Member Info for RightOn

25th July for me please. I suspect that the delays continue a little, but all will come good in the end.

As a matter of interest, have any of the recent posters taken account of the gold loan, and I cut and paste from the RNS dated 22nd June 2020, "14% secured Gold Loan of up to 2,000 troy ounces of gold at a price of US$1,500 per troy ounce, equating to a value of US$3.0 million (c.£2.4 million) before expenses from AIMS pursuant to the Loan Agreement", and on which the interest rate was subsequently raised to 17%, in the RNS dated 18th December 2020. Has this been factored in to your calculations? Does it have a material impact? Or with the present economics is it so small as to be insignificant?

Here follows the link to the video of the company webinar:
https://youtu.be/wNoDP-_-d9Q

Sparky, I think the BoD would agree that ultimately we would be bought out by a major. Indeed, you could almost call that a long term goal. But that is not going to happen for a very long time, as no major would make a decent offer based on an aspiration. The BoD have designed us a project to get rich in a rather clever way. The Empire Open Pit mine is of no interest to any major, it's just too small. But no major would take a punt on making an offer for future potential today, as the knowledge of the resource at the moment is not enough. Large miners generally make their money by buying low risk ventures and operating them efficiently, and not by taking punts, and frankly today we are a punt, or our share price would be way higher. If our results from the deep sulphides come back good, we will certainly invest in more drilling, and even at some opportune time, JV with a major, but definitely not sell. The BoD have designed this company for their retirement and not to sell out early. Besides which, you just can't say we'll be gobbled up, without describing the process. It just doesn't work like that, someone coming along and gobbling us up as if by a random act. No, we're not for sale, and we're staying that way (qualification: we're not for sale till we're a billion dollar plus company).

My apologies, for sportsbilly is correct (thanks mate). In juggling things round to try to get them to fit in, I left out question 9. And it is an important one. Here it is:

9) The company has referred to the deep sulphides as “the ultimate prize”. Could you give an idea of the potential size of that resource and is it something that is a factor in funding discussions or is the open pit being treated as a standalone project?
Answer: The open pit is a standalone project. Funding the underground mine will be a different exercise in due course. The ultimate prize, well yes. Do not forget that we are drilling the sulphides this year. We know we are in a prolific geological district. We know that we are at the epicentre of 3 faults which cross at Empire. The largest US copper mine is at Bingham Canyon 4 hours down the road. We are absolutely in the right area, and we know we have a substantial ore body underground. How substantial? That’s anyone’s guess. “What I am about to say is not backed up or signed off, but is stated to give you an idea of the size.” We know from existing data that the sulphide belt is between 5-7 kms long (let’s call it 3 kms to be conservative), we know it is at least 1,000 ft deep (let’s call it 300 metres), we know it is 200 metres wide, at least. Multiplying these together, we have 180,000,000 cu metres of rock. This rock has a specific gravity of 3, but call it 2, so that is 360,000,000 tons of rock. As for grade, when the mine closed it was mining 6-8% copper, but let us call this 0.5%, (a very simplistic calculation) this gives us 1.8 million tons of copper. Ignoring all the other metals, although they are certainly there (like gold and silver). Putting that into perspective, the tenth largest copper mine in the world, The Grasberg mine in Indonesia, has 10 million tons of reserve, which suggests we are a world class copper deposit, and could be much larger. Looking at a 60% recovery rate, at today’s price, we have a deposit worth $11 billion just of copper, which shows how big this could be and that ignores the Tungsten/Molybdenum porphyry underneath (noting that Tungsten and Molybdenum are each approximately 3 times the price of copper). It could be pretty big. And worth getting out of bed for.

10) How invested are the directors in the success of the company?
Answer: We own about 6% of the company and are strongly incentivised with share options. We are very much in this as shareholders, not drawing down massive salaries, and our benefit will come from share growth, and are therefore aligned with shareholders. We have participated in every equity financing to date and bought in the market. None of the directors has ever sold any shares. We are in this because we see what this company could be worth when we are up and running. When Empire open pit mine is in production, and in production at Red Star, then the underground deposit, then Navarre Creek, First Cobalt doing good things with Cobalt at Redcastle, maybe we’re doing things in Bighorn, I think as I’ve said before, this could be a billion dollar company. I want to be a shareholder then, and preferably without issuing too many more shares.
11) Can you offer any thoughts on your future dividend policy?
Answer: We want to add value and to offer dividends. The backbone is already in place. Since the IPO all the money we have sent to our operating company has effectively gone into a shareholder loan, so sitting here as Phoenix Copper, we the parent company have a $14 million shareholder loan, earning 6% per year. By the time we get into production it will be approx. $27-28 million. We know that we will be throwing cash out very quickly, we estimate maybe $40 million in the first year alone, and we want Konnex to repay that shareholder loan back to us as fast as possible, and would use that cash as a basis of a dividend. We will be in production for 2023, it is quite conceivable that if we have the free cash, and after cash aside for reinvestment, Konnex might re-pay $7-10 million, which means that we could be declaring our first dividend at end 2023. This would be attractive to all shareholders, including myself.
(Please note the person speaking was one of the directors and not me)

8) What do you believe will be the catalyst for the permanent move of the SP from the 40’s?
Answer: The longer our market cap stays above £50 million, the more institutions could buy into our shares. We expect to have 2 more analysts look at our shares (Panmure Gordon and Oberon), and we are hoping we may get some coverage in US through EAS. Some important institutions came on board during the last equity raise, and institutions tend to add to their holdings when they have cash inflows, so we are optimistic there will be more buying. It will be a gradual process enhanced by catalysts. The first drilling rigs arrive on sites shortly, we have results due shortly on the EMG survey, we will have drilling results from Navarre Creek and Red Star plus the Sulphides keeping the pot boiling over the summer, and soon after our plan of operations, which will be in about 6 weeks, we will start talking about financing. I believe that the share price will really move when the market sees that we are funded into production without having to add more shares.
Supplementary Question: What conditions would make you look for equity financing rather than debt.
Answer. Us directors own 6% of the company, and we don’t want to be diluted. We look on other companies and want to avoid their mistakes. Our models show we can pay back any debt in less than 2 years. There is no contest. There is no need to raise equity at the moment, and we have sufficient cash to take us well into 2023, by which time we will be in production and generating our own cashflow.

3) If the results from Red Star look good this summer, will the company have the capacity to run 2 start-up projects at one time?
Answer: First point is that we are drilling Red Star this summer. Assuming this programme is positive and generates a suitable mineable Resource, then we would definitely move Red Star forward as fast as possible. However, there is the possibility that Red Star is very large indeed, and continues up to Horseshoe, which would make the project very large and more complex. One option is to keep Red Star as a small scale underground mine, entirely on patented land, and since Red Star would share quite a lot of capital with the Open Pit mine, the additional capital required to start-up Red Star may actually be quite modest. If we could do that, it may be perfectly feasible to build them both at the same time. But first we need the Resource. Our financing will also be on a project by project basis. Financing for all the other projects will be separate. We will be building the company in manageable chunks, and minimising the issue of additional shares.
4) With the announcement on Redcastle with First Cobalt, are you looking to do a similar type of deal/JV on Bighorn?
Answer: Our property is directly contiguous, on the same rock and we have a lot of chemistry with First Cobalt. Our Bighorn property is about 25 miles north, and so a separate project. We have had people suggesting deals at Bighorn, but we are waiting. Nothing is going to happen in the short term, but we expect Cobalt prices to continue to rise, so it would pay us to hold on to Bighorn.
5) How are we progressing with relationships with US institutions?
Answer: In the last round of financing, EAS Advisors brought in some new American shareholders, and so our US base is expanding, and as we grow, we are becoming more attractive for US Institutional market. We are working closely with EAS and are confident our US base will grow in a big way in due course.
6) Are you planning to upgrade the listing in the USA?
Answer: Yes, we are planning to upgrade, and it’s a question of timing. Once we are producing and generating revenue an upgrade to NASDAQ would make sense. A listing on the main board here in London may make sense as well.
7) Do we expect our business to be impacted by the recent comment that President Biden will look abroad for metals for the electric revolution?
Answer: This was a remark which was taken completely out of context, and has subsequently been corrected. The trillion dollar package now in place means they will not be able to choose where they get their metals from, and indeed, if anything, they may well accelerate the permitting process for metals produced domestically.

Notes from 1st June 2021 Company Webinar
These notes were those I made from today’s webinar, hosted by Marcus Edwards-Jones and Richard Wilkins. They are not verbatim, but I believe carry the message. They are also not an official document but are supplied as a summary from an independent shareholder.

1) With the strong metal prices is the company looking at forward selling some capacity as an option to finance our projects?
Answer: We have looked at off-taking as part of the debt financing, amongst other possibilities, but we are not planning to forward sell part of our production. We believe metals prices will continue to rise, and so will resist anything which locks us in to current prices.
2) Can you give details of our relationship with ExGen, and the financial agreement between us for royalty payments? Will ExGen always remain a 20% partner in Konnex?
Answer: The relationship with ExGen is clear, positive and cordial, and we are close to them. Jason Riley their President is one of our directors, and our Dennis Thomas is one of theirs. Financially, it is our responsibility to fund everything till we have the BFS, then Ex-Gen should join in the funding at 20%. If they do not join in, then they dilute themselves according to a formula. They also have a 2.5% Royalty.

Out of curiosity I went to the company and asked them what would be the results of the economic model, if we inputted today’s approximate metals prices. The results are amazing. With a basis of Gold $1900/oz, Copper $4.50/lb, Silver $28/oz, and Zinc $1.30/lb, we would have pre-tax NPV (at 7.5%) of $193 million (post tax $177 million), and a pre-tax IRR of 101% (post tax 92%).

Can you think of any other project with such a fantastic return, and which itself is designed to throw off cash for the rich projects in the deep. That’s akin to allowing us access to the pot of gold at the end of the rainbow!!

Question 2. From myself. About the roles of the new director and advisor.
Response: Both came across as very good additions to the board, with Harry in particular describing the geological importance of the region, and how he was excited to be on board with this opportunity. He particularly mentioned the prospectively of our deposit, and made very positive words, as a geologist, on this basis. He commended the BoD on their approach, and said it is a very attractive way too develop the small open pit mine before moving to the high level deposits in the deep. Catherine explained her responsibilities a little, particularly in governance issues, and looking forward to her anticipated responsibility of working with Lennie, our ESG coordinator.
Question 3 from Ben. In resolution 7 you are asking permission to issue 23.3m new shares, a possible increase of 20%. What can we read into this regarding the structure of capital raises to build the Empire open pit mine? What is the attitude of the board to raising finance for our projects through equity?
Response: As an AIM company we have to seek authority each year to issue shares. The standard requirement is 20% general authority and 10% for cash. In practise, many companies ask for much more, as we have done in previous years. This year we have just asked for the standard requirement, which we feel sends a very strong signal that we are not intending to issue equity next year. Richard Wilkins stated that the company has sufficient funds in the bank to cover all operating and holding costs plus corporate overheads to take us through to 2023, when we will be in production and generating money. He made it very plain that we were not intending raising cash through an equity issue and further, the company intends financing the construction through debt. One way they are considering is to offer redeemable shares as indicated in the motions. This is not considered as an equity raise, as the issue is considered akin to a loan, with interest being offered, and are redeemable but not convertible.
Question 4 (from Julian). Are you planning to upgrade the listing in the USA?
Response: In short, yes we have a plan to upgrade, and we know this is of interest to US investors.

Here follows my notes from the AGM, noting that these were taken at speed, and therefore did miss some of the detail:

All votes passed with near to 100%. This ended the formal part. This was followed by a brief update from Ryan McDermott, who mentioned the following:

• Everything is running to plan in Mackay.
• We are on course to deliver the Operating Plan in late June which is the main permitting requirement
• The following is planned for the drilling:
o The electromagnetic survey is already well under way
o The first drilling rigs (for site surveys) arrive June 3rd
o The Core drill rigs arrive 15th June for Red Star and Horseshoe canyon
o The RC drill rig arrives mid-July to complete the work
o The Geophysical work will most likely be presented in mid-July as it needs substantial interpretation.
Then came the questions.
Question 1 from Mark. What returns does the Empire project PEA model show at current metal prices?
Response: Using roughly current prices, we have pre-tax NPV of $181 million (at 7.5%), and IRR of 106%.

You said that the news had not moved First Cobalt's share price today. Parroting the words of John Cleese, even a million volts would not have moved its share price today, as there is a holiday in Canada!

I think the key message is we get good potential upside and First Cobalt manage the risk & project. That’s a win-win. Several other key points from my perspective.

1) We pretty much recoup our outlays from day 1 (my understanding is that we have spent a total of just over $150,000 on claiming the Redcastle property)
2) In essence, First Cobalt must spend a minimum of $3m over the next 5 years AND deliver a NI43-101 compliant PEA. If the PEA takes longer and/or costs more than $3m, the additional expenditure is also down to them, not us, whilst we reap a share of the profit
3) This deal allows us to focus on Empire (we would not have spent time/money on Cobalt for some time anyway), whilst still having some potential revenue from the Cobalt.

Now some more background I am aware of:
• I understand that Redcastle is in difficult terrain (Bighorn is much easier, with direct approach roads), so it made sense to pass to First Cobalt, who only have to extend their Iron Creek works to gain access. We would have had to have created infrastructure, and particularly roads and processing facilities, which are expensive.
• If we had delayed doing anything, we may have lost this opportunity to do a deal with First Cobalt.
• Don’t forget, First Cobalt are committed now to spend money on exploration, and if they find Cobalt, and mine, we will take a share of the profit.
• There is another carrot dangling behind, which is the Bighorn property.

Hi Spudton, and anyone else interested in joining the Telegram group, here's the link https://t.me/j o i n c h a t/I5hNdxg-LUTkNvtljGWq1A noting to remove the gaps

Yes, Spudton, but if you posted there liked you posted here yesterday "Agree, 40p is a key indicator as it sits on the downward trend of peaks. Probable retraction to support at 36p if there's no news in the pipeline" was anything to go by, where you must surely agree you gave a fairly negative message, before researching if there was indeed any news, I can understand. It's not fair to give negative messages when you do not know. It's always better to research before you post, and I applaud you for asking the question here.

Good morning Tranter. You asked about my company in Kazakhstan. No, I was with Petrokazakhstan, in the oil refinery. When I joined the company sp was $9, and 4 years later, it was sold by the Canadian owners for $55. I was lucky enough to have some options, and that was my start at investing, and understanding the potential for investing in the right company to make money. Sadly one of my wrong ones was indeed Max Petroleum, and I remember very well the woes of the drill bit stuck in the hole. (not forgetting the corrupt practises which had preceded that).

Hi British Mike, I think you will be quite pleased with the company philosophy. First, from my conversations, I believe the intent is to return dividend back to the shareholders as early as possible. There will be a webinar in a few weeks time when financial matters like this can be addressed, so I suggest you put the question then. Second. The metals come out in palates, the precious metals together, and the base metals together. After that, yes, there is some additional cost, but I am sure that the company have already looked at this issue. Can I suggest you take a look at the detail in the economic model, plus in the analysts reports, and come back to us after your review.

Good morning Ides. I think we need to clarify a very important issue. You wrote "however having studied Hardman's report I see the plan is to raise funds via debt and another small placing next year". This was a comment by Hardman, and is not contained in any plan. Indeed the company have stated several times that they now believe that they have sufficient funds to take them through to production. I hope that makes you sleep better!

Good evening Ides of March. That's not a strange question at all, and I am very happy to answer.

I have known several of the board over about 20 years, when I was in management of an oil refinery in southern Kazakhstan, and they were starting up and running a gold mining company in Uzbekistan. We used to meet on a social basis in Tashkent. They got the company off to a decent start, and when the profits started rolling in, the financial police descended, and the company was taken away from them. That's the reason they are particularly keen that this business is set up in safe, secure environment, like Idaho. There was never any reproach against any of the directors from those days, and there are several investors from those days who are also invested here, which I guess speaks for itself. So, I have known them for this period, and like them, and trust them. I offered to facilitate the webinar, and that's stuck. I would be more than willing to step down at any time in the future, when I have passed my sell by date. I have not been paid anything to do this, and have no connection with the company aside friendship.

They are not wanting to "drive the share price up", just to provide good PR. I think that your scepticism is wide of the mark on this occasion. I do talk with them a lot, as a friend, and I am happy to share my knowledge, within market constraints, of course.

Please do not hesitate to ask any question, and I'll see if I can answer. Alternately, please do call to them directly, for they are a genuinely friendly bunch of guys. Happy Holidays!