Great to see the market support this decision. We now have a great foundation to build on. We will be a gold producer by mid next year. This will slowly trickle up towards beatles value of 33-38cents. Now the big driving force to push it higher will be Mapawa. I think this is what the inst are positioning themselves for. Questions- When do we expect the next drilling results? Also when will get more drill rig on site to accelerate this as planned so as to get a flow of news to keep driving the price
VAU - Vault Minerals
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Hi KurwaJegoMac and Kash, I agree that the initial market reaction has been positive, but to be honest the changed deal has got me wondering about their decision to substantially increase share capital issued at this time and price!
I intend to talk it through with RED management before making any more comments on the arrangement, and as to whether I would recommend to shareholders to go along with the deal and approve the second tranche of equity funds - after all, we have until 23 Nov to make that decision and to observe what benefits these additional funds and insto's are doing for us in terms of share price support! Even if the valuation is enhanced by the guarantee of Siana development, the substantial increase in shares has significant impact on valuation cps, and eps. And without the second tranche of funds, if not approved, RED STILL has enough cash to develop Siana, with funds left over to explore Mapawa.
Enough said by me at this stage, except that its needless for me to say that in any case I'm not selling a single share!
I intend to talk it through with RED management before making any more comments on the arrangement, and as to whether I would recommend to shareholders to go along with the deal and approve the second tranche of equity funds - after all, we have until 23 Nov to make that decision and to observe what benefits these additional funds and insto's are doing for us in terms of share price support! Even if the valuation is enhanced by the guarantee of Siana development, the substantial increase in shares has significant impact on valuation cps, and eps. And without the second tranche of funds, if not approved, RED STILL has enough cash to develop Siana, with funds left over to explore Mapawa.
Enough said by me at this stage, except that its needless for me to say that in any case I'm not selling a single share!
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Perhaps if we reject the additional raised capital now (knowing that the placement was 4 times over subscribed), and then say in 3 months, since the price will be much higher due to the demand for the shares (4 times oversubscribed!) and Siana approaching completion, we raise capital then?
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You've hit the nail on the head Beatle. Last year, management stated that they planned to raise $80m to develop Siana, more than necessary, but to provide financial comfort as well. They duly raised $40m via that equity raising at 15.5c, and we all know what happened to the brilliant deal they entered into with DB! Now, over and above the dubious gold pre-pay, they have diluted us by a massive 30%, placing 300m shares to lucky punters who happened to be on Casimir's hit list (who ARE they, by the way!!) It's all very well to take advantage of the booming gold sector, but I'm gob-smacked that management have opted for such a large dilutionary issue. Don't get me wrong, I'm not a seller, but I too would like a little more explanation. My simple calculation is that Siana development requires about $70m, $20m is to be set aside for Mapawa exploration.....why therefore are they needing this additional $35m ?(approx) I'm bemused.
Hi ParleVousFrancais and all RED club members.
I've put up a patched model to cover the variations as I see them with respect to this much different basis of funding, covering both the debt of US$25million, and US$50 million equity at 17 cents. My revised valuation of RED for Siana is 32 cents per share, plus an enormous amount of spare cash which equates to something like 3.5 cps depending upon how much is left over from Siana development plus the amounts not used up already in Mapawa exploration.
Thus the revision of the funding package has altered the valuation for RED to
(32 + 3.5) cps = 35.5 cps.
Nothing has been attributed to Mapawa value in that valuation, and I have used revised commodity prices as of today plus exchange rate, ie US$1,370 Au, US$24 Ag, Exchange A$1.00 =99.5 US cents.
In time I work out a scenario if we don't arrive at any greater market price for RED, of if the second tranche funds are not approved at a share price - but we have got 6 weeks to observe and decide whether those extra funds should be approved by shareholders.
IF RED has used all insto's in these placements THEN the smaller shareholders of RED (ie many smaller shareholders that are members of our RED club on ASF and HC!!!) are the final decision makers as to whether we want the second tranche funding to occur or not, since clearly RED has enough funds from the debt plus first tranche equity, to develop Siana and continue with exploration at Mapawa, without the need of the second tranche of this placement.
I've put up a patched model to cover the variations as I see them with respect to this much different basis of funding, covering both the debt of US$25million, and US$50 million equity at 17 cents. My revised valuation of RED for Siana is 32 cents per share, plus an enormous amount of spare cash which equates to something like 3.5 cps depending upon how much is left over from Siana development plus the amounts not used up already in Mapawa exploration.
Thus the revision of the funding package has altered the valuation for RED to
(32 + 3.5) cps = 35.5 cps.
Nothing has been attributed to Mapawa value in that valuation, and I have used revised commodity prices as of today plus exchange rate, ie US$1,370 Au, US$24 Ag, Exchange A$1.00 =99.5 US cents.
In time I work out a scenario if we don't arrive at any greater market price for RED, of if the second tranche funds are not approved at a share price - but we have got 6 weeks to observe and decide whether those extra funds should be approved by shareholders.
IF RED has used all insto's in these placements THEN the smaller shareholders of RED (ie many smaller shareholders that are members of our RED club on ASF and HC!!!) are the final decision makers as to whether we want the second tranche funding to occur or not, since clearly RED has enough funds from the debt plus first tranche equity, to develop Siana and continue with exploration at Mapawa, without the need of the second tranche of this placement.
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Perhaps if we reject the additional raised capital now (knowing that the placement was 4 times over subscribed), and then say in 3 months, since the price will be much higher due to the demand for the shares (4 times oversubscribed!) and Siana approaching completion, we raise capital then?
I agree PVF - if the demand is there from Institutions, they should have to pay a premium for the dilution they're causing to our shareholding. We weren't able to participate in this raising so why should we do the Instos any favours by letting them have a slice of this company at a discount to its' potential.
Seems as though a number of us were posting at the same time, so didn't acknowledge nor comment on each others posts.
Hugh_jarzz I am more than gob-smacked, lol!!! But I'm also very comforted now with the market settling down, that it seems that RED share price likely to hold at current level around 21.5 - 22 cents. I see that as being a very positive start, and with insto's now the main market makers for RED its likely to start the push higher from now on. (I wouldn't mind betting that a Mapawa result might be just around the corner to sweeten our views a tad over the placement arrangements).
On the other topic PVF and KJM, as I've mentioned before I think we now have the time (AND the CONTROL) to see how RED behaves (and the insto's trading impact on RED share price!) in the next 6 weeks before the time of the vote, before we make a decision as to whether WE should allow them the rights to tranche 2 of the placement - its NOT a done deal if we don't agree, remember that, but if RED share price does move up in the intervening period then I'm happy to go along with it. Up to the insto's now, we are waiting and watching insto's . . .
Hugh_jarzz I am more than gob-smacked, lol!!! But I'm also very comforted now with the market settling down, that it seems that RED share price likely to hold at current level around 21.5 - 22 cents. I see that as being a very positive start, and with insto's now the main market makers for RED its likely to start the push higher from now on. (I wouldn't mind betting that a Mapawa result might be just around the corner to sweeten our views a tad over the placement arrangements).
On the other topic PVF and KJM, as I've mentioned before I think we now have the time (AND the CONTROL) to see how RED behaves (and the insto's trading impact on RED share price!) in the next 6 weeks before the time of the vote, before we make a decision as to whether WE should allow them the rights to tranche 2 of the placement - its NOT a done deal if we don't agree, remember that, but if RED share price does move up in the intervening period then I'm happy to go along with it. Up to the insto's now, we are waiting and watching insto's . . .
One thing for sure is that whilst there remain outstanding sellers at 21 - 21.5 cents we are not going to see the commencement of the re-rating of RED share price! It seems that sellers are quite happy to accept current share price, just at a time when we know that Siana IS GOING to be developed, Gold WILL be produced in the first half of next year, AND RED now has got an enviable shareholder base of international investors!
Why sell now just at the time when the share price is likely to move up in line with or beyond the valuation?
Why sell now just at the time when the share price is likely to move up in line with or beyond the valuation?
I've mulled over that same question myself even before the finance came out.. if the potential is a near doubling of what we have now.. why sell..
only they can answer ..Hi guys, well like the rest of you I am also gob smacked at size of the CR. I also agree that because of the highly dilutionary effect, that the discount seems excessive. How was the issue price arrived at? Was it the average of a period of trade beforehand? I have not the time to try to work this out, but these things usually have some sort of logical base. I have been wondering what the other insto's have made of the CR? But the answer is that the larger holders will have all been contacted beforehand to seek their views and the likelihood that they might react adversely. Therefore, in thinking this through, unless we see evidence in the coming days of sustained heavy selling (ie institutional selling), then it would indicate that the existing insto's are happy with the outcome. If this is so, then IMO we should also be happy. The proof one way or the other will be, as observed by others, in the SP in the coming days/weeks. I like Beatle also have a suspicion that there might be a Mapawa announcement coming, which might settle the market. I am personally undecided on whether I should buy up sufficient additional shares to help offset the dilution, or to rely on the SP driving forward to levels not previously modelled as the fundamental valuation. Beatle, I am not sure if you have modelled the effect of Mapawa being 10 times the size of Siana. If you have, could you remind me of the result please. If not is it possible to do so?
Thanks. AB
Thanks. AB
Hi Anderbond, and once again agree with your points made, although unlike yourself I believe from a smaller shareholders point of view compared to the insto's, our best outcome is to watch and observe whether the additional insto's/funds coming onto the shareholder list has made any difference to the share price of RED in coming weeks leading up to the AGM vote.
What I am at odds with, is that most likely each of the existing insto's probably have been invited to take up shares in the placement, therefore of course they are happy to go along with it, unlike us smaller shareholders that suffer the dilution without the invite. I don't begrudge a placement at a discount unless there is no clear requirement for so much money (which appears on the face of it to be in the case here) - in my view it is an inefficient management of the share capital to issue so many at that price when there is every reason to expect the share price to move up within the next 5 months as a direct consequence of activity at Siana plus anything that may arise from exploration at Mapawa.
The interesting test of whether all existing insto's have been invited into the upcoming placements, is that IF THEY HAVE TAKEN UP SHARES in the placement they will not be able to vote at the meeting, therefore there is every likelihood that we smaller shareholders not involved in the placement have all the control in deciding whether the placement should proceed. As I have said a number of times, we go along for the ride, the insto's control our destiny with the market price, so now we sit back and see if they are wanting to take the share price up - if it goes up in the next 6 weeks then I will vote YES for the placement, if it just bobs up and down and stays much the same as now notwithstanding any outstanding influences such as gold price movements/general market conditions, then I will more than likely vote NO and seek all other smaller shareholders follow that same path.
With regard to Mapawa I did an analysis a few months ago after the first holes were drilled, and based on that plus the size of the geophysical anomaly, I posted the results of that suggesting around 9 cps, but since then we have the expanded capital and a bit more infor, so based on a potential minimum size could of around 100 million tonnes Potential at 1.0 g/t Au resource = 3.2 million ozs contained gold. But that is a very hairy estimate based on such slim information! If we assumed that number, it could put around 5 cps based on the expanded share capital base assuming US$20/Potential oz (if its higher then you just multiply what you want, say US$30/Potential oz), but thats a very hairy guesstimate and I wouldn't want anyone quoting me or refuting it, just an indication of what it could be worth at this very early stage of exploration.
There is no point to putting any estimates for Mapawa based on DCF as I have outlined the reasons why you must be quite careful with any analysis that has no real basis, realising we don't know the real tonnage potential as a reserve, no recovery factor, no capex, no opex - any estimate would be garbage in = garbage out!
What I am at odds with, is that most likely each of the existing insto's probably have been invited to take up shares in the placement, therefore of course they are happy to go along with it, unlike us smaller shareholders that suffer the dilution without the invite. I don't begrudge a placement at a discount unless there is no clear requirement for so much money (which appears on the face of it to be in the case here) - in my view it is an inefficient management of the share capital to issue so many at that price when there is every reason to expect the share price to move up within the next 5 months as a direct consequence of activity at Siana plus anything that may arise from exploration at Mapawa.
The interesting test of whether all existing insto's have been invited into the upcoming placements, is that IF THEY HAVE TAKEN UP SHARES in the placement they will not be able to vote at the meeting, therefore there is every likelihood that we smaller shareholders not involved in the placement have all the control in deciding whether the placement should proceed. As I have said a number of times, we go along for the ride, the insto's control our destiny with the market price, so now we sit back and see if they are wanting to take the share price up - if it goes up in the next 6 weeks then I will vote YES for the placement, if it just bobs up and down and stays much the same as now notwithstanding any outstanding influences such as gold price movements/general market conditions, then I will more than likely vote NO and seek all other smaller shareholders follow that same path.
With regard to Mapawa I did an analysis a few months ago after the first holes were drilled, and based on that plus the size of the geophysical anomaly, I posted the results of that suggesting around 9 cps, but since then we have the expanded capital and a bit more infor, so based on a potential minimum size could of around 100 million tonnes Potential at 1.0 g/t Au resource = 3.2 million ozs contained gold. But that is a very hairy estimate based on such slim information! If we assumed that number, it could put around 5 cps based on the expanded share capital base assuming US$20/Potential oz (if its higher then you just multiply what you want, say US$30/Potential oz), but thats a very hairy guesstimate and I wouldn't want anyone quoting me or refuting it, just an indication of what it could be worth at this very early stage of exploration.
There is no point to putting any estimates for Mapawa based on DCF as I have outlined the reasons why you must be quite careful with any analysis that has no real basis, realising we don't know the real tonnage potential as a reserve, no recovery factor, no capex, no opex - any estimate would be garbage in = garbage out!
Hi Beatle, thanks very much for your response. I concur entirely with your thoughts, and will indeed vote against the expanded CR if the SP action over the coming period reflects a lack of positive movement. I guess I am trying to discern the "real" reasons behind the expanded CR. As stated it was a surprise to me, and although it is possible that it was seen by management/board as an opportunity, why raise capital at this price rather than wait until later. So IMO there has to be a lot more to what has been anounced so far. Hopefully you will be able to discuss this with CJ. I presume you can call him easily to discuss. AB
Hi All
good to see green on the board. Just to say thanks Beatle and PVF for taking the time to answer my query re valuation. Just got home late so didnt thank you earlier. Ill have a look at the details and see how i go. This funding sure is bizarre. Why as many have said raise the extra cash when we should have either/or income and higher SP in the near future. Oh well, guess we just wait and see what they leave for us.
good to see green on the board. Just to say thanks Beatle and PVF for taking the time to answer my query re valuation. Just got home late so didnt thank you earlier. Ill have a look at the details and see how i go. This funding sure is bizarre. Why as many have said raise the extra cash when we should have either/or income and higher SP in the near future. Oh well, guess we just wait and see what they leave for us.
HI Beatle @ Anderbond,
Basically the small shareholders have been shafted by the institutions and management to some extent,the gold price is at record levals of alltime and who could resist taking the opertunity to double the CR by only 100 % when you are trying to get a gold mine off the ground and a possible exploration property said to be much bigger.Ultimatelly it will be a benefit to all if you are prepared to wait untill the mine is actully up and running.However I believe the shareprice might not be much higher closer to the AGM on 24/11/10. Judging what has been happening to the SP over the past six months or so,If you wait untill about 1 month after that I suggest the shareprice willl be much greater depending on Global circumstances of the time.
P.S. I was a net seller today.
Basically the small shareholders have been shafted by the institutions and management to some extent,the gold price is at record levals of alltime and who could resist taking the opertunity to double the CR by only 100 % when you are trying to get a gold mine off the ground and a possible exploration property said to be much bigger.Ultimatelly it will be a benefit to all if you are prepared to wait untill the mine is actully up and running.However I believe the shareprice might not be much higher closer to the AGM on 24/11/10. Judging what has been happening to the SP over the past six months or so,If you wait untill about 1 month after that I suggest the shareprice willl be much greater depending on Global circumstances of the time.
P.S. I was a net seller today.
McCoy Pauley
Get out of here Budweiser!
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I've been researching RED this morning. It's been on my watchlist for some time but I was put off taking a position due to the delays in obtaining the finance packaging. Obviously, that's now been put to rest.
Looking at RED's announcement released to the market on 16 July 2009, RED advised the market that the Siana Bankable Feasibility Study concluded that there was 336,000 oz of gold in the open pit at an average grade of 3.4 g/t and 839,000 oz of silver in the open pit at an average grade of 8.5 g/t.
I think the Study suggested that the production costs would be in the order of US$351/oz, after capital expenditure of US$62.5 million to establish the mine at Siana. The Study concluded that the NPV for Siana at US$1,000/oz would be US$251.7 million. They didn't even look at gold prices above US$1,000/oz for the purpose of the BFS.
Seems to me that there is a compelling reason to acquire shares in RED, but am I missing something?
Obviously, there are concerns about the dilutionary effect of the cap raising, but I'm not a holder in RED, so that doesn't affect me, so much.
Looking at RED's announcement released to the market on 16 July 2009, RED advised the market that the Siana Bankable Feasibility Study concluded that there was 336,000 oz of gold in the open pit at an average grade of 3.4 g/t and 839,000 oz of silver in the open pit at an average grade of 8.5 g/t.
I think the Study suggested that the production costs would be in the order of US$351/oz, after capital expenditure of US$62.5 million to establish the mine at Siana. The Study concluded that the NPV for Siana at US$1,000/oz would be US$251.7 million. They didn't even look at gold prices above US$1,000/oz for the purpose of the BFS.
Seems to me that there is a compelling reason to acquire shares in RED, but am I missing something?
Obviously, there are concerns about the dilutionary effect of the cap raising, but I'm not a holder in RED, so that doesn't affect me, so much.
Hi Mardo and thanks for your thoughts. With regard to the AGM date, the way I read it I think RED put a request to have it deferred a couple of weeks, but the CR has been able to be completed sooner than anticipated earlier so the schedule is still with 23 Nov (thats how I read it, but I agree some confusion has been caused by announcing that later dated AGM to the market - it may well have been put out to confirm to the ASX that despite the deferral they are going earlier).
With respect to the shareprice Mardo, I believe its worth giving RED and the insto's the benefit of the doubt first, and see how things develop in the next few weeks. IF we remain static over that period then it suggests to me that the free kick that the new insto's (and the existing instos's) have been provided with should be halted only to the first tranche funding. If that is the case then we should not approve the second tranche funds. IF they prove that they have been an asset on the register by supporting the stock with the share price moving up then I for one will be prepared to support the second tranche - but its a poor use of company share capital in my opinion regardless. I'm disappointed as to RED not providing a definitive reason and rational argument for the additional funds in the announcement.
McCoy Pauley, I'm not sure I understand your question as to whether you have missed something, as it seems you have read the feasibility docs, plus subsequent announcements on Siana and Mapawa? Maybe you can be a bit more definitive about what you think you are missing?
With respect to the shareprice Mardo, I believe its worth giving RED and the insto's the benefit of the doubt first, and see how things develop in the next few weeks. IF we remain static over that period then it suggests to me that the free kick that the new insto's (and the existing instos's) have been provided with should be halted only to the first tranche funding. If that is the case then we should not approve the second tranche funds. IF they prove that they have been an asset on the register by supporting the stock with the share price moving up then I for one will be prepared to support the second tranche - but its a poor use of company share capital in my opinion regardless. I'm disappointed as to RED not providing a definitive reason and rational argument for the additional funds in the announcement.
McCoy Pauley, I'm not sure I understand your question as to whether you have missed something, as it seems you have read the feasibility docs, plus subsequent announcements on Siana and Mapawa? Maybe you can be a bit more definitive about what you think you are missing?
Mccoy Pauley; the BFS was over a year ago and used $US800 as base case - the table showed a range 200 above and below that. The 800 was something the investment community would at that time consider for projects at that time -remember the POG does go down as well as up.
As i had posted elsewhere previously roughly each time $US100 POG increased would increase the NPV by $US50M 'ish. However you have to factor in the AUD/USD as well when considering comparing the NPV with RED market cap. because the cross rate has moved in step with the POG, in effect diminishing the direct effect of any change.
As i had posted elsewhere previously roughly each time $US100 POG increased would increase the NPV by $US50M 'ish. However you have to factor in the AUD/USD as well when considering comparing the NPV with RED market cap. because the cross rate has moved in step with the POG, in effect diminishing the direct effect of any change.
Hi Mgm1a, and thanks for the assistance in answering that question. Of course I concur with your comments entirely and you have put them in context with respect to the timing of the feasibility study and the more recent movements in gold price way above what anyone would consider. Its unfortunate we don't get much benefit with the rising A$, but of course since lots of the capex components are priced in US$ we do get some benefit to the expected capex spend with the rising A$.
As an interesting aside to the initial feasibility study, the Whittle pit optimisation was done at a gold price of US$650/oz and silver price of US$10/oz, but the exchange rate was not quoted. I wouldn't mind betting that the halo of resource to the ultimate reserve delineated by that Whittle run would now be economic, thus it could mean that the open pit phase of mining operations will be expanded once mining begins, thus additional gold production, notwithstanding the huge hits in drilling that post-dated the resource model (Hole SMDD134 -5 metres at 25.4 g/t gold and Hole SMDD135-3 metres at 31.6 g/t gold)!
I can't wait to have RED start reporting gold production, as well as the expansion of exploration activity for Mapawa.
As an interesting aside to the initial feasibility study, the Whittle pit optimisation was done at a gold price of US$650/oz and silver price of US$10/oz, but the exchange rate was not quoted. I wouldn't mind betting that the halo of resource to the ultimate reserve delineated by that Whittle run would now be economic, thus it could mean that the open pit phase of mining operations will be expanded once mining begins, thus additional gold production, notwithstanding the huge hits in drilling that post-dated the resource model (Hole SMDD134 -5 metres at 25.4 g/t gold and Hole SMDD135-3 metres at 31.6 g/t gold)!
I can't wait to have RED start reporting gold production, as well as the expansion of exploration activity for Mapawa.
McCoy Pauley
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Hi Beatle and mgm1a - my question as to whether I'm missing anything was probably more rhetorical than anything else. Thanks for your comments, both of you.