# RCO - Royalco Resources



## powwww (19 June 2006)

Royalco Resources – Overview 

Royalco Resources is to raise $12 million through an underwritten IPO and list on the ASX in June. Royalco offers the balance of a highly prospective exploration land package in the Philippines and a royalty bank with identifiable future cash flows from two mining operations. 

Augmenting raised funds with royalty streams ensures a well-funded ongoing exploration programme and significantly reduces the need to raise further capital for early stage exploration. 

As part of the Royalco IPO, Oxiana is vending in its entire Philippine exploration tenement package in exchange for shares. 

This allows a dedicated focussed approach to assessing mineral potential. Royalco will also be earning an interest in one of Phelps Dodge’s Philippine exploration interests. 

*Key Points * 

• Royalco is issuing 24 million shares at an issue price of $0.50 per share to raise $12 million. Shares will be offered to existing Oxiana shareholders. Royalco aims to list on the ASX in June 2006. 

• Royalco’s main assets upon listing will consist of the Philippines exploration tenements of Oxiana, one held by a subsidiary of Phelps Dodge, and Royalco’s existing royalty bank. 

• Oxiana’s Philippine explorations assets are to be vended into Royalco in exchange for A$5m in shares whilst Royalco is earning a 100% interest in Phelps Dodge’s property by spending US$1.45m. Both Oxiana and Phelps Dodge retain claw back options if a “company maker” size copper or gold deposit is discovered. Oxiana has a strong track record in dealing with junior exploration companies. 

• Retention of Oxiana’s Philippine exploration teams means work continuity and intellectual property retention. The Philippines is a highly prospective country for exploration. The mineral endowment ranks amongst the highest globally. Exploration drilling to commence immediately upon listing. 

• Royalco holds royalty right over 10 properties of which two have projected cash flows. Royalty revenues are expected to commence from Oceana Gold’s (OGD) Reefton mine in 2007 and Kagara Zinc’s (KZL) Mt Garnet mine in 2009. 

*Brief History and Strategy * 

Since incorporation in April 2001 Royalco has acquired rights to some 10 individual royalty streams of which 2 have imminent cashflow potential. The first royalties were acquired in November 2001 over projects in NSW. Further royalties were acquired in January 2002 and an additional royalty was created in 2004. 

The strategy has been gain access to strategic, low risk investments in the resource sector whilst maintaining upside potential, which is a character of Over Riding Royalties (ORR) and Net Smelter Royalties (NSR). The benefit of a royalty bank is that it provides identifiable fundamental value and avoids risks associated with a single project company. 

Other benefits of royalties include: the operator’s propensity to optimize mine life and metal recoveries, and no requirement of the royalty holder to fund further capital expenditure. In addition royalties are leverage to metal price movements, sometimes with escalators as in Royalco’s Reefton gold royalty. 

Royalco has a database of some 500 royalties over various mining/exploration interests in Australia a Southeast Asia and may look to enhance cashflow through acquiring additional royalties. 

Royalco’s royalty portfolio is presently heavily weighted towards gold, a commodity which is generally easily financed and developed meaning earlier royalty revenue streams. Royalco’s first source of royalty revenues is from the Reefton gold project, which is due for commissioning late 2006. Despite a portfolio bias towards gold, the second royalty stream will be from the Mt Garnet zinc and copper project. 

Royalco’s royalty bank is now suitably mature and provides a solid foundation for taking on a higher risk exploration portfolio without jeopardizing the ongoing viability of the company. To this end Royalco has agreed to acquire Oxiana’s exploration assets and team in the Philippines, a deal that was initiated in Nov 2004 prior to the High Court of the Philippines approving the foreign investment law which means the deal terms represent excellent value to the acquirer. More recently Royalco has augmented this Philippine package with a joint venture with Phelps Dodge on an additional epithermal gold play. 

*Royalco IPO Details and Capital Structure * 

Royalco is issuing 24 million shares at an issue price of $0.50 per share to raise $10 million through an IPO. Oxiana shareholders will receive a priority offer. 

*Seed Shareholders * 

Seed shareholders will represent 43% of issued capital post the IPO of which Rio Tinto will hold 6.4%. 

Use of funds Royalco plans to spend $3.9 million per annum on exploration (incl. administration) for the first two years. 

*Royalco’s Assets * 

Royalco’s current royalty bank is listed below of which 2 projects are under development: 

Reefton – is located in the South Island of New Zealand. Ore won from the mine will be concentrated on site and treated at the Oceana Gold’s facility at the Macraes plant which has recently been upgraded. The Reefton operation is set to commence production in late CY06 and royalties will commence in CY07 at a 70kozpa production basis after a six month grace period. 580koz in reserves 

The Reefton royalty, which covers the Globe Progress mine, has reserves of 580oz (7.2mt @ 2.60g/t) and resources of 1.6moz (18.8mt @ 2.72g/t). Oceana is actively proving up additional reserves. The Reefton royalty also covers the Sams Creek project where Oceana has identified a resource of 13.5mt @ 1.78 g/t (800,000 ounces) 

An initial royalty applies at the rate of 250oz per quarter irrespective of the production rate. There is an incremental addition to this royalty should the New Zealand gold price rise above NZ$700/oz up to NZ $900/oz. For each NZ$10 increment above NZ$700 a further 50 ounces per quater. 

Reefton is worth $3,500,000 per annum, with gold at $550USD.

*Royalco’s Philippine Exploration Assets * 

Upon Listing, Royalco’s Philippine exploration assets will comprise those of Oxiana Philippines Incorporated and the Samay project from Phelps Dodge Philippines Incorporated. 

Royalco is acquiring 100% of the Oxiana subsidiary, Oxiana Philippines Inc, for a consideration of A$5.0 million of scrip (expected to be escrowed for 2 years) on listing plus reimbursement of exploration expenditure from 1st July 2005 to the listing date (approx A$220,000). Oxiana will retain a 51% buyback option for each resource discovered which is greater than 800k tonnes contained copper metal or greater than 2.0Moz of gold. Consideration for buyback exercise is US$8 million and a free-carry of Royalco to develop the project up to BFS stage. 

Oxiana Philippines Inc (OPI) has been exploring for copper-gold and gold deposits in the Philippines since the mid 1990s. An impressive array of mineral exploration projects has been assembled over a period of almost ten years by OPI in known mineralised regions including the Central Cordillera of Northern Luzon, The Sierra Madre of eastern Luzon, in Southern Leyte and in North-eastern Mindanao. 

OPI’s tenement portfolio comprises ten separate titles, seven in Northern Luzon, two in northeast Mindanao and one in southern Leyte, covering an aggregate area of approximately 109,300 hectares. 

*Why is Oxiana selling down? * 

The obvious question to ask is “why is Oxiana selling down its Philippine interests”? By vending its Philippine exploration ground into a separate listed structure Oxiana is allowing a dedicated team to focus purely on this asset. Royalco’s management and exploration team’s interest will be completely aligned allowing exploration potential to be maximized. 

Oxiana has a 50.1% buyback option for each resource discovered which is greater than 800,000 tonnes contained copper metal or greater than 2.0Moz of gold. A deposit of this size would be a company maker for Royalco, even with 49.9% interest. The additional attraction to Royalco is that Oxiana will pay US$8 million and free-carry Royalco to develop the project to a BFS stage. 

It is worth noting Oxiana’s track record in dealing with small exploration companies and their shareholders. In late 2004 Oxiana offered Minotaur shareholders, via scrip and cash, a price of $2.29ps for their shares which was 48% over the 30 day VWAP. At the time Minotaur Resources controlled the Prominent Hill project in which Oxiana was part way through earning a 65% interest. More recently Oxiana and Minotaur Exploration raised $18m through an IPO for Toro Energy which is an amalgamation of both companies’ South Australian uranium interest. The IPO was heavily over subscribed. 

FULL TEXT AVAILABLE HERE


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## powwww (19 June 2006)

*Re: RCO - Royalco Resources FPO*

Royalties are the magic ingredient in Royalco float
Email Print Normal font Large font By Barry FitzGerald
May 29, 2006

IT'S something of an oxymoron to suggest that you can have an exploration company with a cash flow.

By their very nature, exploration companies chew up cash in the hunt for a discovery, returning every so often to shareholders, cap in hand, for additional ”” and dilutive ”” equity funds.

If everything goes well, the eventual discovery becomes the project that will provide the cash flow for the company to do some growing without having to reach into the pockets of shareholders.

But there is a model under which a junior company can become self-sustaining while the search for the company-making discovery continues.

It's a model that Melbourne-based Royalco Resources is bringing to the market in its $12 million underwritten float of 24 million shares at 50 ¢ each.

More than five years in the making, Royalco comes to the market with the promise of an ongoing royalty stream from a portfolio of 10 projects, as well as an advanced portfolio of exploration properties in the Philippines picked up from Owen Hegarty's Oxiana juggernaut and US copper heavyweight Phelps Dodge.

It is a mix that investors seem to be taking to with gusto, with early feedback from marketing of the float ”” Shaw Stockbroking is the broker ”” suggesting it will be put away in quick fashion.

The first of the royalties is due to start flowing in the middle of next year. It is 1 to 3 per cent overriding royalty on production from Oceana Gold's new Reefton goldmine in New Zealand. It's paid in gold bars too, thank you very much.

It slides around depending on the gold price, but essentially increases the higher gold prices go.

On current boom prices for gold, particularly in shot NZ currency, the entitlement could be expected to deliver Royalco about $4 million a year.

That's not a bad start for a company that on listing will have a market capitalisation of $28.2 million (56.4 million shares after listing).

Then there is the prospective cash flow to come from any number of the remaining royalties in Royalco's portfolio, remembering all the time that one of the beauties about being a royalty holder is that you can bank on the royalty project operator to be working flat chat to get the project into production as soon as it can and for as long as it can. All that without additional cost to the royalty holder either.

Other royalties in the Royalco portfolio include a 3 per cent net smelter return on Kagara's Mount Garnet base-metals project in Queensland and a 1 per cent NSR on Copperco's Mount Kelly copper/gold project, also in Queensland.

Other less advanced projects covered by Royalco royalties ”” they are either in the pre-feasibility or scoping study stages ”” cover the full range of base and precious metals.

If the "stronger for longer" expectations of the current China-led boom in demand for commodities holds true, most, if not all, of the royalties could reasonably be expected to kick in down the track. Royalco also intends to actively manage the portfolio, trading some royalties out and buying others in over time.

As the $12 million size of the float tells you, Royalco is going to be one of the more active explorers around. It can comfortably afford to spend close to $4 million a year for the next two years and still have about $3 million in the bank come June 2008. What's more, that does not count any royalty contributions. That's music to the ears of those institutions that don't mind parking some funds in an exploration company but which fret when constant calls for fresh equity are made.

Most will also find Royalco's Philippine exploration focus appealing. It's a country noted for its potential to host world-class orebodies, offset in part by the odd difficulty in overcoming the anti-development stance of certain non-government organisations.

But for all of those difficulties, the national government remains strongly supportive of the mining industry. It's one of the country's best shots for improving the appalling living standards of a big chunk of the population.

The global industry has also warmed to the Philippines as a place to explore and develop, with five companies raising $130 million since January 2005 specifically for exploration/development projects in the country.

Royalco's entry into the country is supercharged thanks to its deals with Oxiana and Phelps Dodge. In the deal with Oxiana, Royalco picks up Oxiana Philippines Inc for $5 million in scrip and $200,000.

As a result, Oxiana will hold about 17.7 per cent of Royalco. Oxiana has also secured an invitation for its shareholders to subscribe to the Royalco float. Also on the register will be Rio Tinto, with a 6.4 per cent stake, a holding it got from the sale of certain royalties it held into Royalco.

Other less advanced projects covered by Royalco royalties ”” they are either in the pre-feasibility or scoping study stages ”” cover the full range of base and precious metals.

If the "stronger for longer" expectations of the current China-led boom in demand for commodities holds true, most, if not all, of the royalties could reasonably be expected to kick in down the track. Royalco also intends to actively manage the portfolio, trading some royalties out and buying others in over time.

As the $12 million size of the float tells you, Royalco is going to be one of the more active explorers around. It can comfortably afford to spend close to $4 million a year for the next two years and still have about $3 million in the bank come June 2008. What's more, that does not count any royalty contributions. That's music to the ears of those institutions that don't mind parking some funds in an exploration company but which fret when constant calls for fresh equity are made.

Most will also find Royalco's Philippine exploration focus appealing. It's a country noted for its potential to host world-class orebodies, offset in part by the odd difficulty in overcoming the anti-development stance of certain non-government organisations.

But for all of those difficulties, the national government remains strongly supportive of the mining industry. It's one of the country's best shots for improving the appalling living standards of a big chunk of the population.

The global industry has also warmed to the Philippines as a place to explore and develop, with five companies raising $130 million since January 2005 specifically for exploration/development projects in the country.

Royalco's entry into the country is supercharged thanks to its deals with Oxiana and Phelps Dodge. In the deal with Oxiana, Royalco picks up Oxiana Philippines Inc for $5 million in scrip and $200,000.

As a result, Oxiana will hold about 17.7 per cent of Royalco. Oxiana has also secured an invitation for its shareholders to subscribe to the Royalco float. Also on the register will be Rio Tinto, with a 6.4 per cent stake, a holding it got from the sale of certain royalties it held into Royalco.

Read the full article via the Age website here


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## powwww (19 June 2006)

*Re: RCO - Royalco Resources FPO*

Explorer interest helps some escape mining bloodbath
Email Print Normal font Large font Barry FitzGerald
June 12, 2006
Page 2 of 2 
GARIMPEIRO

FROM the update file comes news that in the midst of last week's great resources sell-off, Melbourne-based Royalco Resources comfortably raised $12 million for the twin pursuits of royalty streams and the game-changing potential of exploration in the Philippines.

Garimpeiro wrote about the float a fortnight ago and it seems that the combination of ongoing royalty streams from a portfolio of 10 projects and the Philippines exploration potential was more than enough to quell investor fears brought on by last week's rout in resource stocks.

The offer has been closed heavily oversubscribed, with the invitation to Oxiana's 28,000 shareholders to subscribe creating plenty of traffic.

*Oxiana itself ends up with 17.7 per cent * of the stock on debut, courtesy of the Filipino properties injected into Royalco.

Demand was sufficiently strong for Royalco to fill the $12 million raising without having to print a prospectus, although some will be printed for those subscribers who like "hard" copies for their files.

That Royalco got away ahead of the limited edition of hard copies being printed was due to the ability nowadays to subscribe via the internet ”” after reading the online prospectus, of course. The nation's forests can breathe easier, given it's a trend that can be expected to become the norm.

Read the full article here


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## powwww (21 June 2006)

Did anyone subscribe to this IPO?

I did, and have my fingers crossed I get as little of my application money back as possible!!!!!!  Not looking good though, however we'll all know how little we got end of the week.  Looks like it will list next week under RCO.

Some positive anouncements for RCO already...not sure if you noticed anyone noticed the announcement by Kagara yesterday in relation to the Mt Garnet Zinc and Copper deposit yesterday???

If so, you will have noticed...

MT GARNET DEPOSIT DRILLING UPGRADE 19-06-06
"The intersection is the best intersection drilled within the largely undeveloped Mt Garnet deposit and enhances the potential for early underground development."

And if you have a really keen eye and remember the prospectus, RCO hold a 3%pa interest in Mt Garnet...so fast tracking of that would be beautiful.

I hope they're not too expensive on market the first few days as I have a feeling that I'll be getting most of my application money back end of the week without interest!! ha-ha.


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## yogi-in-oz (30 June 2006)

Hi folks,

RCO - Royalco ... floated on 29 June 2006.

A high of 60 cents on the first day of trading 
failed to hold and Day 2 has been an inside day
so far, with RCO trading from 58 high down to 
54 cents, trading down for most of today.

With only 11 bidders in total, there appears 
to be little interest in RCO, right now.

Looking ahead, key dates and expected sentiment
are detailed, below:

July 2006:

     05072006 ..... minor and positive

     14072006 ..... minor 

     23072006 ..... minor

     24072006 ..... significant & positive (finances?)

     25072006 ..... minor and negative

  28-31072006 ..... negative spotlight on RCO

August 2006:

     02082006 ..... positive news/moves expected.

  15-16082006 ..... negative news???

     18082006 ..... negative cycle - finace-related???

     29082006 ..... minor and positive news.

  30-31082006 ..... 2 cycles here - positive news???

September 2006:

     11092006 ..... positive sentiment - finances???

  15-18092006 ..... 2 cycles here - minor news???

     25092006 ..... minor and positive

October 2006: 

2909-02102006 ..... minor

  06-09102006 ..... 2 cycles - significant and positive news???

***  30102006 ..... 2 cycles and VERY significant news 
expected  here ..... finance-related??? *** ..... 

November 2006:

 02-03112006  ..... aggressive rally from here???   

    09112006  ..... negative and finance-related???

Let's see how all this unfolds.

happy days


   yogi


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## MalteseBull (30 June 2006)

Like SBM, this is a good one to add to the "Long-term List" with huge potential backed by Oxiana.
I topped up myself today


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## powwww (1 July 2006)

MalteseBull said:
			
		

> Like SBM, this is a good one to add to the "Long-term List" with huge potential backed by Oxiana.
> I topped up myself today




 I have tripled my holding since listing...very happy and confident with this one.


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## MalteseBull (1 July 2006)

It was a good buy on Friday too seeing Gold is up another $12


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## MalteseBull (3 July 2006)

looking to test 60cents today


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## powwww (7 July 2006)

My opinion: Their business model appears very solid - however we've seen an average performance to date...bolstered by a couple of smaller insto's getting out.

At the current gold price US$633, the Reefton Royalty alone will be bringing in AU$4,265,235.20 by as soon as next year so the company won't need to go to the market for funds.  Top 20 are holding 75.5% and every indication is that some of them are looking to build bigger positions when the dust settles.

Royalco plan to spend $AU3,900,000 (drilling AU$3,300,000) a year starting momentarily, so assuming gold is $579 + there won't need to be any dilution or cash burn unless we strike a massive deposit.  In which case we won't be complaining!

At the current gold price they will actually be making money - not bad for an explorer.

Using IRN as an example, Indophil went from 78,743,004 to 181,137,336 shares between 2002-2003 to raise $25,000,000.  In the RCO example a lot of this dilution would be avoided and assuming the same success we'd likely see RCO's share price closer to $5.00 thanks to the royalty streams as well as $8,000,000 payment from OXR assuming a big discovery.  As I said a very solid business model.

Despite a disappointing start I feel we should look at this subdued performance as an opportunity instead of a disappointment. Once the smart money takes their positions this could be one of the tightest share registries on the asx.

Pow


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## powwww (11 July 2006)

Worth a thought - one of RCO's Phillipines tenements is next to Climax's philipines project. RCO's link to Oceana is very obvious...Reefton.


New Zealand-focused gold miner Oceana Gold Ltd. (OGD.AU)
plans to merge with Philippines-focused Climax Mining Ltd. (CMX.AU), the
companies said in a joint statement Tuesday. 
The merged entity would have a market capitalization of A$523 million at
current values and former Climax shareholders will own around 44%, they said. 
Under the terms of the deal, Climax shareholders will receive 0.62 of a share
of Oceana for each Climax share and 0.31 of an option to acquire Oceana shares
for 0.925 cents. 
The offer represents a 27% premium to Climax's average share price over the
last 30 days. 
Climax's board recommends shareholders and option holders vote in favor of the
deal at meetings slated for October. 
Climax's main asset is the Dinkidi gold and copper deposit in Northern Luzon,
the Philippines. 
Oceana expects to increase annual output at its gold mines in New Zealand's
South Island to 300,000 troy ounces.


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## powwww (12 July 2006)

RCO up 18 % today.

Shaws report was released after the market closed + an analyst note valuing the company as buy up to 80c pre drillling august came out this morning. 

http://www.royalco.com.au/royalco shaw report july 2006.pdf

Smart Money was buying today...watch for change in substantial holding statement.


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## powwww (18 August 2006)

3.086600million off market transfer yesterday

Interesting. Did anyone else notice the 3.0866 million share transfer after close yesterday (nearly 10% of the company)? 

- could potentially explain the recent sag in the sp.
- Worth watching from now on as drilling can't be far off.

Time Price Volume Value Conditions Attributes BuyXRef SellXRef 
17/08/2006 04:57:42 0.5 3086600 1543300.00 SP O 
17/08/2006 03:51:08 0.51 4000 2040.00 F 
17/08/2006 02:39:39 0.515 10000 5150.00 G 
17/08/2006 02:09:10 0.51 2000 1020.00 F 
17/08/2006 01:39:05 0.51 8000 4080.00 G 
17/08/2006 10:25:51 0.505 10000 5050.00 
Any ideas who took it ? Reasonably tight stock and hopefully the sellers gone so could move fast on news.


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## powwww (18 August 2006)

Correction - just over 5% of the company


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## powwww (23 August 2006)

23 August 2006: Update

1. Phillipines drilling & exploration activities.
2. Change in substantial holdings from CBA

1. Update on drilling and exploration.


 
Drilling contractors have been booked
drilling to commence in October
Samay first, 
then Pao Yabbe 
and then Gambang. 

2. CBA have taken another 1,000,000 shares (on 17/08/06) - so that's a total of 7.86% now

CBA has bought for Goldman Sachs (Asia) for colonial first state. No surprise the price was held down now... 

from 6.20% 
to 7.86% of RCO.


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## Ken (3 October 2006)

Where is this one at?

54 cents.

Price of gold has dropped.

What is the valuation on it?


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## Ken (20 October 2006)

i'm in now,

pretty much got it at float price.


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## powwww (26 October 2006)

Ken said:
			
		

> Where is this one at?
> 
> 54 cents.
> 
> ...




Shaws just put out this in response to what I thought was a terrific quarterly.
ROYALCO RESOURCES (RCO) @ $0.49    ST: Buy    LT: Outperform

* Discovery of a historic pre-JORC resource at Gambang.

* Gambang is clearly mineralised which bodes well for drill testing late this year. 

RCO's quarterly has a detailed outline of all its exploration activities, however, the surprise is the discovery of an archived feasibility study on the higher grade portion of a 55 million tonne  non-JORC compliant copper-gold "reserve" located within RCO's Gambang project. In 1979 Trans-Asia had made plans to mine 1.65mtpa from a 16.5 million tonne portion of the "reserve". The study does not contain the original drill logs and assays, however, it supports the understanding that RCO's Gambang project contains significant porphyry coper-gold mineralisation. As outlined in the RCO's prospectus channel sampling along the copper mineralised outcrops at Herman’s Find resulted in 42m@ 2.35% Cu & 0.20g/t Au and 45m@ 2.82% Cu & 0.17g/t Au and 54m@1.32% Cu, 0.12g/t Au. In addtion artisanal mining activities a strong indication of mineral endowment. Gambang is earmarked for drilling activities late this year 

Why was the Tans-Asia resource never developed?  Probably due to sub $1/lb copper and the moribund nature of the Philippine mining industry at the time. In 1974, there were 18 copper mines in operation, most of them of porphyry-type. Production peaked at 304,500 metric tons of copper in metal in 1980, but declined markedly beginning 1982 and was only 16,300 tonnes in 2005 . In 1980, the Philippines was the world's fifth-largest gold producer and the ninth-largest copper producer. It earned $1.2 billion that year from mineral exports but by 2003, minerals only fetched $500 million in export earnings.


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## Ken (27 October 2006)

powwww.

RCO looks like a hidden stock at the moment

no press, no public knowledge.


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## powwww (27 October 2006)

Ken said:
			
		

> powwww.
> 
> RCO looks like a hidden stock at the moment
> 
> no press, no public knowledge.




Be patient...It's early days...If you do the research you know what will be coming up...without anomalies like stocks like RCO in the market we wouldn't have such good opportunities and the market would be gambling 

Cheers, powwww


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## Ken (3 November 2006)

well thanks for the heads up.

time will tell.

i bought some more at 50 cents.

Looking at the market depth and the way the stock trades, it looks like it will go up in a hurry when the positive news comes.  There is not many buyers....  However the sellers are not putting any downward pressure on the price.


It is screaming opportunity at the moment to me...


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## Ken (14 November 2006)

hmm still flat on 49-51 cents. low volumes.  good or bad....

how far along the line are we on exploration results being released.


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## Ken (14 November 2006)

annual general meeting this friday.

might pop along.


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## Ken (14 November 2006)

currently drilling Samay prospect as per attached Quarterly Report.

Both Pao and Gambang tenements are awaiting final access approvals as per the above report.

Once gained should be drilling at both locations during 1st quarter 2007. Both areas have extensive drilling programmes proposed through 2007 into 2008.

Following up drilling at Samay will also be conducted subject to results achieved from this current programme.

Malangza is in the final stages of approval and once completed requires further groundwork prior to selection of drill sites-hopefully second half 2007.

As indicated in the Prospectus, Pao and Gambang are the most prospective areas on what is known to date.


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## Ken (17 November 2006)

did anyone else go to  the AGM.

was my first one that i have been too

I was pretty impressed.  2007 should be an exciting year with the Gambang exploration


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## powwww (22 November 2006)

Didn't make the AGM unfortunately Ken however was at the melbourne mining club Cutting Edge pres last night. Look out for audio/slides at this link. http://www.melbourneminingclub.com/cuttingedge.htm

I agree, 1st quarter 2007 could be impressive. Also grab the age theres an article in their on them worth reading. 

See below an article on the company story from an international mining forum.  Cheers, 

powwww


Now onto this little company, in which I will say upfront I am a large shareholder in as are several associates, so I am extremely biased (to be kept in mind while reading).

Royalco Resources is a relatively new listing making its appearance in June 2006 without much fanfare. The fanfar was restricted by the fact that the total shares of the company were held 75% by the top 20 leaving bugger all free float (a lot less now!)

The performance of the shareprice has been anything but glorious and it is sitting currently at its listing price. No point putting a chart in given the average volume in the stock has been negligible for past few weeks (as has the price action).

So what is Royalco and why am I interested in the company. 

First the brief version:

Royalco is a company involved in both exploration and royalties (unique in Australia). Its market cap is around 27 mill but it has around 10 mill in cash, and a imminent royalty of around 3-4 million pa from Oceanagolds Reefton project in NZ. Its exploration projects are mostly the old OXR Phillipines projects which are likely to throw up large porphyry gold/copper systems, and with the cash in the bank and royalty, exploration is fully funded without having to raise more capital (the achilles heel of most exploration companies).

The detailed version:

When I invest in small mining companies, and I've been doing it for almost 10 years, I have 5 core requirements that the company needs to meet, though the 5th one is a nice to have. 

They are (in order of importance):

1. Quality Management/staff
2. Early or likely cashflow
3. Tight capital structure *without a likely blowout*
4. LARGE scale exploration projects
5. My broker needs to like it

A few companies (all Aussie) I've picked at the bottom that had all or most of these attributes for example were OXR (at 4c), IGO (at 30c), BSG (at 14c)...admittedly they were all when metal prices were down in the dumps...it wasnt brain surgery finding those and many more value situations...I'm sure you'll agree its a LOT HARDER to find a VALUE company in the junior mining sector these days!

But I think I've found one in RCO which meets each one of these in the following way:

1. Quality management/staff
The originators of the company were two fellows that have been on each others coattails for the last couple decades. Both ran Mineral Commodities and have been involved in in the corporate world for a while. They are NOT geos or exploration experts...but they know 'royalties' (see 2. below) and they have a very strong network in the industry...and its not that cowboy network in Western Australia either! 

The exploration prowess comes from several areas. Tom Eadie, also a director, is one of the best geophysicists in Australia. Those that follow Copperstrike, another listed ASX company will note the board is pretty much the same as RCOs except in reverse. Basically Copperstrike is a keenly focussed exploration company. The two companies will share resources, and CSE's exploration team is second to none with Terry Lees and Steve Tambanis. (Note: CSE itself is definitely worth following!)

Further, RCO have been lucky enough to grab the services of Peter Lester from Oxiana (OXR is RCOs top shareholder). Peter was responsible for the Phillipines exploration areas of OXR, which OXR has divested into RCO in return for 10 million shares (and clawback rites - see 4 below)

2. Early cashflow
RCO's market cap at current shareprice is around $27M. Thats pretty high for a recently listed exploration company, specially given that its still at listing price...bit different from the dodgy 3-4 mill floats appearing on the ASX every second day. 

So how does RCO meet the 'early cashflow' requirement, since it doesnt have any project ready to go?

ROYALTIES! As far as I know, RCO is the only listed ASX company with a focus on both royalties and exploration. And the first royalty is probably only 6-12 months with production starting at the project in a month or so. That royalty is on OceanaGolds Reefton project which has an initial minelife of around 7 years. At current gold price, the royalty should be worth the equivalent of around 3-4 million AUD to RCO...I say equivalent because the royalty is actually delivered in physical gold...so there is large exposure to the gold price.

So 3-4 million cashflow for 7 years...thats pure profit since of course there are no mining costs involved...that sticks it on a PE of about 7-10 depending on actual amount received and the fact that the companies previous tax losses should minimise tax for at least a couple years.

And thats only one royalty...it has several others, and is working on acquiring several others...since thats what it does, buy royalties...and what better place to get them from than from RIO TINTO's own royalty database (there is a reason that RIO has 7% of RCO and thats it!)

Two other imminent production royalties are Kagara (at Garnet - production to be recommenced in 2008/9 though likely to be much earlier according to Kagara due to high metal prices and good drill results) and CopperCo (cant remember project name but should commence prod next year).

Oh and the company also has $10 million in cash.

3. Tight capital structure and will stay that way
RCO only has around 56M shares on issue...of which around 72% is held by T20 shareholders in the latest annual report. I can guarantee its higher than 72% now, probably around 80-85%.

Unfortuantely it is too often you see small mining companies lose the plot and go on cheap capital raisings that raise money but destroy the potential for shareholder wealth...a company that I made this mistake in (but unfortunately was blind to the problem forming) was Integra Mining which before you knew it had gone from less than 100 mill shares to well over 200 mill...and they just did another rights issue. 

I am glad to say the same will not happen with Royalco, for 3 reasons:

(a) Management have specifically told me that the last thing they want to do is have to issue more shares...hence the clawback rights with OXR...though of course if they find a project that is too small for OXR, but significant size for RCO then they may need to to develop it...but thats ok since thats 'development' raisings not 'exploration'

( their current cash balance is $10M and that should be sufficient for 2-3 years exploration

 © the cashflow from Oceanagold royalty (see 2 above) at 3-4 million per year will more than fund ongoing exploration 

4. Large scale exploration projects
I'm interested in companies that have projects that can become company makers...however they have to be quality projects. Im getting sick and tired of companies saying that their project is Olympic Dam style, or has affinities to Voisey Bay etc etc.

It is imperative that you take a look at the ground and see if a company is selling you a story, or ha some substance. RCO's exploration projects in the Phillipines have substance...they were former OXR projects and previous exploration results were extremely significant. Why did OXR give them away...well, firstly they got 10 mill shares in RCO for the divestment, secondly they have retained 50% clawback rights (for consideration) at certain resource levels, oh and at the time, they were working on a 'small little project' in LAOS called SEPON .

The core focus is to find large porphyry gold/copper systems, a bit like the Didipio projects owned by Climax (and now ironically by Oceanagold due to merger)...drilling is currently going on at Samay (this was a previous Phelps Dodge project), however that is a low priority target compared to the others...the real exitement will be when Malangza and Gambang get drilled imo (both just waiting on approvals)...worth taking a look at recent quarterly and the 'lost feasibility study'.

5. My broker needs to like it
Up until 3 years ago, I was pretty much going it alone, and doing very well if i do say so myself. However my own job got a bit hectic and decided I liked certain article I saw a particular broker writing, who was focussed on the junior explorer end of the mining sector. Anyway, its been a rewarding relationship, and he likes Royalco...and it is extremely hard to get him to a like any company other than the ones he likes.

So what we have is a well managed company with a imminent significant cashflow, cash already in the bank, and large exploration potential in projects that have more than a chance of throwing up so good stuff.

So why the boring share price. I and my associates have been wondering the same thing...but we think its a factor of the Aussie public not understanding the royalty story, and the illiquidity of the shares. It may take time, but eventually the market will sit up and take notice. I'm not into one night wonders by the way, prefer to make money investing in a company with a real future.

Hopefully starting tomorrow, with RCO presenting at the Melbourne Mining Club which Ill be a very interested spectator at.

Feel free to shoot me a PM or email if you want to discuss this, or any other Aussie mining company that I might know a bit about.

Cheers and happy investing

BuffetJr


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## Ken (8 December 2006)

RCO

not going anywher at present.

But there is no doubt in my mind that its found its base at 50 cents.

a big order for this stock of 160,000 shares was placed to sell at 50 cents.

there were no buyers on open within 20 minutes snapped up and gone.

i dont know what too make of it but i would say someone is accumulating a **** load at 50 cents.  160,000 is the biggest order i have seen in months with this one and would almost put them as a substantial holder.

still a flat stock at the moment. but interesting that hasnt dropped below issue price on volume.


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## Ken (12 December 2006)

RCO's last 10 trades since 8th of december now 12th....

8/10 of ten trades have been between $10,000 and $30,000.

purchases ranging around 52 to 50 cents.

I follow the stock closely.

The volumes are still low.  But the size of the trades are usually only $4000 for a day!

now we are seeing trades of $30000 and some even $65000 in one hit.  

something is up with this one.

2007 few things are happening.

If the big money was exiting you would have thought there would have been a more severe drop in price as people paniced.  But looks like people smart money is taking place.

Powwww any updates buddy?

I still hold. I'll try get my holding up to 30,000 shares by end of january. 

Deciding whether to put profits from T3 into this.


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## Ken (15 December 2006)

sellers are disappearing with RCO.

looks like could be the beginning of a small upward trend for the moment.

I know the market has risen a fair bit.  but int he past RCO has been flat.  

The announcement of the grant they received for phillipense looks positive also.

definitley big year for RCO once drilling starts.

$10 million in royalties, no capital raising.

proposed dividends

will hold and buy on the bad days...


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## Ken (18 December 2006)

RCO touching 55 cents is a good sign.  not on big volume, but the sellers have disappeared.

i can see it gathering up to 60 cents, but on the flip side i can also see a big seller coming in and wiping it back down to 50 cents.

time will tell, but i still hold for the good times.


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## Ken (27 December 2006)

powwww

any updates, you seem to be all over RCO, any idea when its going to get moving.

I'd love to buy more but can see some shorter term gains at the minute.

do you think the overseas mining in the phillipines plays apart in the lack of share price movement?


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## Ken (10 January 2007)

it rocking now...

and i think its ready to roll...
market depth looks good.

once its through 60 cents i can see it heading further north rather quickly.

2007 big year for them....

explorer with cash flow...

and 75% owned substantial holder... these current volumes have been large for this stock considering it doesnt normally get much action..


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## powwww (11 January 2007)

Ken as you have read RCO is my top pick for 2007 for a number of reasons (not all listed).

"RCO  Royalco Resources Ltd. www.royalco.com.au
1. $10 million cash, $30 million market cap
2. Reefton Royalty to kick in during 2007 with potential to generate in excess of $4million.
3. Substantial exploration upside from several highly mineralised tenements to be drilled 2007.
4. Modelled on US based royalty income company, Franco Nevada which averaged 30% gains over a 10 year period however didn't have the exploration upside RCO has.
5. Current price would be PE 5 of market cap minus cash when Reefton royalty kicks in mid 2007. This doesn't include exploration upside.
Rgds, Powwww"


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## Ken (15 January 2007)

well there is hardly anymore shares left to buy...

so i put mine up for sale at 90 cents... not going to get bought  but they look good there!!


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## powwww (15 January 2007)

that was you ha, sniff of news and they might be gone-you never know!


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## Ken (15 January 2007)

hehe

8409 sold @ 90 cents. Seeing as i paid 51 cents.

Dont know how far they are going to go.

Cant see them moving over 70 cents without some real good news to market...

But I hope I am wrong.


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## Ken (15 January 2007)

Last 10 trades. These are relatively big trades for this company.  It was only a few weeks ago that there was 1 or 2 trades a day and sometimes no trades.

It has some momentum, my favourite stock because of the lack of sellers.

Royalco Resources Limited (RCO) 


Date          Time        Price ($)   Quantity Value ($)
15-01-2007 03:52 PM  $0.645     20000    $12,900.000   
15-01-2007 03:52 PM  $0.640     1300      $832.000   
15-01-2007 02:34 PM  $0.630     12996    $8,187.480 
15-01-2007 02:34 PM  $0.630     4          $2.520   
15-01-2007 12:34 PM  $0.650     10000    $6,500.000   
15-01-2007 12:34 PM  $0.650     15500    $10,075.000   
15-01-2007 12:34 PM  $0.660     23000    $15,180.000
15-01-2007 12:32 PM  $0.700     3000      $2,100.000   
15-01-2007 12:14 PM  $0.650     2500      $1,625.000   
15-01-2007 12:06 PM  $0.650     7500      $4,875.000


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## Sean K (15 January 2007)

Ken said:
			
		

> Last 10 trades. These are relatively big trades for this company.  It was only a few weeks ago that there was 1 or 2 trades a day and sometimes no trades.
> 
> It has some momentum, my favourite stock because of the lack of sellers.
> 
> ...



Ken, you aren't serious?
Of the 10 'big' trades, 5 of them are less than $5K....
I am really missing something here.


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## Ken (15 January 2007)

kennas,

RCO's trades are normally pretty low in volume.

There have been some larger trades just recently.  And anything over $10,000 has driven the share price up.  

I am not saying volume is massive, but compared to a few weeks ago when it would go days without a trade it is something positive.

the stock is not going to be a million plus volume share unless the top 75% shareholders decide to sell up.


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## Ken (15 January 2007)

Kennas,

DKS is probly a similar stock to RCO as far as the way it is traded.  Not many shares are traded daily, and share movements is not very tight. 

just my observation.

It is not going to be a day traders stock due to the lack of volume.


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## powwww (15 January 2007)

Figuratively speaking "don't talk to me until..." 1,000,000 plus shares are traded. When it happens I would be seriously surprised not to see a jump closer to 50% than from what we saw today.


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## Ken (24 January 2007)

RCO quarter cash report....

thumbs up or down???

nothing we didn;t know i dont think.

no nasty secrets....

wouldnt mind a cheeky dividend....


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## powwww (24 January 2007)

Very positive imo,

Couple of significant developments regarding the approvals were touched upon.

Drill rigs due at Gambang March.

And not long after in Pao.

Look out for updates in a few weeks.

Rgds, powwwww


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## Ken (31 January 2007)

$360,000 trade went through today in one hit.  20 trades for the day to the value of 470k and only a small rise in share price of 2 cents. I didn't follow how many were buys rather than sellls, but over 700,000 shares traded for the day.

Possible change in substancial holder?

Or are we looking at sell off on the cards?

Biggest days volume since the 12th of October 2006.

Am clueless to where its heading but the big trade of 360k caught my eye.


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## Ken (2 February 2007)

TOUCHING 74

good sign


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## powwww (14 February 2007)

Looking good Ken.

Now all we need is the drilling to start say, March April and this puppy could be on fire.  

Cannot wait.

Hope you're set as I can't see where selling will come from over the next weeks...Rgds, P


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## Captain_Chaza (23 March 2007)

*RCO*

No/Negligable Volume

No/Negligable Buyers
No/Negligable Sellers

Where to from here?

Bon Voyage and Gods' speed
Captain Chaza


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## cryonix (25 March 2007)

Hi Guys,

I just noticed RCO is presenting at the singapore mining conference.  Could be interesting to see what interest the team comes back with.

http://www.terrapinn.com/2007/asiamining/

It might be a coincidence that the are presenting right after OGD Oceana gold who recently took over Climax.  RCO just happens to have the adjoining tenements along the same fault/valley as OGD's copper/gold deposit in the Philippines.  RCO also has a royalty over OGD's reefton project which should be fully commisioned this coming month.  

In regards to the SP, the stock has been quietly accumulated by a few parties close to the company.  If there was any decent volume come onto the sell side of the screen there are buyers already waiting in the winds.  There are some small insto's who are looking to accumulate should the opportunity arise.

cheers,

Cryonix


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## greenfs (14 April 2007)

Charge since Xmas in share price should continue until it reaches target of $1.10 hopefully sooner rather than later

:bounce:


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## doctorj (14 April 2007)

greenfs said:


> Charge since Xmas in share price should continue until it reaches target of $1.10 hopefully sooner rather than later



How'd you come up with $1.10?


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## powwww (26 June 2007)

See post below regarding yesterdays anouncement sourced from another forum. by BuffetJr...

Today's announcement by RCO is excellent, and supports my recent post about the work they are doing in the Philipines.

They now have exploration access to one of their 'top 3' prospect areas, PAO. The others are Gambang and Malangza (though their other areas are by no means substandard). Gambang is my favourite (since I've seen what's there)...Malagza is a conceptual play (some access already granted here) that has the potential to be, well, 'earth shattering' would be an accurate term. But must more greenfields it seems.

Historic sampling at PAO as per following shows the 'potential':

"Historic sampling of the Manidyo vein has recorded up to 49.42 g/t gold, 348 g/t silver and 3.94% copper in assays, whilst samples from Digyan have assayed up to 95 g/t gold, 272 g/t silver and 13.6% copper. The outcropping vein at Manidyo is approximately 10 metres wide and at Digyan the vein is approximately 4 metres wide."

Of course they need to throw the lie detector down there to see if there is anything beneath. As shown by the graphic in the announcement however, the fact that these two areas are quite distinct (about 1km separate) shows the obvious mineralisation potential of the project.

Unfortuantely this was not one of the project areas I visited in December (refer posts and pictures in earlier posts) so couldn't see it first hand. Though my friend has (can't shut him up about it!).

Drilling should begin during July, probably towards the end or early august. If they hit something...thats when the fun really begins.

BuffetJr


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## greenfs (26 June 2007)

My price of $1.10 as per earlier post was based upon valuation by a broker far smarter than me. When I bought for $0.52 I was told that the stock was worth $1.10. 

I am now looking to sell @1.20 in spite of the latest good news in the hope than I might buy in again later at a cheaper price. Nothing has changed the broker's opinion that the price has gone up since my quote in April.


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## happytown (13 May 2009)

takeover offer for all shares at 30c (on-market thus the large buy order at 30C), directors have rejected the offer for their 18% holding, by anglo pacific who have purchased shares on-market at up to 48c

cheers


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## hobo-jo (16 May 2010)

RCO has announced the payment of a 10cps distribution, based on Friday's close this is essentially an instant 20% ROI. Not only that but the distribution does not need to be added to assessable income, so is not taxed (but does reduce the CGT cost base by 10c for shareholders share by 10cps). Article covering the announcement on Proactive Investors:



> Royalco Resources (ASX: RCO) has determined that a cash distribution of approximately $5.27 million should be made to Royalco shareholders in the form of a return of capital of 10 cents per share.
> This distribution is to be made due to Royalco having surplus cash for its current operations. As previously announced to the market, as at 28 April 2010 Royalco had cash/liquid assets of approximately $14.2 million.
> After a review of Royalco's financial position and its ongoing cash requirements, the company said it has concluded that its cash/liquid assets are more than adequate to continue its development and objectives.
> The conclusion is on the basis that the company expects continued cash inflows from royalties, minimal expenditure commitments over the next 6 months and has no immediate other opportunities for acquisitions.
> ...



Article Link

Further to this Royalco Resources has indicated that their ongoing policy will be to return 60% of after tax profits in dividends so it's likely we will continue to see a good return from this share...



> *Dividend policy*
> Given the inherent and likely long-term profitability, of Royalcos business model the board of directors of Royalco has endorsed an indicative dividend policy:-
> 1. Dividends to commence once they can be classified as fully franked.
> 2. Biannual payments.
> ...



Link to Announcement

Profit ending 30th June, 2009 was $4.783m. Times this by 60% and divide by 53m shares = 5.5cps.



> Royalco currently holds a total of ten royalty interests of which three produced income during the quarter. Using prevailing spot prices for gold, income for the quarter from these interests was $1.8 million.
> ...
> The delivery of physical gold into the Companys account at AGR Matthey continues under the Reefton royalty agreement with Oceana Gold Limited. The royalty payment for the December quarter was 1314 ounces pre New Zealand withholding tax. Subject to the spot price remaining above NZ$900 (currently NZ$1500+), royalty receipts should adjust back to the original rate of 1250 ounces per quarter pre withholding tax. At prevailing prices and exchange rates this equates to approximately $5 million per annum in net royalty income.



March 2010 Quarterly

$5m from Reefton alone, 60% of that is over 5.5c per share...AUD Gold was $1260 at this quarterly's release, it's now $1375, $115 (9%) higher.

In September 2009 their royalty interest was valued (by DMR Corporate) between $15.88m and $16.96m - Link to announcement

Even after payment of the the distribution they will have around $9m in cash/bullion and a royalty valued at $16.5m (taking the midpoint), total net assets of $25.5m. Their market cap at 50c is around $26.5m, so even after the payment they will be trading at barely over net asset value (if SP didn't rise higher from here), with no value priced in for the further developments since that royalty valuation (e.g. re Gambang tenement, Gold price increase, etc).

Extreme value buying here IMHO. Over 20% back in your pocket within a few weeks if you manage to buy at 50c. Tell your friends!


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## hobo-jo (17 May 2010)

Good to see further mainstream coverage of this announcement:

http://www.businessday.com.au/busin...-a-goldmine-for-reelection-20100516-v6d5.html


> MELBOURNE-BASED royalty/exploration company Royalco Resources (ASX: RCO) is in the minority among the juniors on the cash holdings score - so much so that it is returning $5.27 million (10 ¢ a share) to shareholders.
> 
> Structured as a tax-effective capital return, the payment reflects Royalco's assessment that it is sitting on cash surplus to its needs. At last count, it was holding some $14.2 million in cash/liquids assets (27 ¢ a share).
> 
> ...




Buy side building with very few sellers.


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## ParleVouFrancois (27 October 2010)

Seems this can't get any long term interest from even hard core intrinsic value investors. I did a blog post on this summarizing the value of RCO (hint, it's very short and finds RCO is very undervalued). Several nice tidbits from management in the quarterly, let's hope a few buyers start to line up, the disconnect between value and price doesn't last forever.


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## Sean K (27 October 2010)

ParleVouFrancois said:


> RCO is very undervalued).



Sorry, why is it very undervalued? How do you actually 'value' something like this? Interested to hear....Cheers, kennas


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## skc (19 November 2010)

ParleVouFrancois said:


> Seems this can't get any long term interest from even hard core intrinsic value investors. I did a blog post on this summarizing the value of RCO (hint, it's very short and finds RCO is very undervalued). Several nice tidbits from management in the quarterly, let's hope a few buyers start to line up, the disconnect between value and price doesn't last forever.




Thanks for pointing out. I am afraid you need to look more carefully on the royalty arrangements. The gold coming in only runs to the end of 2012... no one will pay a PE multiple on that. Just discount the 2 annual payments to present and RCO share price isn't that far off compared to the "confirmed" assets.


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## Jackass (19 April 2013)

Well I for one think this is undervalued. Did anyone else see the recent announcement about the part purchase of the weeks royalty? I've been watching this stock for a while now and this announcement was enough to make me pull the trigger.


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## System (19 February 2020)

On February 18th, 2020, Royalco Resources Limited (RCO) was removed from the ASX's Official List in accordance with Listing Rule 17.4, following despatch of the compulsory acquisition notices by Fitzroy River Corporation Limited.


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