Hi Catepillar, Sorry for the slow response. I was away for the...

Hi Catepillar,
Sorry for the slow response. I was away for the weekend and just got back to this. There is a part here you may wish to respond to under the heading of Supergene Enrichment as you are far more qualified to discuss this than I am.

Anyway, here are my thoughts regarding BRB for what it’s worth.

I have been holding BRB since the 2013 CR. I purchased more for the free stuff [options, BRBCA’s] on offer more than anything else. I sold the heads for a small profit, holding the rest for the longer term. I have been buying BRBCA’s since April last year for an average buy of ~.008c and repurchased THE FPO’s again after seeing Tom buying consistently on market all the way from the 2c range. My average price of BRB’s is ~ 5c. I sold some to protect my capital at 20c a couple of weeks back.

I have been getting more and more interested in BRB for the last year and have been a little surprised that the market doesn’t really seem interested. Perhaps it’s the tight registry and low number of shares on issue that is partly responsible for the lack of interest?

One thing I did notice was about six weeks ago what appeared to be bot trading commenced. It was partly responsible for the rise in sp. Some days I don’t think there was one real trade at all! Trades occurred every 3 minutes [off and on] for small parcels worth around $200

The other issue I am a little concerned about is the 604’s that have recently been released. These holdings were as far as I can see from the original IPO. Is it that they are taking a 50% profit after four years and a languishing sp for most of that time? Some comments in those 604’s state readjustment of portfolio … buying and selling [hence maybe the bots?]? Smarter people than me may know what that trading may mean.

I’m not getting carried away as to where this may go but I am getting a little excited. Tom is no f00l! He has years of experience, runs on the board, has written books and the tone in recent announcements is one of confidence. It’s there, all that remains to be seen now is how big it is.

BRB listed on the ASX in April 2012 after the IPO was heavily oversubscribed. The initial terms of the IPO were:

For an offer of 40,000,000 Shares at an issue price of $0.20 each with one free attaching option for every two Shares issued (Attaching Options) to raise $8,000,000, and the right to accept oversubscriptions by the issue of up to a further 2,500,000 Shares together with Attaching Options to raise up to an additional $500,000.

A total of 6,000,000 options have been issued to executive and non-executive Directors or their associates for no consideration.

These options comprise the following:
• 3,000,000
Options on issue with an exercise price (“Exercise Price”) of $0.25 each (“25c Options”) that will lapse at 5.00 pm, Western Standard Time on 30 June 2016 (“Expiry Date”), and
• 3,000,000
Options on issue with an exercise price (“Exercise Price”) of $0.30 each (“30c Options”) that will lapse at 5.00 pm, Western Standard Time on 30 June 2016 (“Expiry Date”).

BRB’s sp traded in the mid 30c range after listing before slowly slipping to it’s all time low of 2.3c in April of last year. However, one thing I like is that during and since this time, Tom Sanders has been buying on market.

Director buying – Tom Sanders 2015
9th December 2015 150,000 for $12,855
12th August 2015 114,200 for $5,824
7th August 2015 1,257,389 for $42,751
4th June 45,000 for $2,538
26th May 55,000 $2,882
15th May 37,737 for $1,962
12th May 129,454 for $5,618
7th May 173,125 for $5,955

Director buying – Tom Sanders 2014
Three buys in 2014 45,763 for ~$3700

On top of this, Tom has taken up his rights in two capital raisings – 2013 and 2015

Share Registry and Directors interests
As has already been mentioned, the registry is very tight with BRB.
BRB has less than 83m shares on issue and the top 20 holding more than 85%
BRBCA [I’ll get back to these] have less than 6.9m shares on issue with the top 20 holding almost 90%. [Last AR, recent trading and events may have changed this].

Tom Sanders – Direct and Indirect
19,707,998 FPO ~ 23.8%
2M unlisted options 22.8c strike
3M unlisted options 27.8c strike
1,309,871 partly paid shares BRBCA

Michael Kitney
1,392,550 FPO ~ 1.7%
55,000 partly paid shares BRBCA
500,000 unlisted options 22.8c strike

Mark Edwards
1,180,000 FPO ~ 1.4%
500,000 unlisted options 22.8c strike
65,000 partly paid shares

Total director holdings ~ 27%

Speculation regarding a CR
A CR will no doubt be needed sometime in the future but I don’t think we’ll be seeing it before the full results of this current campaign are known. When it does eventuate, I don’t think it will be heavily dilutive. Here are some of the reasons I think this:

The IPO for BRB closed heavily oversubscribed raising $8.5m in March of 2012.

Since that time BRB have undertaken two very modest CR’s:

*November 2013 on the basis of 1:4 @ 11c.
With that CR, for every two shares subscribed for investors got one free attached option in the same category as the existing IPO options BRBO [since expired] and one partly paid share [BRBCA] paid to 1c. This CR had a 65% uptake from investors, the rest being placed by Patersons.

*September 2015 on a 1:5 ratio @ 4c.
This CR again was closed 65% subscribed for [when you take into account oversubscriptions by sh].

Given the current sp and depending on results, it will be interesting to see who and at what price any CR occurs at and whether this is some sophisticated professional investment.

R&D Grants
BRB has received around $3.28M from R&D grants over the last two years:
On 8/7/14 BRB received a $1.78m R&D rebate
On 12/11/14 BRB received a $0.93 R&D rebate and
Reported in the last quarterly BRB received a $0.570m R&D rebate.

Whilst they may not be generating money from mining, BRB are receiving some money to replenish the coffers.

Current drilling campaign
Current drilling is on a 50% drill for equity basis. Again, this is minimising expenditure.

Spending vs Administration
As Caterpillar mentioned, the last quarterly shows BRB spent almost four times the money on exploration activities than they did administration. Look at the prospectus from 2012 and see this amount was almost five times.

Methodology for discovery
BRB have demonstrated a slow, methodical and best use of funds strategy to lead to this discovery. It may not be sexy and excite the market but it is getting the job done. If you look back at the IPO prospectus [that sadly I can’t copy and paste as it’s protected] there is a good explanation regarding the research and changes in understanding of the Eastern Goldfields region of WA. I have typed up a little below:

2001 – 2008 new government research related to the timing, distribution and nature of the gold mineralising events in the eastern goldfields region. In 2010 Breaker moved quickly to apply for a large number of tenements that specifically targeted underexplored major faults situated adjacent to regional anticlines, domal granite intrusions, greenstone belts and fault bends.

Several of Breaker’s projects are situated along strike or close to gold discoveries make by Gold Road [ASX:GOR last trade 50c] and Regis Resources [ASX:RRL last trade $2.70 – up over 100% in the last six months!].

BRB have had a long held strategy of making an early discovery to fund future development of other projects. “…Breaker’s forward strategy is one of selective drilling of high priority gold targets to generate near-term discovery, such as the Lake Roe and Duketon North Projects, and strategic joint venture to accelerate exploration in other areas where a longer term financial commitment is necessary to advance to potential discovery”. 2015 Annual Report P.p.2

Tom has expertise in project generation, exploration, mining and corporate management with a strong emphasis on gold and nickel in Western Australia. Mr Sanders founded ASX-listed Navigator Resources Ltd in 1996 and as Managing Director guided that company from initial project acquisition to ASX-listing. He then oversaw the building of a two million ounce gold resource inventory through discovery and acquisition and was responsible for the establishment of a rare earth metal resource at Cummins Range. It was his presence on the board that is mainly responsible for the impressive list of names on the share registry. Mr Sanders was responsible for identifying and acquiring Breaker’s projects.

Lake Roe is not a flash in the pan project. BRB has been informing the market for over six months. It’s only now that the market has woken up to its potential.

BRBCA – Partly paid shares
In the 2013 CR, BRB issued 6,887,498 partly paid shares. These shares have an issue price of 20c but are only paid to 1c. When issued, there was a guaranteed ‘No Call’ period of four years [Until December 2017]. There was, nor has been as far as I can see, any mention of when or how much the first and/or subsequent calls may be. In any event, there is just over $1.3m out there that can be called up in December of next year.

Options
The 6m options that Caterpillar mentioned with strikes of 22.8c and 27.8c were issued to management after the IPO under the Employee Option Plan. Originally with strikes of 25c and 30c respectively, the strike price was adjusted twice as a result of issued capital in the two CR’s undertaken in 2013 and 2015. Assuming the current SP stays where it is, there is potentially $1,536,000 that could come into the kitty before the end of this financial year. The question I have is what is the maximum percentage one person can hold given Tom already holds 23.8% of BRB

Change in tone of announcements
Ann 4th December 2015
”… Preliminary results confirm a new gold system of considerable scale and coherence that is open to the north and south”.

Ann 29th January 2016
”…The results upgrade the continuity and resource potential of a greenfields gold system of scale and coherence that is open in all dimensions”.

The terminology from the 29th January ann was repeated again in the RIU Explorers Conference Presentation with results reported in that presentation as ”… a big system signature”.

Supergene Enrichment
This is something Caterpillar and I have briefly discussed. I would allow him to expand on this point as he is far more experienced in this area to explain this. Basically, we discussed the fact that should the mineralisation be a result of supergene enrichment, results may not necessarily improve from the north to the south as expected. This may have a negative sp effect as many new holders may have built into the current sp improved results. It doesn’t necessarily mean however that BRB have not discovered something large. If you believe BRB are onto something, this could create an buy in or trading opportunity?

I don’t think Caterpillar will mind me inserting this here as it may save him some typing time:

“ … I should have mentioned that the EOH AC drilling, or RC drilling for that matter, is perhaps ending in a "Supergene enriched" zone, where the above Au has been re-deposited to a lower level.

That may be reflected with the new RC drilling, where the higher values from the earlier AC values may not enhance the new assays expected at depth from the latest RC work. That’s OK. We are really looking for a nice average value in the Primary Mineralisation to be somewhere around the values of the SuperPit, at 2.5g/t would be pretty exceptional! As I think Tom has previously expressed, anything at 100m +- is a "free grab" in open pit terms!”

Hope that helps and gives rise to more discussion.

Regards,
Perdy.