numbers from the annual report and very little assumption
It shows that providing RDG gets to a steady state above 100ktons p.a it more than likely will be able to service and repay its debt
Operating improvements (as it is a volume game) should see an increase in operating margin and an increase the the 30 plus year production this asset can deliver.

*** Very key point **** unlike lithium ,iron ore,ilmenite ...industrial garnet has and is a very stable price per product globally

Australian Garnet sales so far would predominantly be in Australia in Aussie dollars
Growth will be overseas all priced in USD at FOB prices from import /export data at circa USD 330 per ton.(or $500 Aussie per ton)

Sum of the parts valuation is probably the best as the company caries forward $20 million of tax losses on its latest balance sheet.




2) What does Min Res do from here?

It owns 68% of shares and 130 million in debt
Min Res has a new Chairman and newly reconstructed Board
Still remains unclear if Chris Ellison is leaving
Still remains Corporate issue such as the recent Kali issue in the paper.

A new Board of Min Res coming in is focused on Governance,cleaning up the business to a much clearer Corporate story and focused on reducing debt.
Onslow is core to their debt reduction strategy.

With respect to RDG they can:

1) Call the debt and put RDG into a DOCA if it were to default...problematic ...unlikely
2) Buy the balance of equity don't own ..probably Min Res shares and at what independent value.If Min Res swallowed RDG just creates more corporate mess and a more confusing investor story for Min Res share holders considering Andrew Ellison is CEO of RDG.
3) Put new Min Res known management and possibly put Min Res other non core assets into RDG such as the stake in Ballard Gold mines they just acquired.

Who knows but i suspect we will find out shortly given the events of last week.

on the current plant ,it should be possible to be producing circa $20 million in EBITDA annually.
It has more than 30 years supply and a second wet plant and increased scale dry plant could see this double.

Given the complete vacuum and lack of information if roughly what is written here is explained and close to correct the stock likely to be trading back between 2 and 3 cents shortly

At 1.2 cents ...its just ridiculous given operating asset with more than 30 year cashflow