RE: RRR24 Feb 2021 10:25
RRR is a junior explorer. The model with all of them, is to scratch around in the dirt, find something, take it to the next valuation inflection point and then move it up the value chain to someone else with a lower cost of capital. No matter what the asset is, it is worth more to someone with a lower cost of capital.
That model worked quite well up to about 2016 and then transactions pretty much stopped. In 2019 that market started to come back and stopped again in 2020 due to COVID. It has restarted and will now accelerate because the industry thinks we are in a commodities super cycle.
AB pretty much said the same thing in an interview about three weeks ago.
In looking to maximise value, RRR has to take each project as far as it can using it resources before the cost of capital outweighs taking it any further. Anyone looking at RRR's assets will be trying to work out if RRR has the capital and determination to take it to the next value inflection point or not. If not, then just wait because RRR will be a weak seller. If yes, then they need to move sooner because they don't want to pay the price demanded after the next value inflection point has been reached.
The best way to get value out of Migori and Musonoi to make it look like RRR will get to the next value inflection point and relatively quickly.
Separately, AB has said that RRR's strategic advantage is to get involved in messy situations and sort them out. Adidi Kanga being the most apposite example.
Another advantage would be if RRR is seen as a good partner because it is good at the above. In DRC RRR is seen as a good partner, mainly because of AB.
Lots happening in the next few weeks. Juno matters to RRR and that will list on 11/03.
We should hear more on the RRAL situation and its licenses imminently.
DYOR
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