Thanks foryour response (which is the only one that has addressed what I raised in myposting of 16 December).
Frankly, Idon’t believe in upramping nor downramping. My dilemma has been that I regardRVR as seriously undervalued but the market thinks otherwise and I have beenendeavouring to understand why. I could understand the royalty issue being anegative even though I knew it was a red herring but that (as events haveproved) does not account for the disparity between my belief of RVR’s value andthe market price. I suppose everyone buying a share thinks that its price doesn’treflect its value -otherwise why buy? In contrast, those selling may have abetter use for the proceeds (eg personal requirement or even a better investmentopportunity).
I don’tthink your comment “Its never good news when you take on debt to pay your way” is unfair on Management and misrepresents what happened. Instead, what RVR has done is replace a liability (for past and future royalties) of an unknown amount with a fixed debt. The payment was not an expense for the running operations applying to the current financial year only. As you say, RVR has a plan to repay it and once done RVR benefits from no longer having an ongoing liability to pay royalties.
Sure, thereare unknowns on what the cash balance will be. That has only a minor impact onvaluing RVR. Surely, the cash balance, the cashflows from future mining and thepotential from Hillgrove and Liontown don’t create a situation where thefinancial future of RVR is put at risk? Of course, as with any company, thereare uncertainties.It’s fair enough to say that the changes in operations at both sites creates more uncertainty than normal. Consequently, for a risk adverse investor, as it seems you are, that is a fair enough reason for not investing in RVR at the moment. In any event what you do is none of my business and not what my post concerned.
Those riskswill in some way be reflected in the current value of RVR (eg by requiring ahigher PE ratio or return on investment).
Drill results don’t affect the bottom line per se but they can significantly increase the value of a company eg by ensuring a longer LOM and profits for a greater period of time and minimising the adverse impact a cyclical downturn in metal prices might otherwise have.
It isstandard valuing practice, where valuing a project being constructed, toestimate income and outgoings for the project once constructed and thendiscount the net income stream to the present. A check on the value derived (egwith feasibility studies) is to compare the net revenue with the capital costs incurredpre-completion. It is not “a pointless exercise only indulged upon by uprampers”.
The reasonI chose 31 October is because I thought there would be general consensus that,by that date, the uncertainties which you have mentioned would be overcome,namely, Hillgrove and Liontown would be operating and Far West winding down. Ifthis was considered too ambitious, a date such as 31 December could be chosen.This does reduce valuations but does not impact the main point of disparitybetween RVR’s current SP and its value at a time not in the too distant future.
IMO it is difficult to see how Hillgrove and Thalanga won’t have a valuation of $200M each once mining of the Syndicate and Liontown deposits have been established. This is because of the replacement value of the existing plants, the development work carried out (particularly at Hillgrove), the reserves and resources identified. The LOM of both operations and the significant potential to increase these at both sites having regard to the exploration potential of the whole Hillgrove Mineral Field and the surrounding area of Liontown quite apart from a Highway Reward look-alike, the value of byproducts particularly antimony at Hillgrove, the early boost to income from the rich Syndicate deposit and surface gold at Liontown, the broad mix of metals derisking the company with gold in addition being regarded as a hedge against market turmoil.
People will have varying views on the value of each of these elements but $200M does not buy you much in the way of a profitable mining operation in today’s market or even in a less hyped market.
Unless someone can demonstrate otherwise, being extremely conservative instead of realistic, I believe would result in a value of $$350M by 31 December.
I would appreciate the reasons for anyone disagreeing with this assessment.
We will then have our reasons for discounting that value to what anyone is prepared to pay now.
I believe RVR is unloved because it lacks broker support. There are too many companies so brokers can afford to choose companies from whom they can earn an income from underwriting share issues.
I can understand anyone selling because of the current lack of excitement and buying back at a profit later. I have said before my track record in doing that is not good eg do those who sold at 22.5c or higher buyback now or wait until the SP goes back to 17.5c. If I bought back now the SP would go down to 17.5c while if I didn’t, the SP would continue to rise (Murphy’s Law!!)
My personal view is one day (don’t hold your breath) there will be an announcement that propels the SP closer to fair value-this could be an announcement on antimony, unexpected drilling results, a micro-cap fund manager taking a holding… [insert your guess!]
Anyway DYOR GLTA
