RE: Here's a good vid on Kenyan licence issues7 Aug 2020 15:20
read this Dukey old chap, this is called analysis....
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Posted in: RRR
Posts: 7,964
Price: 0.555
No Opinion
RE: RE: Convertible Loan Notes06 Aug 2020 12:12
As an example of how to look at the decision making on a CLN: lets suppose the CLN holder has £100k in the CLN and that the coupon is 12% and that the conversion price is 0.6p and it expires on 19/12/2020.
Monthly interest is £1,000; converting at 0.6p gives 166,667 shares per month.
Lets suppose my target price for exit is 2.5p. Then for each month I hold the CLN then I make £4,166.68 per month that I hold.
From 19/08 there are four months left. If I converted flat now and got my money back that would be one thing but if I held I could exit at 2.5p then I have given up 4 x £4,166.68 x 4 which is £16,667 on £100k on early conversion. So I would be giving up a return of 16.67% between now and December. Any CLN holder who thinks that they can exit in December at 2.5p would hold because the accrual of interest materially improves their position.
So it come down to down to a few things: is there any risk that the CLNs plus interest won't be redeemed in December, what is the price likely to be on conversion, what is the fair value calculation once Migori has been reissued, DRC progressed, Victoria progressed and the iron ore assets progressed.
We are in a metals bull market and in particular in the metals that RRR is in: only someone who really needs the money or has a much better transaction to rotate into would convert early. Now if RRR spikes hard and I think that it has gone way over fair value, then that is a different matter. However, I don't see that being an issue before October. If we spike hard off the back of the TSX listing, the ASX listing and progress on DRC then it would be time to sell.
DYOR
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