…especially as we’re talking about the world of junior mining companies, where Bistromatics reigns supreme and literally hundreds of companies are run by people who don’t even know how to turn on a pocket calculator, let alone use one, but I’m going to have to ask it all the same. It concerns the NR out of Golden Dawn (GOM.v) this morning and the question is:
Is this the worst ever financing deal done by a junior mining company?
Inquiring minds (etc). The headline tells us that an outfit called RIVI Capital LLC has agreed to loan GOM.v U$4m, most already sent over and the balance in by mid-February. So far so lahdy-lah, but then the terms of the deal show up and explain how GOM.v (“the company”) is going to re-pay the loan. IKN quotes:
“The Company is obligated to deliver 13.5% of the gold production limited
to the Lexington and Golden Crown Mines for US $ 400 per ounce to a
total of 15,000 oz. Post-delivery of 15,000 oz at US $ 400 per oz, the
percentage of production from the Lexington and Golden Crown Mines to be
delivered to RIVI will be reduced to 6.75%, and the price per oz. of
gold paid by RIVI to the company will increase to US $ 650 per oz.”
WOAH! Say that again???
RIVI lends GOM.v U$4m, then GOM.v has to deliver 15,000 oz gold to RIVI, for which RIVI pays U$400/oz? WTF? Just that bit has me going ouch ouch stoppit it hurts, because even if we factor in today’s modest U$1,150/oz price for the shiny stuff the math goes…
(U$1,150/oz – U$400) X 15,000 oz = U$11.25m in net profit for a U$4m loan.
…and Shylock (aka Kevin Puil, serial junior director and one time equities anal yst) is alive and well and living in San Francisco California. But even that isn’t the end of the fun, because RIVI gets gravy poured all over its deal by getting 6.75% of subsequent gold production at GOM.v over life of mines (plural), at U$650/oz. All of which is crazy. I mean, Rick Rule would offer easier terms than these.
Hey, wouldn’t it be amazing to find out that Puil and David Hodges of Zimtu had a long-term and cozy business relationship?