RE: M&A19 Mar 2019 10:47
1. I have no idea when a deal will be done on Musonoi and neither does anyone else. It is going to be down to the nature of the deal proposed and who the other party is.
2. Note that there is no requirement on RRR to disclose offers that it has already received and turned down. Once it has a deal in process, it will not make an announcement until it is pretty much done.
3. How long a deal will take is down to the offers received, them being acceptable, are they cash only, cash and paper, paper only, whose paper is it and so on. So a cash shell offering cash and paper would not in my view be attractive. A deal in Glencore paper I would take. Obviously, only my opinion here.
4. Next fund raise? That depends on a few things. Para can be sold, the shares are out of escrow; JMS can be sold shortly, the shares will be out of escrow in the next few weeks; we will likely get Migori back in the next few weeks, I expect that some sort of deal releasing cash will be done there; Elephant Oil could well be IPO'd August/September time; I expect Steelmin to be sorted shortly. So as long as everything doesn't simultaneously grind to a halt, cash should not be a major issue.
5. There are a number of ways of valuing Musonoi; EBITDA multiple, DCF, NAV, analogue/comparative analysis. The only way available to us at the moment is the last, analogue.
6. The analogue is the Kalongwe/Nzuri Copper/Chengtun deal. Chengtun has bid $79mil for Nzuri which has 85% of Kalongwe, so that is our starting point. I think that more work is required at Kalongwe to bring it in to production and it will be a more expensive site than Musonoi. I think the grades will be shown to be better than Kalongwe and with some drilling work, the resource in place will be shown to be greater. I also think that Nzuri have sold cheaply to Chengtun. Based on that I think that Musonoi is $100mil plus and we have 50.1% of Musonoi.
7. The final figure might be higher or lower dependent on the deal proposed, when it is sold, how hot the M&A market is in copper and the outlook for the copper price. If it was worth $100mil and sold for $30mil I would be more than happy.
8. As a certain bore says but has no understanding of the meaning of what he says, an asset is only worth what someone is willing to pay. Partly what an asset is worth is also a function of what somone is willing to sell it for. If we get the Migori license back shortly and we do the putative JV deal then we will not be a weak holder of Musonoi and we have 50.1% of the VUP JV: RRR calls the shots on this one.
9. In my view the ideal outcome would be a decent sale price, say north of $60mil in cash, a production royalty of say 3% and some shares in a decent company.
10. Ideally, RRR would then institute a share buyback programme for the majority of the cash and keep enough cash to develop the other six licenses and pick up any opportunistic deals.
DYOR
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