will rni survive?

Some commentators think that many micro cap explorers, and even some small miners, are going to disappear within the next 6 months or so because they will run out of funds and won't have the where-with-all to raise capital to keep them alive. Will RNI be one of those? It's a question that needs to be posed imo.

1. As at 30/9 there was $3.882m in the bank with a projected expenditure for the current Q of $1.7m. That should leave about $2.182m in the bank as at 31/12. In addition, RNI can draw $2m from the Taurus bridging loan, making a potential reserve of a bit over $4.1m as at 31/12.

2. So, there is $1.7m (exploration, development and admin'n)expected to be spent this Q. What else is there that we will need money for? Well, maybe nothing this Q, but next Q we will need:
# $2.8m by 31/1 if the MZM option is exercised
## $3.5m some time to finish the gold plant (that's a maybe too), and
### $13+m to pay T loan back and interest by 8/2 (that is NOT a maybe).

That's a minimum of $13m and a max of about $20m.

3. Where will the money come from? Maybe not spend # and ##, but you still have ###. Unless T extends the loan or there is replacement interim finance with another institution, then RNI will have to find about $13m. The expected $2.182m in kitty at 31/12 would imo be reserved for ex, dev and admin for the next Q.

4. So where does RNI get that large amount of money from?
* non-bridging loan granted to fund repayment, MZM, plant finish and exploration etc. FS would have to be spot-on and/or
** Cornerstone Investor to fund same things (maybe in conjunction with*).

5. IMO the money can't come from anywhere else. If Resolutions 3,5,6 and 9 are passed (and I will definitely be voting "yes" to all 4), then that will empower the Board to place the share equivalent to a max 25% of the issued shares. Assume we have 300m shares (close), then 75m shares could be issued without going back to a SH meeting. Say SIs come in at 5c, that only raises $3.75m, so nowhere near enough by itself. With a loan too maybe, but the Board would be irresponsible imo if it permitted such a big dilution and raised only that relatively small amount of money.

6. So back to 4. * would require a vg FS as a minimum requirement, but ** may not, relying on the potential of the company instead. Now let's examine ** -ie a CI. Last year's AGM passed the necessary resolutions to empower it to make placements increasing the shares by a total 25%. If R's 3,5,6 (15%) and 9 (10%)are passed then the B will be able to do the same for the ensuing year. Assume a CI wants 19.99% of the company after the placement. Issuing just under 25% yields that result if the CI holds no shares already. The CI wants to be under the 20% threshold. A current holder wanting to become a CI would get less than 25%.

7. CIs normally will pay a decent premium to get such a big stake off-market, and sometimes want an off-take agreement as well - ie a guarantee that it gets a supply from mining of a particular mineral. A very good case in point is Posco and Sandfire in May 2008 (NB, one year before the DeGrussa discovery). I have extracted this from the SFR website:

"SANDFIRE SECURES STRATEGIC ALLIANCE WITH KOREA’S POSCO
A$7.2M SHARE PLACEMENT AND OFF-TAKE AND MARKETING ARRANGEMENTS
• Proposed A$7.2M share placement to Posco Australia, a subsidiary of Korean-based POSCO, the second largest company in South Korea and the world’s fourth largest steel producer.
• Share placement comprises 16.5M fully paid shares at 40 cents and 2.5M partly paid ordinary shares at 25 cents (with 15 cents unpaid).
• Subject to all necessary approvals, Posco Australia to become Sandfire’s cornerstone shareholder with a 19.99% stake.
• Off-take agreement with Posco for up to 30% of future mineral production from Sandfire projects (excluding gold and diamonds).
• Sandfire to accelerate exploration & evaluation of its diversified portfolio of manganese, lead-zinc-silver, iron ore and gold projects in Australia.
• Positions Sandfire to target additional strategic resource opportunities.

Diversified Australian resource company, Sandfire Resources NL (ASX: SFR – Sandfire or the Company), is pleased to announce that it has finalised agreements with Posco Australia Pty Ltd (POSA), a subsidiary of the leading Korean-based global steel group POSCO, to acquire a strategic 19.99% stake in Sandfire through a proposed share placement comprising 16.5 million fully paid shares at 40 cents each and 2.5 million partly paid ordinary shares (Contributing Shares) at 25 cents each (with 15 cents unpaid).
The Share Subscription Agreement, together with a Commercial Agreement, establish the foundations for a long-term alliance between Sandfire and POSCO, providing an immediate A$7.2 million cash injection as well as the financial backing and strategic marketing, technical and corporate support of the world’s fourth largest steel producer, a Korean-based global company with a market capitalisation of some US$45 billion."

8. Now I know that SFR was about 15c at the time and struggling. What a windfall it was for SFR getting that money and at that premium price, but what a bonanza it turned out to be for Posco! Both got lucky, and the rest is history. This time last year I asked Miles Kennedy about the merit of passing last year's equivalent res'n to this year's R 9, which would increase the normal 15% by another 10% - hence the 25% referred to above. It is Spec Res'n so need min'm 75% pass rate. He said that he would like it passed because it then gave the Board the power to make a big placement without going back to the Shs. He told me how Posco virtually saved SFR, but as P wanted 19.99% (as per calc in 6 above this meant 25%) and the Board was limited to a max of 15%, it had to call an expensive meeting of Shs to pass the extra percentage. This why the 15% + 10% can be so important.

9. Therefore vote "yes" for R's 3,5,6 and 9 if you want this, or are ambivalent about it. This would then enable the Board to make a 19.99% placement to a non-holder such as Posco. Will lightning strike twice for Miles K, Tom M and John H " - then on the SFR Board, and now of course here at RNI.

10. Now to answer my question "will RNI survive?" I am very confident it will. There is far too much of value and potential at stake - far too much! Will it proper? You betcha, if a CI such as Posco joins us.

Other opinions are most welcome, including those HC people who hold and read but do not/or rarely post here.