I am massively ahead on the Red Rock Resources (RRR) shares I bought at about the 0.625p offer price when we tipped the shares. Though initially frustrated by news that the company has raised another £1 million at 1.05p, I have considered the rationale and I have bought a few more shares after an interview with Andrew Bell you can watch HERE. Here is why you should also buy the shares...
The market cap is £12.2 million and for starters, the company now sits on cash of c. £2 million and listed securities which are easily tradeable of £3.5 million. So that underpins almost half the share price. The cash will be used for an extensive drill program in the DRC copper cobalt prospect and in the Kenyan gold fields. The former does look interesting and could have real value as the deposit appears to straddle Red Rock’s acreage and that of a state-owned entity. At the latter, the aim is to get a resource of 1.5 million ounces at a higher grade than the current 1.2 million lower grade resource. At that point, it will have a value in excess of the current market cap which can be realised via a trade sale or a Canadian IPO.
Talking of which, Andrew Bell has confirmed that lawyers are now working on the IPO of Red Rock's 50% owned Australian assets in Canada. This will happen in H1 and Bell points to peer group valuations in Canada of companies with nearby acreage and suggests our stake, post a fund raise, in RRAL will be worth a multiple of the current market cap. And then there is a potential royalty stream from Mount Ida in Oz. Ok there are risks that this mine may not be developed but an IPO suggests those risks are diminishing rapidly. And if it is, then the royalties Red Rock will earn will be far greater than the current market cap on an NPV basis.
So this is all in the mix and not in any way discounted at 1.15p. I expect that H1 will see the IPO of RRAL proceed with regular news, drilling in Kenya and the DRC and newsflow on Mount Ida. I recently said that I’d eat my hat on video if Red Rock shares were not 2p+ by June 30. I did not know there was a placing afoot as I wrote, so must appear to some to be Bell’s House Elf getting his placing away with my supportive comment. That makes be feel like a bit of a Charlie, but, as the anger over that clears, my stance is unchanged. Indeed I see the drilling which is now funded only adding to the excitement. Buy at up to 1.25p - target to sell 2p by June.
Filed under: Red Rock Resources, Ariana Resources, NextEnergy Renewables, HotStockRockets
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